From Sovereign Man:
Without a doubt, the existing global financial system depends on the widespread use of fiat currencies issued by insolvent governments. The wealth of the world’s large financial institutions requires that there be currencies with sufficient size and circulation to absorb massive capital flows.
... The dollar, euro, and yen have bond markets of such size that getting liquid is never a problem, even for billions of dollars. There is always a market for treasury securities, hence they are considered 'cash equivalents.'
You couldn't do the same thing in the Kingdom of Bhutan with its tiny $3.5 billion economy. If you tried to move $100 million into Bhutan, its currency (the ngultrum) would spike. In the U.S., Europe, and Japan, $100 million barely registers a blip.
Over the last few years, though, the confidence has begun to fade quickly, and the reserve currency issuing governments are starting to be viewed with increasing skepticism.
The thing that's missing right now is an acceptable alternative...
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