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Saudi Arabia’s plunging crude prices (a largely self-inflicted wound) blew a hole in the budget and very soon the kingdom was running a fiscal deficit that at one point rose to some 16% of GDP.
Saudi Arabia’s plunging crude prices (a largely self-inflicted wound) blew a hole in the budget and very soon the kingdom was running a fiscal deficit that at one point rose to some 16% of GDP.

Looming Dollar Shortages Threaten Indebted Economies

Economies most at risk are the oil-producing nations with high levels of public debt and industrialized nations reliant on exports of manufactured goods

Looming Dollar Shortages Threaten Indebted Economies

Slowing global economic growth and mounting debt burdens in advanced and emerging economies alike are a hazardous backdrop for the alarming squeeze in global dollar supply, stemming from US trade protectionism and higher Federal Reserve interest rates.
For the first time since the height of the global economic crisis in 2009, the lack of affordable dollar liquidity is putting many of the world’s economies at risk of being unable to finance and service their obligations, Sputnik reported.
With the US Federal Reserve having raised their borrowing costs over the past 15 months, and disruptions in international trade stemming from the protectionist agenda of Brexit and the Trump administration, the inflow of dollar liquidity is becoming increasingly limited for export-reliant nations.
Economies most at risk are the oil-producing nations with high levels of public debt, such as Brazil, Canada, Mexico, Nigeria and Indonesia, and industrialized nations reliant on exports of manufactured goods, such as Germany and its eurozone peers, mainland China, Japan and several other nations of East and Southeast Asia.
Most Important Risk
The US dollar is the world’s most important reserve currency, along with the recently-battered UK sterling and the euro, as well as the Japanese yen, and, to a lesser extent, the Swiss franc. A dollar shortage is therefore the most important risk to economic development and debt servicing for governments with high levels of borrowing, which is mainly driven by substantial social spending or development goals.
A dollar shortage happens when a nation lacks a sustainable and sufficient influx of US dollars for use in the international exchange of goods and services, which includes trade and borrowing. Balance sheet surplus is one way to accumulate the hard currency, but with raw material prices being rather low since mid-2013 for industrial metals and mid-2014 for crude oil, this is a hard mission for most emerging markets. Low demand for manufactured goods is a concern for industrialized countries across the globe.
"The FX basis reflects the relative supply and demand for dollar versus foreign currency funds and a very negative basis currently points to relative shortage of USD funding or relative abundance of funding in other currencies. Such supply and demand imbalances can create big shifts in the FX basis away from its actuarial value of zero," JPMorgan analysts wrote two years ago, commenting on the alarming trends in global trade in goods and currencies.
Since then, the oil prices have recovered slightly, whilst the drag on other types of raw materials continues, moreover, global economic growth, in actual numbers and forward-looking projections, has slowed. All these factors significantly limit the ability of many economies, particularly among the emerging markets, to generate a sustainable influx of dollars.
Currency Wars?
The Trump administration, on the contrary, is adamant to cut US imports and boost US exports, while also likely devaluing the dollar, while the Federal Reserve is making it more expensive to borrow.
"Would a gradual US dollar shortage see the currency squeezed higher, as it becomes increasingly rare, like gold?" analysts of the Netherlands-based Rabobank wrote. "Or might the US aim for a 'currency wars’ approach of pushing the value of the dollar down in order to rebalance its trade?"
Beijing is attempting to manage the RMB's downward trajectory and that's an expensive effort. Saudi Arabia's plunging crude prices (a largely self-inflicted wound) blew a hole in the budget and within no time, the kingdom was running a fiscal deficit that at one point rose to some 16% of the GDP. 
Liquidating All Assets
What the exacerbating dollar shortage might mean for the global economy when a feasible alternative to the greenback hardly exists, is unclear. Yet, at the initial stage of the dollar crunch, overseas government will be liquidating all assets that can bring in at least some dollars, like US Treasuries.
This will depress the value of treasury notes and push the yield up, driving US interest rates, and making borrowed dollars even more expensive down the line.
The ultimate outcome would likely be the rise of prominence of other currencies, mainly those already pre

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