The fraying of the U.S. global currency reserve system • Hacker News Board

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

#301

Post by sanp » Mon, Dec 14, 2020, 4:43 AM UTC

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…

This is missing the point of the article. The main reason for the current state of affairs is the petro-dollar system and the need for US to run deficits. Changing regulations for domestic manufacturing has very little to do with it.

There are quite a few European countries with very robust manufacturing bases who are far more regulated (both from a labor and capital perspective). So, minimum wages, labor unions etc have little to do with the US' manufacturing base. In fact, one could argue that weaker unions, if anything, have contributed to the decimation of the manufacturing base.

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

#302

Post by swswsw » Mon, Dec 14, 2020, 4:56 AM UTC

kurthr wrote: post #48

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?

It's not about slave labor, it's about manufacturing equipment. I suspect it was turned down, because helping the northeast survive a pandemic was not perceived as worth any political risk/capital. https://www.washingtonpost.com/investigations/in-the-early-d...

Wait. According to that article, the last major mask manufacturer in US offered to increase production and was turned down by government.

> "In the end, the government did not take Bowen up on his offer. Even today[May 9, 2020], production lines that could be making more than 7 million masks a month sit dormant."

That article was published in May 9. Even on May 9, the production lines were dormant. How could this happen? It is unfathomable. The country probably had masks shortage since March. It is so hard to believe some of the things that happened this year.

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

#303

Post by hannasanarion » Mon, Dec 14, 2020, 5:19 AM UTC

CountSessine wrote: post #284

8note wrote: post #205

Earlier quoted context omitted.

There is also d) the owners take smaller profits

The average operating margin for the S&P 500 is 10.53% (although that may have been 2018). And economists are worried that even that is high - traditional manufacturers like Ford typically manage operating margins of ~5%. Workers are already getting 95%. And then everything after that like R&D, marketing, and capital amortization has to come out of that 5%. And then finally a bit is left over for earnings for the own…

workers are not getting 95%. Corporate profit and revenue is at an all time high, but wages are down since the 1980s. All that corporate growth goes into price fixing schemes and mergers to establish monopoly, and "consulting fees" to suspiciously named LLCs in the Caymans.

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

#304

Post by onlyrealcuzzo » Mon, Dec 14, 2020, 5:51 AM UTC

economusty wrote: post #4

How much debt can we accumulate before entities stop buying our bonds and treasuries?

This has more or less happened already. The Fed is by far the largest buyer of treasuries right now.

Total treasury supply has nearly doubled this year, and yet foreign owned treasuries is only up 2% - meaning The Fed has bought close to 98% of it [1].

There is no treasury market. There is only The Fed. Considering that this market is about 30% of the size of the entire US economy, this should probably concern people. That's a large part of the US economy to be price fixed. Especially when you consider this essentially fixes prices for the housing market.

[1] https://seekingalpha.com/article/4379154-fed-is-almost-out-o...

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

#305

Post by Guthur » Mon, Dec 14, 2020, 6:22 AM UTC

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…

I'm not disagreeing on the spirit of your statement but I wonder if labour costs are really the prime driver of profitability with high tech manufacturing. It may be, but I'd love to see some of the figures, there could be other factors at play such as environment protection for example.

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

#306

Post by [deleted] » Mon, Dec 14, 2020, 6:36 AM UTC

southeastern wrote: post #166

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.

I don't know why more people aren't saying this. Is it really a majority opinion on this site that a race to the bottom is a good, or even tenable idea?

[deleted]

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

#307

Post by conanbatt » Mon, Dec 14, 2020, 6:42 AM UTC

tastyfreeze wrote: post #71

CuriouslyC wrote: post #28

Earlier quoted context omitted.

Inflating the dollar is probably the only way we're going to get out of the hole we're in, so that'd kill two bird with one stone.

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.

Defaults are much worse than inflation. They stop the economic machine by randomly taking players out.

Inflation can be managed.

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

#308

Post by tastyfreeze » Mon, Dec 14, 2020, 6:43 AM UTC

SubiculumCode wrote: post #266

tastyfreeze wrote: post #238

Earlier quoted context omitted.

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).

In any other field we see the same thing happen exactly the same way 20 time we assume it to be a hard rule until proven otherwise. For some reason with economics every government comes along and thinks they can guide the beast when no one has ever done so in history. I refuse to believe that a currency having 1/6 the buying power over 50 years is a good thing. Yet, under 150 years of gold standard the dollar maintained the same purchasing power.

Inflation does encourage spending. But, it also discourages saving. Everybody wants to get rid of their paper before it becomes worth less. Saving is a healthy part of an economy.

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

#309

Post by conanbatt » Mon, Dec 14, 2020, 6:47 AM UTC

tw8f969ae5b6f4 wrote: post #239

It seems to me that those taking the position that the minimum wage should be lowered/abolished and those taking the opposite position are both accepting the premise that absent the minimum wage, wages would fall. Is there any real-world basis for that premise? From basic supply and demand: 1. a downward pressure on wages emerges from workers competing with workers (competition among suppliers of labor) 2. an upward…

If min wage restriction is put below the market rate, it will have no effect. I think they are called called non-bounding limits in micro-econ

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

#310

Post by conanbatt » Mon, Dec 14, 2020, 6:50 AM UTC

RobertoG wrote: post #16

economusty wrote: post #4

How much debt can we accumulate before entities stop buying our bonds and treasuries?

This is from the article: "As of this year, the US Federal Reserve (blue line) now owns more Treasuries than all foreign central banks combined [..]" So, if your debt is to the Federal Reserve, how much debt can you accumulate before it's too much? Does the question even makes sense?

The more the Fed has bonds in their balance sheet, the more fragile they are in an inflationary crisis. If inflation goes up and interest rates go up, the fed's bonds go down in value. If the fed balance sheet becomes too much in the red, they need to print to make up the difference, which means more inflation.