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Arthur Hayes’ Exit Liquidity Article Explores America’s Position as Global Reserve Currency Issuer

UTC by Tolu Ajiboye · 3 min read
Arthur Hayes’ Exit Liquidity Article Explores America’s Position as Global Reserve Currency Issuer
Photo: Unsplash

BitMEX co-founder Arthur Hayes examines de-dollarization and its fiscal and political implications in an article titled ‘Exit Liquidity.’  

Former BitMEX CEO Arthur Hayes recently aired his views on exit liquidity vis-à-vis the US dollar’s reserve currency status. In a Medium blog post, the American entrepreneur wrote exhaustively on whether the US dollar can be replaced as the global reserve currency. Additionally, Hayes debated whether China or any other powerful nation would be willing to and capable of replacing the US as the global reserve currency issuer.

In his ‘Exit Liquidity’ writeup, Arthur Hayes explored suggested signs that certain “corridors of trade are de-dollarizing” and what it portends for America.

According to Hayes, reserve currency status poses certain benefits but also burdens the host nation with cost implications. The BitMEX co-founder identified the main benefit as “printing currency at will to pay for real goods.” However, he maintained that such primary benefit does not see equal distribution among the host nation’s citizenry.

Arthur Hayes Draws Exit Liquidity Parallels between American Haves and Haves-Not in the Face of Global De-Dollarization

Hayes stressed that despite America’s vaunted wealth levels, the political and military superpower’s inequality problems rank among the worst in the developed world. Furthermore, he added that this situation is worsening even though most of America’s populace, who own little financial assets, feel the brunt of the reserve currency status. According to Hayes, global de-dollarization threatens the position of American elites who have largely benefitted from global reserve currency status. However, he also fears that the majority of Americans could become ‘exit liquidity’ to their more privileged compatriots regarding capital expropriation. In Hayes’ opinion, the American financial elite would do anything to remain influential amid de-dollarization. Therefore, such drastic measures to protect their wealth could entail transmuting potential global fiscal repercussions to less illustrious citizens.

Hayes’ writeup showed a series of detailed charts that support his inequality argument. For instance, one visual representation showed the US as number 1 in the latest gross income inequality Gini coefficient among G7 nations. America outranked the UK, Germany, and Canada with a much higher figure of 0.434.

Hayes Touches on Asia as Potential Global Reserve Currency Successor to US

Hayes suggested that many believe China can replace the US as a reserve currency issuer. However, the ex-BitMEX CEO stressed that cynics remain unconvinced due to the unappealing nature of the yuan. In a world where trades are increasingly priced in dollars, Hayes opined critics might wonder what the yuan can buy. According to him, another knock on the yuan is that China’s capital account remains closed.

In Hayes’ opinion, these constraints pose the question of whether China actually yearns to be the new global reserve currency issuer. Furthermore, he questioned to what extent the so-called de-dollarization can induce the desire for a new global reserve currency. Lastly, former crypto business executive Hayes wrote that crypto could be critical in shaping new international financial policies. The ex-BitMEX co-founder suggested that it remains unknown how the global reserve currency saga will play out eventually. However, he is reasonably certain that in the coming years, the world will trade in several currencies instead. Additionally, Hayes also predicted that savings would be in gold and digital assets such as Bitcoin (BTC).

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