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Soviet Collapse Echoes in China’s Belt and Road

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Re: Soviet Collapse Echoes in China’s Belt and Road

#171

Post by trocadero »

jnurmine wrote: post #162
trocadero wrote: post #150

Earlier quoted context omitted.

The US owes China gazillion dollars. Not a gazillion dollars in services and stuff. That's a huge difference because at any point the US can create a gazillion dollars for virtually no effort.

Won't "printing more money" crash the value of the currency?

It will have an impact, no doubt, but probably more like a few points higher inflation than a total crash. Either way, the point is that owing money in a currency you control is vastly different than owing money in a currency you don't.

Re: Soviet Collapse Echoes in China’s Belt and Road

#172

Post by User23 »

TangoTrotFox wrote: post #112
User23 wrote: post #104

Earlier quoted context omitted.

"the mechanism does not matter" only if you have no interest in understanding how the system actually works. China isn't the US's lender and they do not make any loans. They can't foreclose, because no loan exists. All they can do is take their coupons or sell the security to someone else who will do the same. China can't starve the Treasury of money because the Treasury exclusively borrows reserves from the Federal…

While everything you've said is accurate, I think you're intentionally skirting around the meat of the issue and that is the value of currency. That we can we can 'print' (colloquially speaking) as much money as we like is not in dispute. However, the consequences of choosing to do so are the heart of the matter. In the past our money was implicitly backed by oil thanks to our petro dollar arrangements, but those tim…

The US dollar is backed by the taxing power of the United States and the productivity of the US economy. Our economic decisions have always stood and fallen on their own merits. Those merits include the world's largest consumer market and the world's putative strongest military. Foreign desire to export to the US and thereby acquire dollar denominated assets is a function of those merits. So long as that situation holds, foreigners will always desire to swap their non-interest bearing reserves for interest bearing treasuries, at any nominal positive interest rate.

So long as enough oil is denominated in dollars to satisfy US demand for imports, it doesn't really matter what currency other countries pay. A eurodollar crunch doesn't have any appreciable effect on US domestic prices and neither will a eurodollar glut. Petrodollars are eurodollars. [1]

To cut right into the meat of the issue, US issued currency will remain valuable until economic and political collapse destroy US consumer markets and productivity. Foreign asset holders cannot cause that by refusing to show up at treasury auctions. It would take a serious civil war, a world war where the mainland USA wasn't left untouched, or a similar multi-megadeath level catastrophe. And even then it wouldn't be impossible for the US to pull through as a going concern, as it were.

[1]https://ftalphaville.ft.com/2016/01/25/2151037/petrodollars-...

Re: Soviet Collapse Echoes in China’s Belt and Road

#173

Post by SamReidHughes »

spacehome wrote: post #63
lwf wrote: post #30

Earlier quoted context omitted.

The VA is a weird case — if we had comprehensive medical coverage for all Americans, the because-of-military costs would only be those incurred due to care for wounded veterans. I believe that's a minority of the VA's expenditures, but sometimes it is hard to separate. For example, my grandfather receives a hearing aid from the VA — is that because of too much time spent around jet planes, or just due to age?

Without a doubt, but as it stands now, it's part of the total compensation package that is offered to service members and should be accounted as such.

It's not appropriate to include in terms of proportion of GDP because they'd be spending that money on healthcare anyway.

Re: Soviet Collapse Echoes in China’s Belt and Road

#174

Post by nickserv »

AnimalMuppet wrote: post #57
nickserv wrote: post #52

Earlier quoted context omitted.

There's also the fact that the Soviets over-extended themselves militarily at the same time, Afghanistan comes readily to mind. China has a large, powerful and I would assume expensive militarily, but has not deployed significant number of troops in the past few decades (since Korea?), and in any case has never occupied a foreign country. That's a huge amount of resources available to spend on infrastructure and "sof…

> China ... has never occupied a foreign country. I'm not sure that Tibet would agree with you.

You're quite right in the sense that the military invaded, but it was not so much an occupation with a puppet government and continuous guerilla warfare , like the Soviets in Afghanistan, the Nazis in France or the US in Iraq.

It was more of an anexation of adjoining territory based on historical claims (fabricated or not), like Germany with Alsace Lorraine, Russia with Crimea or the US with certain parts of northern Mexico.

The point was not so much about seizure of territory but the huge cost of a prolonged occupation with local resistance.

I was definitely not trying to legitimize the invasion of Tibet nor downplaying the suffering of the Tibetan people, so thank you for bringing this up.

Re: Soviet Collapse Echoes in China’s Belt and Road

#175

Post by sonnyblarney »

trocadero wrote: post #150
sonnyblarney wrote: post #93

Earlier quoted context omitted.

It's the same thing as borrowing. US gov sells TBills, those TBills are bought by China. The transaction you described also translates government debt into currency, which China also sits on, so it's a kind of an exchange debt. So the US 'owes' China a gazillion dollars in services and stuff. One way or another.

The US owes China gazillion dollars. Not a gazillion dollars in services and stuff. That's a huge difference because at any point the US can create a gazillion dollars for virtually no effort.

The US owes China both a gazillion dollars, and additionally a gazillion dollars in stuff that dollars can buy - because they have not just US debt, but they also have currency.

Re: Soviet Collapse Echoes in China’s Belt and Road

#177

Post by sonnyblarney »

User23 wrote: post #167
sonnyblarney wrote: post #117

Earlier quoted context omitted.

You're confusing mechanism with economics. "China isn't the US's lender and they do not make any loans." Yes, China is a lender to the US, in fact the largest lender [1]. Treasures are loans/bonds. Whoever owns them is a lender to the United States. It's economically the same thing as any other nation selling bonds. "They can't foreclose, because no loan exists. All they can do is take their coupons or sell the secur…

For the benefit of anyone else reading this, I'd like to point out the misconceptions and misinformation above. > China can 'starve' any nation to the extent they are a lender to that nation. China's demand for Treasuries makes up part of the demand curve for Treasuries, along with all the the demand. The Federal Reserve controls short term yields completely through its open market operations desk. It controls long t…

"I hope this helped everyone else with an interest in understanding some of the widespread ideologically motivated ("money printing" is a shibboleth) misconceptions in this area"

I think the opposite is true, I think you're not grasping some basic economic issues and may need to re-look at the situation.

None of your responses are in fact responses to my points.

Re: Soviet Collapse Echoes in China’s Belt and Road

#178

Post by User23 »

sonnyblarney wrote: post #177
User23 wrote: post #167

Earlier quoted context omitted.

For the benefit of anyone else reading this, I'd like to point out the misconceptions and misinformation above. > China can 'starve' any nation to the extent they are a lender to that nation. China's demand for Treasuries makes up part of the demand curve for Treasuries, along with all the the demand. The Federal Reserve controls short term yields completely through its open market operations desk. It controls long t…

"I hope this helped everyone else with an interest in understanding some of the widespread ideologically motivated ("money printing" is a shibboleth) misconceptions in this area" I think the opposite is true, I think you're not grasping some basic economic issues and may need to re-look at the situation. None of your responses are in fact responses to my points.

I tried to engage with you constructively. It’s too bad I failed.

Re: Soviet Collapse Echoes in China’s Belt and Road

#179

Post by spacehome »

SamReidHughes wrote: post #173
spacehome wrote: post #63

Earlier quoted context omitted.

Without a doubt, but as it stands now, it's part of the total compensation package that is offered to service members and should be accounted as such.

It's not appropriate to include in terms of proportion of GDP because they'd be spending that money on healthcare anyway.

It still is appropriate because it's compensation for a job. VA benefits are part of the package deal a service member signs up for. Without those benefits the military would have to offer a higher salary to recruit the same number and quality of employees, at the margin at least.

It's like saying a government pension shouldn't be counted as part of the cost of employing government workers because the workers would still have to buy food and housing whether or not their career was with the government.

Re: Soviet Collapse Echoes in China’s Belt and Road

#180

Post by User23 »

kahirsch wrote: post #149
User23 wrote: post #98

Earlier quoted context omitted.

This is hard to wrap one's head around, so let me try again with some more detail. The US doesn't sell TBills. It creates those interest bearing IOUs ex nihilo, and then swaps them for reserves (also created ex nihilo) with the Federal Reserve. Primary Dealers buy treasuries from the Fed, not from the treasury.[1] The process is absolutely nothing like going to a bank or anyone else to borrow money. [1] https://en.wi…

This is not correct. The government sells treasury securities at auction.[1] Primary dealers are required to participate in all Treasury auctions. When the Federal Reserve conducts open market operations, it does create reserves out of nothing, but most Treasury securities are not bought by the Fed. The Federal Reserve can buy treasuries directly from the government via non-competitive bids, but generally buys and se…

> The government sells treasury securities at auction

This is true, in the sense that the Treasury and the Fed work together extremely closely, and both are acting as or on behalf of the government. But strictly speaking, it's the Fed that conducts the auction because it is the Treasury's fiscal agent.[1][2]

The link you supplied provides useful information for a retail investor who wants to buy securities, but it's not and it isn't meant to be a description of the fine mechanics of government funding. In the event that the TT&L accounts[3] and Treasury's account at the Fed are together insufficient for Treasury's spending needs, then it creates securities and transfers them to the Fed for auction, in exchange the Fed debits Treasury's deposit account. This all follows from the statutory limitations on both entities. Treasury isn't legally permitted to carry a negative balance at the Fed, but the Fed legally can carry a negative balance on its own account. A primary benefit of and reason for this arrangement is it makes the funding predictable. Personally I find the system elegant in its (legally mandated) complexity.

Saying "the Treasury sells securities at auction" isn't really wrong, seeing as it's just a simplification that is acceptable in virtually every case with the sole exception being discussions like this one. It's a lot like saying "I sold some AAPL stock." You didn't really, your broker did. In everyday conversation there's nothing wrong with these simplifications.

[1]https://www.investopedia.com/articles/economics/08/treasury-...

[2]https://www.investopedia.com/terms/t/taaps.asp

[3]https://www.newyorkfed.org/aboutthefed/fedpoint/fed21.html

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