this post was submitted on 21 Jan 2026
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Yeah..... The really bad part is that it would be most harsh on countries with unstable currencies. The USD is basically the foreign currency reserve that backs most poorer nations currency.
Countries could slowly start exiting the US bond market, but they would have to find a replacement, and nothing has been as stable or financially open to scrutiny as the USD.
Even if more countries switched over the yuan it'd have to be a slow process. There would also be a lot more blind trust involved since there's a lot of things done behind the curtain between the national bank and local government banks.
True, but it doesn't have to be that way forever.
The Euro, for example, could become the new global reserve currency and those countries who switch to that wouldn't suffer any significant long term harm.
The currency reserve market has been diversifying for a while now, so I'm sure it will happen over a long period of time. The main problem with switching to the euro would just be for the EU needing to find a stable reserve.
If Trump gets his wish and co-ops the Fed, they might as well start dumping USD. It's going to be on a wild ride after that.
I would be skeptical of them "dumping" anything, but they probably would start to slowly diversify their reserves.
Right now there isn't exactly a replacement other than gold, but that's really impractical as a replacement for the bond market.
If only there was another currency used by a number of different countries.
What does France and Germany use? Can England back their pounds on the franc?
Are you asking if the EU can use the euro as a reserve currency?