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The fraying of the U.S. global currency reserve system

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Re: The fraying of the U.S. global currency reserve system

#121

Post by jfim »

AnthonyMouse wrote: post #84
hedora wrote: post #26

Earlier quoted context omitted.

True, but he said he said that simply because Bernie did, and it played well against Hillary in the primaries. He didn’t do anything that actually slowed the loss of our manufacturing base while president.

> He didn’t do anything that actually slowed the loss of our manufacturing base while president. Come on now. Say what you will about the effect of the tax changes on inequality, they're clearly designed to make it more attractive to do business in the US, e.g. lower corporate rates and allowing capital expenditures to be deducted immediately rather than amortized over a period of years. It's hard to argue that tarif…

> It's hard to argue that tariffs on goods from China don't make it less attractive to buy goods from China.

It's true that tariffs will make buying goods from China less appealing, but if you look at the outcome, it's not really a win. Consumers are paying more for the same goods, companies are scrambling to move their production to India and Malaysia, and there's not a significant increase in US manufacturing.

A properly executed initiative to increase US-based manufacturing would address all of the factors necessary to restart manufacturing:

- Not only tax cuts, but subsidies and investment aimed at increasing manufacturing in specific industries

- A concerted program to identify labor and skills shortages, and address them

- A program to identify the missing parts of manufacturing ecosystems and address them. One reason why electronics are made in China is not only cheap labor, but access to a whole ecosystem of suppliers and other manufacturers. Need one million PCBs assembled, plastic casings made, half a million cardboard boxes printed, instruction manuals printed and bound, well, there's a whole ecosystem of partners ready to get all of these things done with the capacity to have a relatively short turnaround time.

- A clear bipartisan commitment that this is something that won't get deprioritized or axed one or two administrations later, but something that is of national interest and that both parties agree to push forward

- A national focus on a key differentiator from other countries' manufacturing. China has cheap, Japan, Switzerland, and Germany have good, the US has big and sturdy maybe?

- Tariffs to protect newly formed manufacturing businesses, but only in conjunction with all of the above

This is what a solid plan for restarting US manufacturing would look like.

Re: The fraying of the U.S. global currency reserve system

#122

Post by Threeve303 »

Before spending the rest of the day reading articles on this site, I have to say this is a comprehensive and easily understood history for how the U.S. got to this point financially.

Being a cynic, I've studied many aspects of this system for some time. I have to say I'm shocked how obvious the PR has been for some of this stuff.

A favorite example is the Iraq war. Clearly a mafioso protection racket type of move. Nice country you got here, quit using Dollars and see what happens...

The 1970s in can be almost explained in the sense of a 1930s style run on the bank, except this time it's allies and foreign countries after their gold. The Saudi benefit from attacking Iraq probably even mirrored what France thought it was getting in "French Indonesia and French Vietnam". You can almost imagine a scene playing out between French and U.S. diplomats where the French ask for their gold and the U.S. goes, "well... here's the thing about your gold, tell you what let us call it even and we will spend a decade or more at war for you? Deal?"

The entire thing is absolutely crazy and the way it is taught to average people is complete bullshit.

Re: The fraying of the U.S. global currency reserve system

#123

Post by birdsbirdsbirds »

jaredtn wrote: post #34
jboydyhacker wrote: post #31

Economists writing about the end of the dollar as a reserve currency is not a new thing. With the Fed printing money tho at record rates this would be the time for a shift to happen. The problem is there is no alternative. The Euro has it's own structural issues and as we saw in March when folks got scared they sold alternatives like Bitcoin down hard. In short, there is no alternative without international cooperati…

There are two concepts here: medium of exchange and store of value. Currently the US dollar (and Treasury bonds) do both. It's unlikely that the US dollar disappears as a medium of exchange, though there are steps being taken here, such as China + Russia pricing their oil trade in yuan rather than dollars. Yet with M2 money supply increasing 25% in the last year and the DXY crashing by 10%, the US dollar is no longer…

Gold is not priced as a commodity and if everybody is starting to buy oil to store their value, it will stop being a commodity, too. The oil price would go up for a short moment, investments into renewable energies would increase and oil would actually drop in value after it had sucked up the value to be stored.

Can't the increased M2 money supply be interpreted as a move to stabilize the value of the dollar? Maybe the crisis made that increase necessary to maintain the value?

Re: The fraying of the U.S. global currency reserve system

#124

Post by koolba »

nextweek2 wrote: post #79
alex_anglin wrote: post #56

Earlier quoted context omitted.

Competing in a race to the bottom ought to beg the question about what alternatives and options are. Focusing on efficiency and quality are two examples that would probably be a better long-term bet, with fewer negative secondary effects.

That's the strategy of the Germans.

We all want to be like Germany, but do we have the sheer force of will?

Re: The fraying of the U.S. global currency reserve system

#125

Post by ggggtez »

AnthonyMouse wrote: post #84
hedora wrote: post #26

Earlier quoted context omitted.

True, but he said he said that simply because Bernie did, and it played well against Hillary in the primaries. He didn’t do anything that actually slowed the loss of our manufacturing base while president.

> He didn’t do anything that actually slowed the loss of our manufacturing base while president. Come on now. Say what you will about the effect of the tax changes on inequality, they're clearly designed to make it more attractive to do business in the US, e.g. lower corporate rates and allowing capital expenditures to be deducted immediately rather than amortized over a period of years. It's hard to argue that tarif…

> It's hard to argue that tariffs on goods from China don't make it less attractive to buy goods from China.

Disagree. I think this is small minded. So you add a tariff on chinese goods. If they are not the cheapest, then you buy from elsewhere... which still isn't the USA.

And then China does the same thing: retaliating with tariffs, and then buying goods from elsewhere, which isn't the USA either.

So in this game, tariffs probably hurt businesses in both countries.

And, anecdotally: I still buy products from china. More today than 4 years ago. The products for sale on Amazon are often just chinese imports that have been marked up or re-branded. I think it's the exception, rather than the rule, that tariffs did anything positive for someone.

Re: The fraying of the U.S. global currency reserve system

#126

Post by nemothekid »

AnthonyMouse wrote: post #76
lettergram wrote: post #49

Earlier quoted context omitted.

My father was one of the last tool makers in the US working for Molex. They spent years teaching the Chinese, the Chinese would disassemble all molds sent over to China and often break them, so my fathers team would have to fix / rebuild them. They spent years training the Chinese side-by-side in the US. In the end they still haven’t exactly caught up to the quality we had in the US. However, they now have 5x the too…

> To compete, you really do have to cut minimum wage. You have to loosen regulations, and importantly, you have to do massive tariffs / sanctions on China for the next decade. Part of the problem here is that the existence of some kind of universal "more regulations / less regulations" slider is an illusion. It allows the problem to be cast in partisan terms when that isn't the problem at all, because the problem isn…

I agree with your view wrt to regulations, but doesn't the article paint a different story? I'm wondering if I understood the article wrong -

As I understand it, the US status as a global reserve currency requires us to maintain a perpetual trade deficit - other countries need dollars and we must give it to them. This is done by buying goods from overseas which has eroded our manufacturing base, as the foreign demand for the dollar is greater than the local demand (which means there is a cheaper manufacturing market).

I'm not sure what regulation you could enact here that wouldn't severely depresses other sectors as they exist today.

Re: The fraying of the U.S. global currency reserve system

#127

Post by throwanem »

CoffeeDregs wrote: post #12

"Instead of drawing down our gold reserves, however, we gradually draw down our domestic manufacturing base and it gets replaced piece-by-piece in foreign countries." To me, this is the money shot. I hadn't seen this expressed before and it makes perfect sense. I'm baffled that we (the US) caused this to happen to the US. I'm (unhappily) registered Republican but I argued vociferously to a Dem friend in 2000 that our…

I agree, but this seems to me to be something which unfortunately requires a generational strategy to repair, and I don't see how any government that's possible in this country could achieve it. The time horizons aren't long enough and the incentives aren't aligned enough to permit even a credible start.

Re: The fraying of the U.S. global currency reserve system

#128

Post by tw8f969ae5b6f4 »

CuriouslyC wrote: post #87
tastyfreeze wrote: post #71

Earlier quoted context omitted.

Default is another option. Inflation hurts everybody. Cutting spending is the only way to start repairing the economy for the long term. Government consumes 31% of the fruit of our labor. Money that could be left in the hands of people to drive the economy.

The beauty of inflation is that it hurts you in direct proportion to how well off you are, and it can't be dodged (i.e. it's like a wealth tax, only actually achievable). We could drive inflation while also ameliorating a lot of the pain it would cause by implementing UBI (in fact, I'm pretty sure big deficit spending is the only way UBI will ever happen). Defaulting would screw a lot of institutional pension investo…

The effects of inflation are neither instantaneous nor uniformly distributed. Those who obtain the new money first are able to spend it before prices have had time to adjust. As that new money propagates, the prices of the relevant goods and services are bid up.

As such, inflation gives an economic advantage to those who receive the new money sooner, and the consequent higher prices harm those further down the flow.

In short, and contrary to the implication of the above comment, inflation benefits banks and corporations (and by extension, the wealthy and powerful), and harms workers and those on fixed incomes.

Re: The fraying of the U.S. global currency reserve system

#129

Post by ralph84 »

lettergram wrote: post #49
CoffeeDregs wrote: post #12

"Instead of drawing down our gold reserves, however, we gradually draw down our domestic manufacturing base and it gets replaced piece-by-piece in foreign countries." To me, this is the money shot. I hadn't seen this expressed before and it makes perfect sense. I'm baffled that we (the US) caused this to happen to the US. I'm (unhappily) registered Republican but I argued vociferously to a Dem friend in 2000 that our…

My father was one of the last tool makers in the US working for Molex. They spent years teaching the Chinese, the Chinese would disassemble all molds sent over to China and often break them, so my fathers team would have to fix / rebuild them. They spent years training the Chinese side-by-side in the US. In the end they still haven’t exactly caught up to the quality we had in the US. However, they now have 5x the too…

China treats workers like shit and the environment like shit. The US wouldn’t win a race to the bottom and shouldn’t try.

Instead companies who manufacture in China should be taxed at much higher rates to account for the negative externalities they benefit from otherwise.

Re: The fraying of the U.S. global currency reserve system

#130

Post by sidlls »

tastyfreeze wrote: post #80
api wrote: post #9

Earlier quoted context omitted.

I’ve seen fretting for years about the collapse of the dollar as the global reserve. Lately I have started wondering if this might not be good in the long run, and if maintaining the dollar as a global reserve is actually a very costly and economically distorting thing.

I think the only reason that a global reserve currency hasnt changed yet is that there are no sound currencies to use. USD was selected as the global reserve because it was backed by gold. We went and fucked that up. Now there are no currencies left backed by anything but promises. If there was a large enough country with gold backed money the reserve currency would have switched decades ago.

I have not read one single serious justification (as in, empirical) for using gold as the backing of a currency. There are many indications that, historically, the boom and bust cycles that exist naturally are exacerbated when tying the value of currency to (often easily manipulated to be artificially) scarce things like gold.

The world has moved beyond tying the value of our currencies to material goods. Digital "coins" aren't any better, and the same group of fringe types who push the gold standard have taken that over as well.

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