IMF COFER data was released last week and led to some amusing analysis, via FTAlphaville:
The man is the Leonardo da Vinci of the genre. Such is his genius, he’s able to conflate the global money supply and the rise in the S&P 500, on separate axes, without pausing for thought.
So we were waiting for a particularly good example of his art — his Sistine Chapel if you will — to come our way, and one posted on his Twitter feed at the weekend didn’t disappoint.
May we present, the “Fall & Rise of nations” by Holger Zschaepitz (2019):
The chart plots foreign exchange holdings as a per cent of total FX reserves globally. The chart seems to imply that the Chinese renimbi is soon to overtake the dollar as the world’s chosen reserve currency.
And it would be a convincing argument, if both data points were on the same axis.
The problem is: They’re not. The renminbi’s portion of reserves has risen from just below 1.10 per cent to 1.89 per cent, while the dollar’s has fallen from 66 per cent to 61.7 per cent. The gap is still very, very large.
Here’s how it should look:
And as Colby reminded us in September, global central banks “have more or less held some 60 per cent or more of their reserves in the greenback since 1996.” So this is nothing new.
There is something to be said, certainly, about certain economies (read: Russia) wanting to free themselves from dollar dependence. In January, for instance, Bloomberg reported that the Russian Federation’s central bank had bought a quarter of the world’s renminbi reserves (along with an equal amount of euros) after selling $101b worth of its dollar reserves.
Zschaepitz, however, seemingly wants us to believe that his chart signifies something larger: a portent of the greenback’s future collapse as economic power shifts immutably East.
Unfortunately, it says nothing of the sort. Move along.
Even the FT has missed the larger point. Here is the IMF data:
Last year for the first time CNY eclipsed AUD in reserve holdings. The Australian empire is over!!!!