Pozsar's Bretton Woods III: Sometimes Money Can't Solve the Problem

Awesome read. I always love Poszar's work, it's a shame that these days he's no longer working at CS - since most of his work is now stuck behind a paywall.

Key quote: "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. For any country potentially facing future sanctions, the calculus of holding large dollar reserve positions shifted."

My only critique here is that Russia is an outlier, along with China, because they both hold large dollar reserves and have a contentious relationship with the US. You have to go pretty far down the list to find another nation that is likely to face US sanctions - and those nations, like Libya and Iran, are already heavily sanctioned!