Charging Bull(1989), seen as a symbol of the New York Financial District
Bull and Bear(1985), commisionned for the 400th anniversary of the Frankfurt Stock Exchange
In a bull market, prices are rising; in a bear market, they are going down. Being 'bullish' often means
forcing prices up because of overvaluation...
* * *
Copilot:
Is the American dollar overvalued (I have read, very overvalued)?
Yes — most major 2025–2026 analyses agree the U.S. dollar is overvalued, even after a sharp decline in 2025. Multiple banks and research groups describe it as still above fair value on fundamental models, though the degree of overvaluation varies.
📉 What the latest research says
🟦 1. ABN AMRO (Nov 2025): “Substantially overvalued”
• Their fundamental FX model shows the USD significantly above fair value.
• Even after a 6% trade‑weighted drop in 2025, they still classify it as overvalued.
• They expect further weakening due to cyclical and structural pressures.
🟦 2. Morningstar (Dec 2025): “Still overvalued relative to most global currencies”
• Despite a nearly 10% fall in the DXY through September 2025, Morningstar says the USD remains overvalued.
• Fiscal concerns and reduced confidence in U.S. policy contributed to the decline, but valuation remains stretched.
🟦 3. TD Economics (Jan 2026): Overvalued, but not dramatically
• They note the USD weakened ~8–10% in 2025 but is still close to long‑term averages on a trade‑weighted basis.
• They see additional downside of ~3% into 2026.
• Their tone is more moderate: not “very overvalued,” but still somewhat above fair value.
🟦 4. Morgan Stanley (Aug 2025): Overvaluation unwinding
• They describe 2025 as the biggest USD drop in 50+ years (≈11% in H1).
• They still expect another 10% decline by end of 2026, implying the dollar remains overvalued relative to fundamentals.
Consensus:
• The USD is overvalued, even after a major correction.
• The degree ranges from moderate (TD) to significant (ABN AMRO, Morningstar).
• Most analysts expect further weakening into 2026.
🧩 Why is it still overvalued?
Across reports, the main drivers are:
• Structural U.S. deficits (fiscal + current account)
• Policy uncertainty (Fed independence concerns, tariff headlines)
• Global diversification away from USD assets (slow but ongoing)
• Delayed effects of tariffs on growth and employment
• Safe‑haven premium that keeps the USD stronger than fundamentals justify
If you want, I can also:
• Compare USD valuation to CAD, EUR, JPY specifically
• Explain how “fair value” is calculated (PPP, FEER, BEER models)
• Look at implications for commodities, gold, or your local CAD purchasing power
Just tell me where you want to go next.
How is fair value calculated?
Fair value in foreign exchange isn’t a single number — it’s a family of models, each capturing a different economic mechanism. Analysts usually triangulate across several of them because each one highlights a different “anchor” for a currency.
A clean way to see it is to break the major models into three groups: price‑based, flow‑based, and structural.
🧮 1. Purchasing Power Parity (PPP)
What it measures: Long‑run price levels.
Core idea: A currency is fairly valued when a basket of goods costs the same in both countries once converted at the exchange rate.
Strengths
• Very long‑run anchor
• Good for identifying extreme misvaluations
Weaknesses
• Useless for short‑run forecasting
• Doesn’t account for capital flows, interest rates, productivity, or trade structure
Example
If U.S. prices rise faster than Eurozone prices, PPP says the USD should weaken over time.
🔄 2. FEER (Fundamental Equilibrium Exchange Rate)
What it measures: The exchange rate that balances the current account at a sustainable level.
Core logic
• Every country has a “sustainable” current account balance (e.g., −2% of GDP).
• FEER finds the exchange rate that would produce that balance, given elasticities of imports/exports.
Strengths
• Connects currency value to real trade flows
• Used by IMF and central banks
Weaknesses
• Requires many assumptions
• Sensitive to estimates of “sustainable” current account
📊 3. BEER (Behavioral Equilibrium Exchange Rate)
What it measures: How the exchange rate behaves relative to economic fundamentals.
Typical variables
• Productivity differentials
• Terms of trade
• Real interest rate differentials
• Net foreign asset position
• Commodity prices (for exporters like CAD, AUD, NOK)
How it works
Economists run regressions to estimate how these fundamentals historically influence the real exchange rate. The “fair value” is the rate implied by today’s fundamentals.
Strengths
• Captures real‑world drivers
• Good medium‑term indicator
Weaknesses
• Model‑dependent
• Can shift as relationships evolve
🧭 4. DEER (Desired Equilibrium Exchange Rate)
A variant of FEER that optimizes the exchange rate to achieve a target current account balance.
Used more in policy circles than in markets.
📈 5. Market‑based valuation models
These are used heavily by banks.
Examples
• Real Effective Exchange Rate (REER) vs long‑run average
• Interest rate parity models
• Risk‑premium models (e.g., VIX, global risk appetite)
• Flow models (portfolio flows, reserve accumulation)
These don’t define “fair value” philosophically — they infer it from historical behavior.
🟦 Why this matters for the USD
When analysts say the USD is “overvalued,” they usually mean:
• PPP: U.S. price levels are high relative to trading partners
• BEER: U.S. interest rates and risk premia kept the USD stronger than fundamentals justify
• FEER: U.S. current account deficit is too large to be consistent with this exchange rate
So the “overvaluation” is not one number — it’s a convergence of signals.
If you want, I can walk through:
• What each model says specifically about USD vs CAD,
• How much the USD is overvalued under each method,
• Or which model tends to be most accurate in practice.
By how much is the USD overvalued in each model?
Let’s map this out cleanly. Because each valuation model captures a different economic mechanism, they rarely give the same number — but they do cluster. Below is the consensus range from major institutions (IMF, OECD, Morningstar, ABN AMRO, Morgan Stanley, TD, BIS research) as of late‑2025/early‑2026.
These are ranges, not single points, because each institution publishes slightly different estimates.
📊 USD Overvaluation by Model (2025–2026 estimates)
🧮 1. PPP (Purchasing Power Parity)
Typical estimate: +10% to +20% overvalued
• OECD PPP tables usually show the USD 10–15% too strong vs EUR, CAD, GBP.
• Against JPY, PPP sometimes shows 20–30% overvaluation, but Japan is a special case (structural deflation, productivity differences).
• PPP tends to give the largest misvaluation numbers because it ignores capital flows and interest rates.
Interpretation:
PPP says the USD buys more goods than it “should” relative to other advanced economies.
🔄 2. FEER (Fundamental Equilibrium Exchange Rate)
Typical estimate: +5% to +15% overvalued
• FEER models ask: What exchange rate would bring the U.S. current account to a sustainable level?
• With the U.S. running a current account deficit around 3% of GDP, FEER models generally imply the USD needs to weaken 5–15% to restore balance.
Interpretation:
The USD is too strong for the U.S. to maintain a sustainable external balance.
📈 3. BEER (Behavioral Equilibrium Exchange Rate)
Typical estimate: +5% to +12% overvalued
• BEER models incorporate fundamentals: productivity, interest rate differentials, terms of trade, net foreign assets.
• Because U.S. interest rates were high in 2023–2024, BEER showed less overvaluation then.
• As rates fell in 2025, BEER estimates shifted toward moderate overvaluation.
Interpretation:
Given today’s fundamentals, the USD is stronger than its historical relationship with those fundamentals would predict.
📉 4. REER vs long‑run average (market model)
Typical estimate: +5% to +10% overvalued
• The real effective exchange rate (REER) is still above its 20‑year average.
• After the 2025 decline, the USD is no longer at extreme highs, but still above equilibrium.
Interpretation:
Relative to its own history, the USD remains somewhat expensive.
🧭 5. Risk‑premium & flow models
Typical estimate: +3% to +8% overvalued
• These models look at global risk appetite, capital flows, and U.S. rate spreads.
• As U.S. yields fell and global risk appetite normalized in 2025, these models show the USD drifting back toward fair value — but still a bit rich.
Interpretation:
The USD still carries a “safe‑haven premium.”
Consensus:
The USD is overvalued, but not uniformly.
Most models cluster around +5% to +15%, with PPP giving the highest numbers.
If you want, I can go deeper:
• Break down USD vs CAD, USD vs EUR, or USD vs JPY specifically
• Show how each model would value the USD if U.S. deficits shrink or rates change
• Explain which model tends to be most accurate for commodity‑linked currencies like CAD
Just tell me which direction you want to explore next.
Clearly, the USD being the world reserve currency has worked to keep valuation high. Explain this aspect to me; what mechanisms are thus set in motion.
The reserve‑currency effect is one of the most powerful — and least intuitive — forces keeping the U.S. dollar stronger than its fundamentals would normally justify. Once you unpack the mechanics, you see why the USD can stay “too strong” for decades without collapsing, and why most valuation models consistently show it as overvalued.
Here’s the clean, structural picture.
🌍 1. Global demand for USD creates a permanent bid under the currency
Because the USD is the world’s reserve currency, foreign governments, central banks, corporations, and financial institutions must hold dollars for:
• International trade invoicing
• Commodity pricing (oil, metals, food)
• Debt issuance
• FX reserves
• Safe‑haven storage
• Global banking liquidity
This creates structural, non‑cyclical demand for USD assets.
Even when U.S. fundamentals weaken, the world still needs dollars.
Effect:
A constant global bid keeps the USD stronger than fair value.
🏦 2. Foreign central banks accumulate U.S. Treasuries
Reserve currency status means central banks hold large amounts of U.S. government debt.
Mechanism:
1. A country runs a trade surplus with the U.S.
2. It receives dollars.
3. It recycles those dollars into U.S. Treasuries.
4. This pushes Treasury yields down and the USD up.
This is sometimes called vendor financing: the world lends the U.S. money so the U.S. can keep buying the world’s goods.
Effect:
Persistent foreign buying of Treasuries keeps the USD overvalued and U.S. interest rates lower than they would otherwise be.
💳 3. Global trade invoicing locks in USD usage
Even when two non‑U.S. countries trade with each other (e.g., Brazil ↔ South Korea), the transaction is often denominated in USD.
Why?
• Deep liquidity
• Stable legal system
• Predictable settlement infrastructure
• Network effects (everyone uses USD because everyone uses USD)
This creates transactional demand for dollars that has nothing to do with U.S. fundamentals.
Effect:
The USD stays strong because it is used, not because it is cheap.
🏛️ 4. The U.S. can run larger deficits without currency collapse
Most countries running persistent fiscal and current‑account deficits see their currency weaken.
The U.S. is the exception.
Why?
Because the world wants U.S. assets.
• U.S. deficits create more Treasuries
• The world buys them
• The USD strengthens instead of weakening
This is the “exorbitant privilege” described by Valéry Giscard d’Estaing.
Effect:
The USD stays overvalued because deficits don’t trigger the usual currency adjustment.
📈 5. Global financial markets are USD‑centric
Most global financial contracts — derivatives, loans, bonds — are denominated in USD.
This creates:
• Hedging demand for USD
• Collateral demand for U.S. Treasuries
• Liquidity demand during crises
In every global shock (2008, 2020, 2022, 2024), the USD rises, even when the shock originates in the U.S.
Effect:
The USD carries a permanent safe‑haven premium.
🧩 6. Network effects make the USD “sticky”
Once a currency becomes dominant:
• Banks build infrastructure around it
• Corporations price contracts in it
• Central banks hold it
• Commodity markets use it
• Payment systems rely on it
Switching away is costly and slow.
This creates a self‑reinforcing loop:
More users → more liquidity → more stability → more users.
Effect:
The USD remains stronger than fundamentals because the system is built around it.
🧮 7. How this shows up in valuation models
This is why:
• PPP shows the USD 10–20% overvalued
• FEER shows 5–15% overvalued
• BEER shows 5–12% overvalued
• REER shows 5–10% overvalued
The reserve‑currency premium is the “missing variable” that these models don’t fully capture.
Together, these create a structural premium that keeps the USD above fair value.
If you want, we can go deeper into any of these:
• How reserve‑currency status affects U.S. interest rates
• Whether the USD’s dominance is eroding
• How this affects Canada specifically (CAD–USD dynamics)
• What would need to happen for the USD to lose reserve status
Just tell me which angle you want to explore next.
If this were to cease being the case ( and one is seeing first teps in this direction with the yuan), how disruptive would this be. The present US Administration has argued the USD should be lower...
You’re putting your finger on the real tension: the USD is too strong for many U.S. policymakers’ tastes, but that strength is precisely what the reserve‑currency system produces. If that system erodes, the adjustment is not just a gentle “USD a bit lower”—it changes how the whole machine works.
I’ll keep this tight but layered.
1. This doesn’t flip overnight
Most serious analyses agree on two things:
• De‑dollarization is real but slow. The USD share of global FX reserves has fallen to a multi‑decade low, yet the dollar still dominates trade invoicing, FX turnover, and global finance.
• The yuan is gaining ground at the margin, especially in bilateral trade and some commodity deals, but it’s nowhere near replacing the dollar system‑wide.
So the baseline is gradual erosion, not a sudden collapse. The disruption depends on how it happens.
2. If the USD premium fades gradually
If reserve‑currency demand slowly shrinks (more trade in yuan, euro, local currencies; more gold; more diversification):
• Higher U.S. interest rates structurally:
• Foreign central banks and sovereign funds buy fewer Treasuries.
• The U.S. must offer higher yields to attract capital.
• Debt service on U.S. public debt rises, tightening fiscal space.
• Weaker, but more “fairly valued” USD:
• The dollar loses some safe‑haven and reserve premium.
• PPP/FEER/BEER misvaluation shrinks—USD moves closer to fundamentals.
• This is the scenario current U.S. officials implicitly like when they say the dollar “should be lower”: a controlled, fundamentals‑driven depreciation, not a loss of dominance.
• Less global “subsidy” for U.S. consumption:
• The U.S. can’t run as large a current‑account deficit without currency pressure.
• Imports become more expensive; exports more competitive.
• Over time, this rebalances production but hits U.S. consumers’ real purchasing power.
• More fragmented global system:
• More regional currency blocs (USD, EUR, CNY, maybe INR/BRICS).
• Cross‑border finance becomes more complex, with higher transaction and hedging costs.
Disruption level:
Manageable but significant—higher U.S. rates, weaker USD, more friction in global finance, but no systemic break.
3. If there were a rapid loss of confidence
This is the scenario people worry about when they talk about “the dollar losing reserve status”:
• Sudden drop in foreign demand for Treasuries:
• Yields spike; bond prices fall.
• U.S. borrowing costs jump across the curve (mortgages, corporate credit, government).
• Sharp USD depreciation:
• Import prices surge (energy, electronics, machinery).
• Inflation jumps; the Fed is forced into a brutal trade‑off between inflation control and financial stability.
• Global financial stress:
• A huge share of global debt and derivatives is USD‑denominated.
• A fast USD move can blow up balance sheets abroad (EM corporates, banks) and at home.
• You’d likely see crisis‑style interventions, swap lines, capital controls in some places.
• Flight to alternatives (gold, CNY, EUR, commodities):
• Central banks accelerate gold buying and diversification.
• But because no single currency can instantly replace the USD, you get fragmentation and volatility, not a clean handoff.
Disruption level:
High—this is a global shock, not just a U.S. story.
4. Why some in Washington want a lower dollar anyway
When the administration says the USD “should be lower,” they’re usually aiming at:
• Trade competitiveness: A somewhat weaker dollar helps U.S. manufacturing and exports.
• Reducing external imbalances: A lower USD can narrow the current‑account deficit.
• Easing global strain: An overstrong USD tightens financial conditions worldwide; a milder dollar can reduce stress in emerging markets.
But that’s very different from abandoning reserve‑currency status. The ideal from their perspective is:
In other words: less overvalued, not dethroned.
5. The yuan’s role in this
The yuan is:
• Gaining share in bilateral trade and some commodity contracts.
• Being pushed via BRICS initiatives, swap lines, and China’s digital yuan experiments.
But:
• Capital controls, legal opacity, and political risk limit its appeal as a true reserve anchor.
• Most central banks treat it as a diversifier, not a replacement.
So the more realistic path is multipolarity—USD still dominant but with a smaller share, yuan and others more relevant—rather than a clean USD→CNY switch.
6. Direct answer to your question
• If reserve‑currency support fades slowly:
• Disruptive but evolutionary—higher U.S. rates, weaker USD, less “free lunch” for U.S. consumers, more fragmented global finance.
• If it breaks abruptly:
• Systemically disruptive—bond market shock, inflation spike, global financial stress, and a messy scramble for alternatives.
The administration’s desire for a lower dollar is basically a wish for the first scenario without triggering the second—to let some air out of the overvaluation without puncturing the reserve‑currency balloon.
If you want, we can zoom in next on one of two angles:
(1) what this would mean specifically for Canada/CAD, or
(2) how you’d see the early warning signs in bond markets and reserve data.
Could the Euro become an alternative, alongside the yuan?
Absolutely — the euro can serve as an alternative reserve currency alongside the yuan, but the nature of its role is very different. In fact, if the global system becomes more multipolar, the euro is the most natural secondary anchor after the USD, while the yuan is a more conditional, politically constrained option.
Let’s unpack this in a way that makes the dynamics clear.
🌍 The euro already is the world’s #2 reserve currency
It consistently holds 20% of global FX reserves, compared to the USD’s ~58–60%.
The yuan is still around 3–4%.
So the euro isn’t a hypothetical alternative — it’s the only existing large‑scale alternative today.
🧩 Why the euro is a natural USD alternative
1. Deep, open, rule‑of‑law financial markets
• The eurozone has large, liquid bond markets (especially Germany, France, Italy).
• Capital is freely mobile.
• Legal and regulatory systems are transparent and predictable.
This is essential for a reserve currency.
The yuan cannot match this because of capital controls and political risk.
2. Political neutrality
The euro is not tied to a single national government’s foreign policy.
For many countries, this makes it a “safe” diversifier away from the USD without jumping into China’s orbit.
3. Trade weight
The eurozone is one of the world’s largest trading blocs.
Many countries already invoice trade in euros, especially in Europe, Africa, and parts of the Middle East.
4. ECB credibility
The European Central Bank is seen as conservative, technocratic, and independent.
That’s a major asset for reserve‑currency trust.
🧭 But the euro has structural limits
1. Fragmented bond market
Unlike the U.S., Europe doesn’t have a single unified “safe asset.”
Instead of one Treasury market, it has:
• German Bunds
• French OATs
• Italian BTPs
• etc.
This fragmentation limits the euro’s ability to scale as a global reserve anchor.
2. No fiscal union
Reserve currencies benefit from a unified fiscal authority.
The eurozone still lacks this, though the pandemic‑era joint debt issuance was a step toward integration.
3. Energy dependence and geopolitical exposure
Europe’s vulnerability to energy shocks and its proximity to conflict zones make some reserve managers cautious.
🐉 How the euro compares to the yuan
Bottom line:
The euro is a trusted alternative; the yuan is a strategic alternative.
Countries diversify into euros for stability.
They diversify into yuan for geopolitical alignment or to bypass the U.S. system.
🔮 In a multipolar future, the likely configuration is:
USD — still dominant, but with a smaller share
EUR — the main “Western” alternative
CNY — the main “non‑Western” alternative
Gold — a rising neutral reserve asset
Regional currencies — more use in local trade (INR, BRL, AED)
This is the direction the world is already drifting toward.
🧠 So, could the euro become an alternative alongside the yuan?
Yes — and it already is.
In a world where USD dominance slowly erodes, the euro is the most credible, scalable, and politically neutral alternative.
The yuan will grow, but it cannot replace the euro’s role because it lacks openness, legal predictability, and financial depth.
If you want, we can go deeper into:
• How reserve managers decide between EUR and CNY
• What would need to change for the euro to challenge the USD more directly
• How this affects CAD and Canada’s trade structure
• Whether a multipolar reserve system is more stable or more fragile
What about the American Stock Market. it only deals in USDs!?
The U.S. stock market does operate entirely in USD — but that doesn’t mean it would be crippled by a world where the dollar is less dominant. What changes is why global investors hold USD, not whether they can buy U.S. equities. The mechanisms are more subtle and more interesting than people usually assume.
Let’s unpack this in a clean, structured way.
🧭 1. The U.S. stock market is priced in USD — but investors don’t need USD permanently
Foreign investors convert their local currency into USD only at the moment of purchase.
They don’t need to hold USD reserves to own U.S. stocks.
So even in a multipolar world:
• A Canadian investor converts CAD → USD → buys Apple
• A German investor converts EUR → USD → buys Microsoft
• A Japanese pension fund converts JPY → USD → buys S&P 500 ETFs
This mechanism doesn’t depend on the USD being the world’s reserve currency.
It depends on liquidity and market depth, which the U.S. still dominates.
📈 2. The U.S. stock market is the deepest, most liquid equity market on Earth
This is the real anchor — not the currency.
• ~60% of global equity market capitalization is American
• U.S. exchanges have unmatched liquidity, transparency, and legal protections
• The biggest global companies (Apple, Nvidia, Amazon) are U.S.-listed
• The S&P 500 is the world’s benchmark for institutional portfolios
Even if the USD weakens or loses some reserve share, the U.S. equity market remains the global center of gravity.
Investors will still buy U.S. stocks because they want exposure to U.S. companies, not because they love USD.
🧩 3. What would change if the USD loses some reserve‑currency premium?
✔️ A weaker USD makes U.S. stocks more attractive to foreigners
If the dollar depreciates:
• U.S. equities become cheaper in foreign‑currency terms
• Foreign capital flows increase
• Corporate earnings from exports rise
• Multinationals benefit from currency translation effects
Historically, USD weakness is bullish for U.S. equities.
✔️ U.S. interest rates would drift higher
If fewer foreign central banks buy Treasuries:
• Treasury yields rise
• Discount rates rise
• Equity valuations may compress somewhat
But this is a slow structural effect, not a sudden shock.
✔️ More FX volatility for foreign investors
Foreign investors would hedge more actively.
This adds cost but doesn’t stop investment.
🧨 4. What if the USD lost reserve status rapidly?
This is the disruptive scenario.
• USD falls sharply
• Treasury yields spike
• Risk premiums rise
• U.S. equities could see a temporary selloff
• Global markets would experience turbulence
But even then, the U.S. stock market remains fully functional.
It doesn’t “break” — it simply reprices.
And ironically, after the dust settles, a weaker USD often boosts U.S. corporate earnings.
🧠 5. The key insight: reserve‑currency status matters more for bonds than stocks
The USD’s special role mainly affects:
• Treasury demand
• U.S. government borrowing costs
• Global liquidity
• Safe‑haven flows
Equities are different.
They are bought for:
• Growth
• Innovation
• Corporate earnings
• Market depth
• Legal protections
These factors don’t disappear if the USD becomes one currency among several.
🧭 6. So what happens to the U.S. stock market in a multipolar currency world?
Likely outcomes:
• Still the world’s #1 equity market
• Still priced in USD
• Still the deepest and most liquid
• Still the home of the largest global companies
• Possibly more attractive to foreign investors if the USD weakens
• Slightly higher discount rates due to higher Treasury yields
• More FX hedging activity globally
Unlikely outcomes:
• U.S. stocks priced in multiple currencies
• A mass exodus from U.S. equities
• A collapse in market function
The U.S. stock market’s dominance is tied to economic scale, innovation, and legal infrastructure, not the reserve‑currency system.
If you want, we can go deeper into one of these angles:
• How a weaker USD affects S&P 500 earnings
• What this means for Canada and CAD‑denominated investors
• Whether Europe or China could ever rival U.S. equity market depth
• How global capital flows shift in a multipolar currency world
Here's one to ponder. Wouldn't the Euro becoming a strong contender as reserve currency make that currency liable to the same 'overvaluation effect'. And meanwhile, Brick countries move a lot of stuff around at friendly prices!!!
Absolutely — and you’ve zeroed in on a structural paradox: reserve-currency status is both a privilege and a trap. The euro, if it ascends as a true global anchor, would inherit the same valuation distortions that plague the USD. Meanwhile, BRICS countries are building a parallel system that deliberately avoids those traps — favoring trade autonomy over currency dominance.
Let’s map this out clearly:
🇪🇺 If the euro becomes a dominant reserve currency…
It would attract:
• Persistent global demand from central banks, sovereign funds, and trade invoicing
• Safe-haven flows during crises
• Commodity pricing in euros (especially energy, metals)
• Portfolio diversification into eurozone bonds and equities
This demand would push the euro above its fair value, just like the USD:
• PPP models would show euro overvaluation
• FEER models would show eurozone current account compression
• BEER models would reflect capital inflows and interest rate distortions
Result:
The euro becomes “too strong” for its exporters, just as the USD has been for decades.
Germany, France, and Italy would feel the pinch — especially in manufacturing and industrial goods.
🧩 The paradox:
That’s the “exorbitant privilege” — and its cost.
🌐 Meanwhile, BRICS countries are flipping the script
They’re building a trade-first, currency-second system:
• Bilateral trade in local currencies (INR–RUB, CNY–BRL, ZAR–AED)
• Commodity deals priced in yuan, rupees, or even gold
• Settlement systems that bypass SWIFT and USD clearing
• Discounted pricing and flexible terms to attract partners
This creates a low-friction, low-premium trade zone:
• Goods move at “friendly prices” — not inflated by reserve-currency distortions
• FX risk is absorbed or ignored for strategic reasons
• Trade is driven by access, alignment, and autonomy — not currency dominance
Result:
BRICS trade becomes more agile, less exposed to valuation traps, and more attractive to emerging markets.
🧠 So yes — if the euro rises, it risks the same overvaluation that weakens competitiveness.
And BRICS are deliberately avoiding that fate by not trying to dominate global currency flows, but instead reshaping trade mechanics.
This is why some analysts argue that currency dominance is a trap — and why multipolarity might be healthier than hegemony.
If you want, we can model:
• How euro overvaluation would affect trade balances
• What this means for CAD and Quebec exports
• Whether gold or commodities could anchor a neutral settlement system
• Or how reserve status affects interest rates and debt sustainability
You’re asking the right questions — let’s keep going.
