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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

#261

Post by jcriddle4 »

nine_zeros wrote: post #215
jcriddle4 wrote: post #209

Earlier quoted context omitted.

A 10% drop in currency would in your example, assuming no cost of shipping oil, US would go from 3.00 to 3.30 at 20% drop would mean 3.60 and even a US currency drop of 40% only gets you to $4.20. The data on trade indicates that countries that cheat on trade have epic growth rates and countries that do the "free trade" have close to zero growth or even declines. The data indicates local manufacturing has synergistic…

I wish prices were directly proportional to value of currency. But it isn't. In the oil price example, drop in value of USD could cause prices of oil to increase (by how much? We don't know. There are entire commodities industries who hire quants to figure this out every day). Assuming price of oil increases by 10%, price of chicken feed would increase by a%, causing an increase in price of chicken by b%, causing an…

The link below is on historical gas prices. Also include a link on US dollar to Euro. Depending on the state we are currently at about 2.50 and have been over 3.50. The dollar menu going to 5 because of a 10% or 20% drop in currency doesn't seem likely. We, and also other countries, can have fairly big currency changes without much internal inflation or deflation(can depend on country size). A number of countries have actually deliberately devalued their currency in order to encourage growth. The question that is more interesting is can we lose high productively jobs(manufacturing...) and still keep high standards of living. The data indicates we cannot.

https://www.statista.com/statistics/204740/retail-price-of-g...

https://www.macrotrends.net/2548/euro-dollar-exchange-rate-h...

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

#262

Post by FpUser »

birdsbirdsbirds wrote: post #218
FpUser wrote: post #207

Earlier quoted context omitted.

Nope it will not be rendered useless. 1) Price of the energy when you pay for it only grows over time. Short disruptions are possible but overall trend persists. 2) More energy also correlates to more goods produced so unless artificially manipulated the ratio should stay more or less the same. 3) All major currencies undergo inflation so even if energy becomes more plentiful there is nothing really new here

(2) actually remains constant. If you use energy to pay for energy, then one unit always costs one unit. But if the world energy production doubles, do you think that scarce resources cost the same? Prices of e.g. concert tickets or art pieces will adjust.

Some of scarce will become not so scarce as their availability limited by energy. Other will increase in price as they're limited by other factors. Same way as with inflation.

If you do not like it you're always free to by gold or whatever resource does not depreciate long term.

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

#263

Post by [deleted] »

paulpauper wrote: post #100
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…

Had you shorted the US stock market in 2000 on that prediction/hunch, you would be down a lot. The economy has moved beyond manufacturing. Data, payment, and information processing and intellectual ropery have taken over manufacturing in importance.

[deleted]

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

#264

Post by onepointsixC »

simonh wrote: post #255
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…

They aren’t slaves, they’re just people extremely happy to get a wage of $10k per year, which would be unobtainable for most of them any other way. The fact that this means they under cut US manufacturing wages by more than half isn’t really their fault. As for bringing back manufacturing home, you need to find two things to make that work. First massive subsidies and tariffs to drive up the cost of foreign imports,…

He's not referring to all Chinese laborers, but Uyghurs who were first sent to re-edcation camps and then sent off to factories all against their will.

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

#265

Post by runT1ME »

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 beauty of inflation is that it hurts you in direct proportion to how well off you are,

This is the opposite of true. In practice, inflation is wealth transfer to the upper class. Inflation benefits debt holders, the people who are most levereged (with debt) into inflation proof assets are those who are rich.

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

#266

Post by SubiculumCode »

tastyfreeze wrote: post #238
SubiculumCode wrote: post #230

Earlier quoted context omitted.

But it hasn't happened to our currency. The only thing that's happening to our currency right now is our political instability, which frankly is a little unsettling at the moment with all the talk of secession martial law, suspension of the Constitution, and religious fervor for Trump that we are seeing on the far right at this moment in time.

Yet... 1970 $1 is equal in purchasing power to $6.71 today. There is no indication from the Fed that this is going to turn around. With the rate the Fed is pumping out dollars, runnaway inflation is a near certainty.

This argument fails. Dollars are to be used, not hoarded. Modest inflation encourages use of the currency. This is good. As far as an argument from authority, I'll take the Fed than random HN commenter. In any case, inflation is well controlled, perhaps over controlled, except for certain products with very real limits to production and supply (i.e. housing).

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

#267

Post by incrudible »

hourislate wrote: post #193
namdnay wrote: post #67

Earlier quoted context omitted.

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 :)

>Germany still has a strong industrial base It's because they build the machines to build the product the Chinese manufacture. The Germans have forced themselves to be at the top of the Manufacturing Food Chain (engineering, etc) while letting the Chinese/Rest of the world build the crap we buy. I don't think we could get there manufacturing the "Trinkets" the Chinese mostly manufacture, that is a a race to the botto…

Your impression of China manufacturing "mostly Trinkets" is decades out of date.

Chinese manufacturing is now at a very high level, to the point where many western brands have effectively become "fabless", leveraging the fact that Chinese brands still struggle with poor reputation even domestically. In this symbiotic relationship, the fact that Germany is literally "the land of virtue" in Chinese might play a role.

Chinese labor has now too become relatively expensive, its economy is moving to become a service economy, and manufacturing gets outsourced from China to even cheaper countries.

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

#268

Post by sumedh »

vsskanth wrote: post #40
vinniejames wrote: post #30

Earlier quoted context omitted.

This is 100%, the fact the US can barely manufacturer face masks during a global pandemic is embarrassing. On the other end, how do you compete with slave labor in the Chinese factories?

> how do you compete with slave labor in the Chinese factories? Trading blocs that ensure minimum working conditions. Companies which pay the worker a decent wage should get favorable tax treatment and procurement.

> Trading blocs that ensure minimum working conditions.

So China will just ship the goods to another country and change the Made in label. Some middle man will make money and nothing will change.

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

#270

Post by jonathannat »

oarsinsync wrote: post #253
AnthonyMouse wrote: post #144

Earlier quoted context omitted.

> 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. If you look at the actual outcome, it was that China devalued their currency or otherwise lowered prices to eat…

> If you look at the actual outcome, it was that China devalued their currency or otherwise lowered prices to eat the tariffs, because their nightmare is manufacturing getting a foothold anywhere else, whether it's India or the US. Which is a win for the US because we have China paying us billions of dollars in tariffs without paying significantly higher prices for goods. Can you tell my suppliers this so they stop p…

The environment/macro has already changed, and the tariffs are here to stay, even Biden and post-Biden. If you haven't yet adjusted to this, your business is in big trouble as your competitors already have moved from China to other SE countries, and you will most likely fail soon.

As an aside. Most US based businesses have already moved on. It seems that alot of European-run businesses are laggards

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