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The fraying of the U.S. global currency reserve system
131–140 of 367 posts
Re: The fraying of the U.S. global currency reserve system
#132>This article places an emphasis on where the bottlenecks and problems have been forming in the system, explains why a continued weak dollar over a 3-5 year period remains my base case, and shows why some of these growing pains seem to be leading to a new re-ordering of the global monetary system over this decade. 3-5 years isn't really saying much especially given that the US dollar does not have much movement, and…
The dollar has fallen ~10% this year against other currencies. https://www.marketwatch.com/investing/index/dxy Example: the Swiss franc, but you see the same with GBP, EUR, and JPY: https://finance.yahoo.com/quote/CHF=X?p=CHF=X&.tsrc=fin-srch
that probably suggests that the trend will likely reverse, not continue. I would be bullish on the dollar now. The dollar always has a tendency of snapping back violently when few expect, like in 2014 or 2017.
Re: The fraying of the U.S. global currency reserve system
#133"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…
Correct me if I'm wrong, but it seems like the US does not need any factories, as it can print any amount of money and buy whatever it wants from any country has factories. Money talks. Or not? It has enough military for safely making this again and again for tens of years at least.
What happens when the other country isn't willing to sell? Consider a war or other disaster e.g. in the months before the pandemic, China stopped the export of face masks and other PPE, resulting in shortages in hospitals around the world.
Re: The fraying of the U.S. global currency reserve system
#134Earlier 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 beauty of inflation is that it hurts you in direct proportion to how well off you are
This seems opposite of reality. During inflation, prices of assets rise, as the currency with which to procure them becomes devalued; those who possess assets are in a much safer position than those who exchange their labor for currency, since inflation will happen far more rapidly to the necessities of life (food, shelter, etc.) than to wages.
Cf. the price of houses, cars, etc., in the U.S. and worldwide vs. the corresponding increases in wages.
Re: The fraying of the U.S. global currency reserve system
#135Earlier quoted context omitted.
He ended up reversing the steady gain we've had in manufacturing jobs since 2010, albeit indirectly, because he botched the response to covid. https://data.bls.gov/timeseries/CES3000000001
The argument against his covid response was in not using more aggressive lockdowns. Which is the thing that increases unemployment. You seem to be arguing that more lockdowns, which increase unemployment in the short term, would have reduced unemployment in the short term (i.e. the period measured in that data).
If you have a more aggressive lockdown, you can control the disease instead of letting it rage unabated for months. Trump’s covid response has been an unmitigated disaster for businesses.
Re: The fraying of the U.S. global currency reserve system
#136Earlier quoted context omitted.
> 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…
The status as a reserve currency requires dollars to flow into other countries, but that doesn't mean it has to be in exchange for manufactured goods. Example: US individuals or businesses buy real estate or stakes in local businesses in foreign countries with US dollars, causing US dollars to flow into those countries. Rents collected from the properties or businesses are used to buy more properties or businesses rather than being extracted from the country.
Re: The fraying of the U.S. global currency reserve system
#137This is perhaps the best written article on the current state and future of US dollar (and thus, America). As an avid follower of geopolitics and with exposure to both east and west, I've often had to work out where the future lies and the thoughts of this article appear to mirror mine. Especially since Trump's election, I have always wondered about the future of America, not just socially but also economically. Trum…
I used to think losing US reserve currency was a bad thing, but now I see it as our responsibility to hand the world back their sovereignty. This could heal the planet more.
Yep. It's a trap that has allowed us to live an unusually high standard of living.
By letting go of reserve status, we don't need to go to wars, we'll get some manufacturing back domestically and less shipping from across the world.
Sure, we'll have to reduce our quality of life with smaller houses, smaller cars, denser towns and lesser "stuff" in general but that's not a bad thing necessarily.
So what if gas costs $7/gallon, we just need to reduce our consumption.
Re: The fraying of the U.S. global currency reserve system
#138Earlier 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…
Without a very strong (and therefore expensive) social security net, “Letting people work for whatever wage they can achieve” is slavery. See 19th century Britain Germany still has a strong industrial base, without a race to the bottom and with strong unions. So it is possible :)
You have to square the circle.
Wages in the US are artificially high because of the dollar's position, but the US needs to either a) match the wages of the countries producing similar stuff or b) increase productivity and value to the levels of countries like Germany.
Since b) requires decades in factories, supply chains, trade agreements and most importantly training in actually producing things which means science and engineering, exactly the occupations an increasingly large portion of the US population has been taught to abhor, it is very unlikely to happen. The US has spent the last decades destroying all those things, so the only real option is to sadly let wages fall to levels markets are willing to pay for. It will bring a lot of suffering but is the consequence of decades of mismanagement and complacency, and it is unavoidable so it will either happen by will or by force. And we know it won't happen by will.
Of course there is always c) keep forcing the rest of the world to pay for the US standard of living while they themselves live beneath their means, but that is the actual problem now so how much longer can it last?
Re: The fraying of the U.S. global currency reserve system
#139Earlier 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…
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Re: The fraying of the U.S. global currency reserve system
#140Earlier quoted context omitted.
Correct me if I'm wrong, but it seems like the US does not need any factories, as it can print any amount of money and buy whatever it wants from any country has factories. Money talks. Or not? It has enough military for safely making this again and again for tens of years at least.
What happens when the other country isn't willing to sell? Consider a war or other disaster e.g. in the months before the pandemic, China stopped the export of face masks and other PPE, resulting in shortages in hospitals around the world.
Free market - money decide.
If not - the politics is involved in selling decision making - then the US starts a sanctions war, as China example shows. It sells in the end, but after being economically punished.