Pozsar's Bretton Woods III: Sometimes Money Can't Solve the Problem

IMHO the fundamental problem is that the world wanted dollars so they gave the US gold or stuff for those dollars. If that flow ever reverses then there's problems. Bretton woods solved the gold issue. The plaza accords solved it when Japan was the problem.

Today the solution is that foreign countries but government debt. That will last as long as everyone is willing to roll it over. It's not clear how or why that stops. But if/when it does it's not going to involve the US sending out trillions worth of stuff

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RA_Fisher an hour ago | parent | prev | next [-]

Pozsar assigns far too much weight to Russia. It’s an economically small country. He should be focused a lot more on large American companies that carry actual heft.

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standardUser 2 hours ago | parent | prev | next [-]

Key quote: "Pozsar’s argument: the moment Western nations froze Russian foreign exchange reserves, the assumed risk-free nature of these dollar holdings changed fundamentally. What had been viewed as having negligible credit risk suddenly carried confiscation risk. For any country potentially facing future sanctions, the calculus of holding large dollar reserve positions shifted."

My only critique here is that Russia is an outlier, along with China, because they both hold large dollar reserves and have a contentious relationship with the US. You have to go pretty far down the list to find another nation that is likely to face US sanctions - and those nations, like Libya and Iran, are already heavily sanctioned!

	▲	bryanrasmussen an hour ago \| parent \| next [-]
		>and have a contentious relationship with the US I sort of feel many countries that used to not have a contentious relationship with the US have one now and thus the observation of outlier status doesn't really work anymore.
	▲	alex_c an hour ago \| parent \| prev \| next [-]
		Normally that would be a fair point (and maybe it was valid in 2022). But given the US approach to foreign policy in 2025, one could argue that the list of countries that “have a contentious relationship with the US” (or, maybe more accurately, the other way around) is a lot longer and less clear-cut today than it was a few years ago.
	▲	ruined an hour ago \| parent \| prev [-]
		the set of US adversaries is not presently shrinking, to put it mildly

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doctorpangloss 16 minutes ago | parent | prev | next [-]

this is a really good article. it makes none of the mistakes of thinking Bretton Woods I was a political choice (it uses the words "collapse") while separating the difference of the financial inevitabilities and political agencies in so called Bretton Woods III (that elected leaders do indeed have a choice to withhold funds from Russia, but on the other hand, there are inevitable financial & economic effects to war, like having to commit more money for credit of shipping oil).

someone on here is saying that Russia is an "economically small country." This is like saying the learning loss during COVID was "not very big." You are not appreciating the consequences of how big of a deal war and pulling kids out of school are, all the same.

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bfg_9k an hour ago | parent | prev [-]

Awesome read. I always love Poszar's work, it's a shame that these days he's no longer working at CS - since most of his work is now stuck behind a paywall.