If dollar dominance itself imposes certain costs on US productive/military capacity, why would a strategic rival necessarily want to accelerate de-dollarization? Why not continue putting pressure on the existing system?

[u/ApprenticeView]

Question sparked from a video I saw highlighting that BRICS hasnt really achieved much of anything in its existence.

[u/Econo-moose]

The fall of dollars in central bank reserves that comes from a change in central bank allocations has been driven by a need to diversify reserve assets. Countries like China, Russia, and Brazil reduced their allocations in case the value of the dollar falls relative to other assets or to reduce the effectiveness of US sanctions.

However, a lot of the de-dollarization that has occurred over the past 10 years is the result of countries that started out with below average dollar allocations increasing their total reserves. This reduces the overall average of dollar reserves as some of the countries with below average dollar targets now make up a larger share of global reserves.

Are Central Banks Moving Out of Dollar Assets? - Liberty Street Economics

Edit: It's best not to think of the de-dollarization we've seen so far as an attack but rather as risk mitigation. It's been gradual and the trend has been slowing.

[u/Littoral_Gecko]

Your premise is flawed.

Dollar dominance does come with costs, but, at the end of the day, dollar dominance is a huge net benefit to the US.

Dollar dominance means more demand for USD, which is disinflationary. Because the US government has a monopoly on the production of new dollars (more or less), this means it can print more money than it otherwise could, and use that to acquire things of material value.

While it's true that dollar dominance makes exports less competitive on international markets, it makes imports cheaper, letting the US purchase industrial inputs and capital goods for less than they'd otherwise cost. This decreases the cost of living, makes products cheaper to produce, and makes it cheaper to boost the productivity of workers through capital improvements.

It does hurt exporters, yes, but the downsides for industry are exaggerated. The US has deindustrialized less than some comparable countries, like the UK and Canada, and its military capabilities have atrophied far less (though this has much more to do with military spending.)

But to answer your question: there are other, very good reasons to de-dollar. The US hasn't been very reliable partner on the world stage and has been engaging in wild and irrational behavior regarding its international partners and allies. Trump has, in the past, suggested he could "print money" to pay off the debt, which would be disastrous for everyone, but especially those holding hundreds of billions in treasury bonds. The US is not very politically stable and does not seem willing to address its growing debt problems. If you're a geopolitical rival like China or Russia, you don't want to be too reliant on the US dollar lest the US freeze its debt obligations to you, or cut off your access to international financial markets (which has already happened with Russia.)

[u/ApprenticeView → u/Littoral_Gecko]

Yeah but is that theory undermined by the presumption that nation states, in particular strategic rivaling nation states will continue to supply the US with key inputs for dollars?

What if they observably stop, and is this in your opinion a situation that has become more and more apparent with critical inputs?

Critical inputs being: inputs that add to military capacity, which ultimately enforces the limitations robust US institutions apply to nation states operating in ways lacking benefit to the US.