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I.M.F. Makes China’s Renminbi One of World’s Select Currencies

nytimes.com

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Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#31

Post by ethbro »

AC__ wrote: post #25
adventured wrote: post #22

Earlier quoted context omitted.

Insolvent you say? The US owns 45% of all global wealth (per Allianz's global wealth studies, it was ~50% pre great recession, fell to about ~39% in 2010 as the US suffered heavy asset declines, and has rebounded back to around ~45% with the recovery in the US economy, that gap is mostly the arrival of China's wealth). The US is massively solvent in fact. Furthering this point, the US is now growing as fast as China…

AF http://www.usdebtclock.org/

The thing people who harp on debt miss is that it's a zero-sum game, not an absolute competition.

Yes, the US has debt, but if the market believes it's stronger than any of the alternatives... the US dollar still holds value.

Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#32

Post by AC__ »

adventured wrote: post #29
AC__ wrote: post #25

Earlier quoted context omitted.

AF http://www.usdebtclock.org/

That's a terrible argument. You're talking about public debt, which is a small fraction of all US wealth holdings (household + corporate + government), and can be trivially managed. Further, unlike a lot of countries, the US has significant spare taxing capability (it rests in the middle tier globally on taxation). The US could easily raise $200 billion in new annual income taxes on the top 25% and not miss a beat -…

Yeah you're right, your argument that the entire globe will absorb U.S. inflation indefinitely is much more grounded.

Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#36

Post by the-dude »

adventured wrote: post #19
the-dude wrote: post #9

Earlier quoted context omitted.

> The dollar is stronger today than it has been in 20 > years As far as I remember the US Dollar was about 1.25 the value of the Euro at it's peak in 1999/2000. We traded in dollars at the time.

The Yen was a credible currency in 1995, and it's now in much worse shape (both today and its outlook). The Euro was widely expected to pose a challenge to the dollar globally, which has not happened at all. The dollar is as strong as it is even with 0% interest rates. Imagine if rates were even half the levels they were 20 years ago. I'd definitely make the argument the dollar is stronger today than it has been sinc…

> The Euro was widely expected to pose a challenge > to the dollar globally, which has not happened at all.

The dollar was trading at about 0.75 to the Euro around 2009. What is a challenge in your eyes?

Anyway, these are just opinions ( yours and mine ). Mine: no US rate hike in the foreseeable future, QE4.

Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#37

Post by adventured »

AC__ wrote: post #32
adventured wrote: post #29

Earlier quoted context omitted.

That's a terrible argument. You're talking about public debt, which is a small fraction of all US wealth holdings (household + corporate + government), and can be trivially managed. Further, unlike a lot of countries, the US has significant spare taxing capability (it rests in the middle tier globally on taxation). The US could easily raise $200 billion in new annual income taxes on the top 25% and not miss a beat -…

Yeah you're right, your argument that the entire globe will absorb U.S. inflation indefinitely is much more grounded.

My argument rests on the fact that the US economy is the world's #2 manufacturing economy, has among the highest median incomes (and median disposable incomes), has one of the most productive economies with one of the highest GDP per capita numbers, does not have a demographic bomb going off (Europe, Japan, China), is capable of being fully self-reliant on energy (which very few nations are), has a boom coming in energy exports via natural gas, continues to have one of the most innovative and dynamic economies, is growing as fast as or faster than competing major economies, owns 45% of all global wealth, has significant spare taxing capacity, US households dramatically reduced their debt to income ratio over the last five years (while most competing economies have seen increases in that ratio), and is the global leader across numerous major industries.

You picked out the one thing that is the easy trump card: the global reserve currency makes it all that much easier for the US.

Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#39

Post by AC__ »

adventured wrote: post #29
AC__ wrote: post #25

Earlier quoted context omitted.

AF http://www.usdebtclock.org/

That's a terrible argument. You're talking about public debt, which is a small fraction of all US wealth holdings (household + corporate + government), and can be trivially managed. Further, unlike a lot of countries, the US has significant spare taxing capability (it rests in the middle tier globally on taxation). The US could easily raise $200 billion in new annual income taxes on the top 25% and not miss a beat -…

You're wrong. I believe you're referring to this statistic: "... 0.7% of the global adult population, and they account for 45% of global wealth"[1] The U.S., ON PAPER, holds about 1/4(25.40%) of global wealth not half. [2]

[1] - http://fortune.com/2015/10/14/1-percent-global-wealth-credit...

[2] - https://en.wikipedia.org/wiki/List_of_countries_by_distribut...

Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#40

Post by adventured »

the-dude wrote: post #36
adventured wrote: post #19

Earlier quoted context omitted.

The Yen was a credible currency in 1995, and it's now in much worse shape (both today and its outlook). The Euro was widely expected to pose a challenge to the dollar globally, which has not happened at all. The dollar is as strong as it is even with 0% interest rates. Imagine if rates were even half the levels they were 20 years ago. I'd definitely make the argument the dollar is stronger today than it has been sinc…

> The Euro was widely expected to pose a challenge > to the dollar globally, which has not happened at all. The dollar was trading at about 0.75 to the Euro around 2009. What is a challenge in your eyes? Anyway, these are just opinions ( yours and mine ). Mine: no US rate hike in the foreseeable future, QE4.

The Euro has acted as a strangling device for everyone in the union not named Germany. For Germany, it has enabled them to ride an artificially cheaper currency with their exports (were they using their own currency, it would be far more expensive). For Italy, Spain, Portugal, Greece etc, the currency held them back by being even more expensive than their own currency would have been; for eg Finland, it has prevented them from making adjustments to become more competitive on numerous cost structures. The end result has been eight years of no net economic growth (and in recent dollar terms it's now far worse than that).

The lack of Eurozone growth will spur more QE for years to come. The US is presently done with its QE program, and there's nothing on the horizon that indicates it'll need to return to that in the next several years (large budget deficits would cause that, but so far Congress isn't growing spending in an out of control manner).

That context will push the Euro lower, and the USD higher versus. Until the Eurozone can show off serious growth (not 0.3%-0.5% type 'growth'), rapidly improving household balance sheets, and a significantly improving employment picture (not 11%), the Euro will struggle.

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