TrendMacro conversation with Michael Pettis on the risk to the US dollar losing reserve currency status

With low tariffs and no restrictions on or taxation of foreign accumulation of US securities, the US is the world's consumer demand of last resort, and go-to destination for other nations' excess savings. As a result, industrial policy in nations like China with large trade surpluses, low consumption and high savings rates forces the US to assume, passively, the opposite policy: trade deficits, high consumption, budget deficits and low savings. For the US, it has facilitated the hollowing out of the industrial base and dispossessed a generation of industrial workers with few alternatives except to be part of an increasingly debt-fueled welfare state. So-called "populists" like Trump and Vance are exploring tariffs and taxes on capital flows to repair these imbalances. The risk is that the dollar would lose its hegemonic role in global trade and central bank reserves, but it is that very role that has allowed high-growth mercantilist economies like China to displace the US in the first place. At the same time, China's development model based on suppressing consumption has probably neared its limits and has to be re-engineered anyway. China is not "uninvestable," but abstracting from idiosyncratic political risks, the opportunities are in sectors that would benefit from increased consumption. The Chinese Central Bank's accumulation of gold is only to bring it up to a reserve ratio at the world standard, not toform the base of a gold-back currency designed to dethrone the dollar.