Chartbook #106: The new buttresses of the…

Triggered by the sanctions imposed on Russia’s central bank there is a lot of excited talk right now about the possibility of major holders of reserves diversifying away from the dollar. I’ve been a skeptic. My sense is that the main lesson from Russia’s experience is that there is nowhere else to go. If you diversify out of dollars the only large-scale bolt hole is Euros and as far as major international crises are concerned the chances of the US and Europe not moving together is slight. And even if European governments did not take action, European financial institutions by now know the cost of finding themselves on the wrong side of the US authorities.

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