[gpjanik]

"Pozsar’s argument: the moment Western nations froze Russian foreign exchange reserves, the assumed risk-free nature of these dollar holdings changed fundamentally. What had been viewed as having negligible credit risk suddenly carried confiscation risk."

This has nothing to do with dollar. Almost all of the confiscated currency was in Europe, and it has to do with invading your bank's ally. No country in the world ever assumed that's risk free, it wasn't being priced back then and isn't now, because nobody except from Russia is stupid enough to do that.

[mrguyorama]

Importantly, Russia fully expected to have access to those dollars during a war with the west, as that was the entire reason of stockpiling them in the first place, but Russia's central bank was not informed ahead of time that they were invading Ukraine and was completely unable to move the money before the west reacted.

The risk was known and expected. The risk that (hilariously) wasn't planned for was the risk that Putin is that fucking stupid.

[7777777phil]

Good point about Europe holding most of the frozen assets (~$300B vs ~$5B in the US). But that actually reinforces rather than contradicts Pozsar's framework; it's not specifically about the dollar versus other currencies, but about Western-controlled financial claims generally (whether USD, EUR, or other G7 assets) versus 'outside money' that can't be frozen by institutional decision.

The key insight imp isn't 'dollars are risky,' it's 'any financial claim on a Western institution now carries confiscation risk if your geopolitical interests diverge.' Whether those claims are denominated in dollars or euros doesn't change the fundamental calculus for reserve holders. That's why we're seeing (and might see more) diversification toward gold and commodities—assets with less/different counterparty risk rather than just EUR-for-USD swaps.

[gpjanik]

There have been numerous cases of sanctioning and wealth confisactions (Afrghanistan, Venezuela, Iraq, Iran, Libya), and "_now_ carries confiscation risk" is just factually incorrect. It has always carried such risk, this risk has materialized numerous times, and most importantly, no diversification is happening - literally nothing changed: https://data.imf.org/en/news/4225global%20fx%20reserves%20de...

By the way, good luck with trusting China, Russia, or other places to store wealth more than Europe. It's total ignorance to believe there's somewhere safer to store your money than the West.