ECB reveals massive euro selling and the dollar wobbles

ECB lifts the lid on massive euro selling and the dollar starts to sustancia ilegal

The dollar isn't falling on its own: it's being pushed. The coordinated intervention to save the yen and halt a massive sell-off of US bonds is the sign that something has broken in the debt market. What's new this time is that the ECB has confirmed it instead of covering up the attack on Europe, as it has so often done.

Will the euro replace the dollar? The data says: not so fast

That's the first question that comes up. The dollar accounts for 60% of global reserves; the euro, 20%. Forcing a swap is, for now, wishful thinking. But the recent history of the bond market suggests the shift won't be binary. One school of analysis argues that international trade will be split among a group of currencies, with the dollar as just one of them. According to this view, it's already happening.

The debt trap as Europe's brake

The other school reminds us that reserve status isn't inherited through charisma. France, Spain and Italy are dragging public debt above 100% of their GDP, and Germany is heading the same way. Debtors are slaves to their creditors, and the Liz Truss episode in the UK is the perfect warning: the market attacked the pound, the rating agencies downgraded the bond, and the prime minister lasted weeks. The ECB also knows that fiscal discipline is imposed from outside.

The prophecy of a dollar as a residual currency won't come true tomorrow. But the taboo has been broken: the ECB has acknowledged that the economic war exists. With the White House bent on shooting itself in the foot, perhaps what the textbooks study a century from now won't be the end of the dollar, but how its one unique privilege was thrown away.