[0xbadcafebee]

It means high inflation because if we're not the reserve currency, global markets sell their dollars, which leaves more dollars unused, which makes them plentiful, which makes them less valuable. This has a knock-on effect; it makes import goods more expensive, it makes government borrowing more expensive (which raises costs for citizens), and loss of petrodollar (the main reason for us being the reserve currency) makes oil more expensive. To pay for our debt, after we no longer have all this investment (other nations buying our dollars, t-bills), we print more money. So our currency is less valuable, and everything for us becomes more expensive, thus, inflation.

[rayiner]

> It means high inflation because if we're not the reserve currency, global markets sell their dollars, which leaves more dollars unused, which makes them plentiful, which makes them less valuable.

So why don't Japan and Germany have high inflation, since those country's currencies aren't the reserve currency either?

[0xbadcafebee]

For reasons? You want me to tell you the entire economic history of 3 countries in a HN comment? The US has no real industry except finance (well, and healthcare, and real estate (which is/was basically finance)), and our economy is only strong because of the petrodollar-created reserve currency. Take it away and we have a gaping void where an economy used to be.

Japan may implode if the US dollar collapses, due to the weird USD<->Yen cyclical debt scheme (yen carry trade) propping them up. If the world switches to the Yen to price oil this might not be so bad. They also just started moving away from negative interest rates and ZIRP, and BoJ may reach 1% interest at the end of this month. This is good for Japan, bad for US.

Germany is not doing great but they do/did have a strong manufacturing sector.