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

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

#321

Post by blueblisters » Mon, Dec 14, 2020, 8:41 AM UTC

momokoko wrote: post #180

cloudinshape wrote: post #174

Earlier quoted context omitted.

The reason foreign real estate investment is so high is because the dollar is the reserve currency of the world, and since those countries produce so much they have a huge excess of dollars but the US produces so little they have nothing to buy with those dollars. The only thing the US can realistically offer is land, if you ban it it will only accelerate the collapse.

Banning foreign investment in real estate forces foreign investors into more productive investments while simultaneously lowering the cost of living for workers and cost of business for companies. Moving inflation to 6% will create millions of working class jobs in the US due to both a weaker dollar and cheaper money supply for value creation. The losers in all of this are wealthy Americans. They will see their asset…

Moving inflation to 6% will almost certainly not impact any wealthy American with most of their net worth in equity. It will impact working class Americans who have their savings, however little, in bank accounts.

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

#322

Post by Gibbon1 » Mon, Dec 14, 2020, 8:55 AM UTC

blueblisters wrote: post #321

momokoko wrote: post #180

Earlier quoted context omitted.

Banning foreign investment in real estate forces foreign investors into more productive investments while simultaneously lowering the cost of living for workers and cost of business for companies. Moving inflation to 6% will create millions of working class jobs in the US due to both a weaker dollar and cheaper money supply for value creation. The losers in all of this are wealthy Americans. They will see their asset…

Moving inflation to 6% will almost certainly not impact any wealthy American with most of their net worth in equity. It will impact working class Americans who have their savings, however little, in bank accounts.

> It will impact working class Americans who have their savings, however little, in bank accounts.

I have about $20k in bank accounts. I owe $450k at 2.5%

6% inflation? Don't throw me in the briar patch!

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

#323

Post by imtringued » Mon, Dec 14, 2020, 9:10 AM UTC

notahacker wrote: post #145

CuriouslyC wrote: post #87

Earlier quoted context omitted.

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…

Inflation can easily be dodged by those with foreknowledge (hold your wealth in assets whose value will inflate). Borrow lots of money at a low fixed rate to buy property and you might even make a profit. Unexpected inflation is a wealth tax on people who loan out their wealth at fixed rates or store most of it in cash, and an sales tax on people and organisations unable to renegotiate salary or contracts. Exactly wh…

It depends on where the money arrives first. Right now all of it goes straight to assets while completely skipping over workers. Whatever asset inflation happens, consumer inflation will always be behind.

If the money arrives on the consumer side first then asset inflation will follow but only after consumer inflation has caught up. All the asset inflation that happens will be caused by productive growth. Encouraging the wealthy to get rich off the backs of rich workers is exactly the situation that we want to achieve. Right now they have no need for domestic workers because the central bank tap is wide open and workers in China manufacture all the widgets (such as iPhones) they need.

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

#324

Post by imtringued » Mon, Dec 14, 2020, 9:30 AM UTC

runT1ME wrote: post #265

CuriouslyC wrote: post #87

Earlier quoted context omitted.

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.

>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.

It may be counter intuitive (it actually isn't, it's perfectly logical) but inflation is merely what happens when demand exceeds supply. This means if you constantly increase demand for labor you will get to see consumer inflation. Since there is barely any consumer inflation there is very little demand for labor. This isn't surprising because a lot of the jobs are now abroad and domestic training opportunities are poor (companies don't provide them) or inaccessible (college is expensive and time consuming). If you could somehow make every American highly educated so that they can work in the highly profitable sectors of the economy that remained (there is no shortage of those) you would still get to see decent economic growth (2% YOY) in developed countries. The reality is that not everyone can get such a job and some need a secondary career after they lost their first. Since there are not many low skilled jobs that can't be done abroad there is little demand for these workers. If you can increase consumer inflation you will directly increase the wages of those unneeded workers because the consumer inflation is excess demand for (low skilled) jobs.

> the people who are most levereged (with debt) into inflation proof assets are those who are rich.

Yeah but here comes the trick. If there is consumer inflation the only way you can make your assets inflation proof is by productively employing workers. If you are owning real estate then the value of your assets will grow but only insofar that workers can afford to pay rent.

The rich won't make money off of sitting on assets, they will make money off of using those assets productively by renting them out. In our current twisted reality you can often make more money off of just letting the property sit empty so that you can have a quick sale 5 years down the line. The idea of unused real estate growing in value is insane but it only happens because there is asset inflation and mismanagement by the central bank.

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

#325

Post by imtringued » Mon, Dec 14, 2020, 9:42 AM UTC

rsync wrote: post #197

CuriouslyC wrote: post #87

Earlier quoted context omitted.

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, 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)." I think you misunderstand ... Generally speaking inflation…

>Generally speaking inflation can be managed and avoided by asset holders and business owners. They can adjust their rents and prices to match the inflation in a way that wage earners and renters cannot.

If there is consumer inflation you can't manage inflation in a way that doesn't productively employ workers. If there is asset inflation you can have an unproductive business and still grow without doing anything of value. The latter is what many people object to. The former would benefit workers far more than it would benefit the rich. If your wages increase by 10% but Bill Gates' net worth merely catches up with inflation who gives a damn? If you can somehow double the income of the poorest members of society then you effectively cut the relative wealth of Bill Gates' in half. He has more to lose from expensive workers that demand reasonable salaries than he can gain from catching up with consumer inflation.

>Generally speaking it is deflation that hurts asset holders and business owners. We have made desperate attempts since the financial crisis to stave off deflation and even then we're barely treading water. Financial assets and real property (and also silly things like paintings) have benefited but look at the price of oil ... look at the price of other basic commodities and services like shipping.

That would be true if there was no central bank intervention. But the central bank is intervening in a way that gives the rich what they want without giving anything to the poor. Deflation on the asset side basically doesn't exist.

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

#326

Post by imtringued » Mon, Dec 14, 2020, 9:54 AM UTC

HexagonalKitten wrote: post #219

CuriouslyC wrote: post #87

Earlier quoted context omitted.

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…

Actually, all you have to do to dodge inflation is dump your idle currency into literally anything else. Rich people hang in the circles where these plans are made so you'll never take them by surprise. (It'd be interesting to look at Cyprus' banking records and see who would have been impacted had the haircut happened suddenly, two months earlier.) So inflation is irrelevant for the little guy, and easily dodged by…

>Actually, all you have to do to dodge inflation is dump your idle currency into literally anything else.

It doesn't work that way. If you want to protect yourself from inflation you have to deploy that capital productively or alternatively be close to the source of the inflation (the central bank). If you are actually doing productive work then workers will see their incomes grow and if workers are underpaid relative to assets then wage growth will continue until both assets and incomes are roughly on par. After that assets will keep up with inflation. The benefits to workers massively outweigh the benefits to asset holders.

When you consider that the central bank is just blindly handing out money to public companies it's basically the opposite. It's actually perverting and distorting the economy because the money isn't going where it is truly needed. If you are rich this is what you want. You want to have lots of money and a workforce that works for peanuts to make your relative wealth even bigger.

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

#327

Post by sudosysgen » Mon, Dec 14, 2020, 9:55 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…

This isn't a correct way of looking at it. You're assuming that the sum total of profit generated is in that one manufacturer. It isn't the case. You have subcontractors that also make an additional ten percent, then materials coming from a supplier that takes another ten percent, which comes from raw material suppliers that make yet another 10%, and then you're going to have consultants in R&D and marketing that might make even more than 10%, and so on. So it really can end up quite a bit higher than that.

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

#328

Post by imtringued » Mon, Dec 14, 2020, 9:57 AM UTC

tw8f969ae5b6f4 wrote: post #128

CuriouslyC wrote: post #87

Earlier quoted context omitted.

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.

Yes but going by central bank policy that money isn't supposed to end up in their hands first. The goal of the central bank is to increase consumer inflation. Of course the actions of the central bank don't match their stated goals but this is primarily a policy failure. The rest of the government is supposed to use the cheap money to increase demand for labor through public spending. It's completely failing to do so.

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

#329

Post by sudosysgen » Mon, Dec 14, 2020, 10:06 AM UTC

jonathannat wrote: post #270

oarsinsync wrote: post #253

Earlier quoted context omitted.

> 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

Yeah, no. US trade deficit to China is still increasing.

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

#330

Post by imtringued » Mon, Dec 14, 2020, 10:19 AM UTC

CuriouslyC wrote: post #195

tw8f969ae5b6f4 wrote: post #128

Earlier quoted context omitted.

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.…

The rich (particularly banks) are always going to game any system, so saying anything is unworkable because the rich can partially game it is defeatism. If we use UBI to inflate the currency, everyone gets the same chance to use uninflated funds, which ends up benefitting those with less. If we inflate via UBI, those on fixed incomes wouldn't be hurt unless it was a fat fixed income, in which case it's disingenuous t…

I propose a very new unconventional type of asset. It is effectively equivalent to a UBI but since it is also an asset the central bank can easily control it.

The central bank does an IPO and sells UBI tokens at a fixed price. Say $100. If you own at least one token then you will gain a dividend of 1 UBI token per month. To prevent abuse there is a government run exchange where this token can be bought on that verifies your identity. This means you are heavily incentivized to sell your tokens to other people for less than $100 yourself. It's basically an "anti" asset. It's relative utility shrinks the more you own. The central bank then can buy tokens back at any price it desires. The beauty of this system is that the wealthy are a minority so any money that the central bank distributes by buying UBI tokens will primarily go the less wealthy because they are the majority. Since you get one token per month and the central bank can set the minimum value of the token it is effectively a UBI. If consumer inflation heats up the central bank can always stop buying tokens because it isn't a true UBI that people depend on.