They say that prediction is difficult, especially when it is about the future. Unwise economic policies may be punished quickly, slowly or might be revoked before punished severely. The question is how much risk one is willing to take. Another matter is of morality. Being invested into something means supporting its practices and being partly responsible for them.
Surely the crash of the US economy has to be soon
431–440 of 697 posts
Re: Surely the crash of the US economy has to be soon
#432I feel like there's some credibility to 'this time it's different' The US economy depends on the country's position of world hegemon - the US dollar is the world's main reserve currency, the US enforces international order and trade rules via its military strength, it dominates technology and culture through 'US defaultism'. I dont think AI even factors in to this. The US economy is priced for global reach - if it ma…
> The looming US debt is also a great question - a lot of economists have argued that since most US debt is good. It's mostly in forms of treasuries purchased in USD that pay in USD - this means the indebtedness creates a huge amount of dollars abroad that foreigners have to then spend on US services, driving demand. You got it wrong (I'm sure most economists don't get it wrong and you just misread/misquote). USD is…
He's not wrong in his conclusion, just not accurate in why. If countries start moving away from depending on the trade imbalance with the US, the demand for USD will dry up. And they are trying to move away from it because of politics, specifically because of US bullying. But more importantly, the US is increasing trade barriers in a naive attempt to reduce that trade imbalance, which is the biggest reason everybody holds so many dollars--they're paid in dollars when exporting to the US, but don't buy enough US imports (individually or collectively) to spend & exchange all those dollars, which is why they park them in treasuries and other US investments. And it won't be long before oil begins receding from the picture (at least relative to total global trade, if not absolute dollars), displaced by renewables. Though oil is odd in that while creating demand for USD to settle transactions even for non-US oil, it's also a significant US export and has the effect of repatriating dollars.
The importance of USD globally was always on borrowed time. Global GDP has exploded in the 21st century, and the size of the US economy relative to the global economy is shrinking, albeit slowly. The US share of global GDP was like 35% in 1985. By 2030 it's projected to be as low as 12%. It doesn't necessarily follow that this would change the dynamic of strong dollar demand supporting US investments and debt, but it makes it much easier for this dynamic to change as countries become increasingly less reliant in relative terms on exporting to the US. In fact, it's kinda idiotic to rock this boat unless/until we're prepared for some serious fiscal belt tightening. As global GDP increases relative to the US, in theory the rest of the world could support profligate US debt in perpetuity.
Re: Surely the crash of the US economy has to be soon
#433> Here’s the current price of silver. Not shown on the chart (and which couldn't have been predicted at the time of writing) is today's crash of almost 30% in that price. Speculative bubbles happen. The narrative of people losing faith in currency made no sense, because that should pump the prices of durable commodities as well, if not instead of precious metals.
Once the supreme court decision about Trump went out, I took all of my investments and put into a savings account. When a dip happens, I simply take 10% of the money, buy the dip, then sell when the price hits pre dip. So far Ive netted significantly more than any of my peers that actually do investing.
Interesting. Do you buy indexes, or ?
Re: Surely the crash of the US economy has to be soon
#434A declining dollar will look like a good economy for those who think the economy is the stock market.
From an EUR perspective the s&p500 has flatlined over the past year while the msci Europe is up by almost 30% in eur terms.
Needless to say, as an outsider from the inflation bubble, American stocks are not a good investment.
There is a good reason to believe that us stocks will not outperform in inflation adjusted terms over the next 10 years.
Re: Surely the crash of the US economy has to be soon
#435Earlier quoted context omitted.
> It happened to blockchain, it happened to metaverse. I don't think AI is comparable to these technologies. AI had a real impact on certain daily activities, such as search, coding, etc. While the metaverse was just a fantasy with no tangible benefit other than Zuck trying to create his own platform to take on Apple and Google. Blockchain had some potential in certain fields, but it wasn't user-friendly or usable by…
I'm willing to bet that the metaverse (defined by me as AR glasses) is a future that's coming and that Zuck was just too early, just like Palm Pilot was arguably too early. The use cases are too compelling, effectively a computer assistant that can tell you anything and everything about what you did or are doing. Yes, privacy people will hate it but the rest will eat it up just like they don't care about privacy on t…
An AR-glass assistant is very different from the metaverse Zuck blew tens of billions on, which was a shittier version of Second Life in VR, with a side of blockchain
He wasn't early with a good thing; he was unfathomably disconnected from reality with a bad thing
Re: Surely the crash of the US economy has to be soon
#436I feel like there's some credibility to 'this time it's different' The US economy depends on the country's position of world hegemon - the US dollar is the world's main reserve currency, the US enforces international order and trade rules via its military strength, it dominates technology and culture through 'US defaultism'. I dont think AI even factors in to this. The US economy is priced for global reach - if it ma…
> The US economy depends on the country's position of world hegemon Unfortunately, the data doesn't back this up. The US economy is actually one of the least trade-dependent nations in the world. 27% of GDP is trade-oriented (The value of imports and exports as a function of GDP), while the global average is 63%. The US is so developed, that even if the country was completely cut off from the world and operated as an…
Become a hermit kingdom to own the libs.
At a certain point we have to ask: what is the point of politics? Who are we doing all this civilisation stuff for? Is a nation an engine of prosperity to enrich the lives of its people, or a life support system for the Dear Leader?
Re: Surely the crash of the US economy has to be soon
#437I feel like there's some credibility to 'this time it's different' The US economy depends on the country's position of world hegemon - the US dollar is the world's main reserve currency, the US enforces international order and trade rules via its military strength, it dominates technology and culture through 'US defaultism'. I dont think AI even factors in to this. The US economy is priced for global reach - if it ma…
Economic crashes are hard to predict. In the end stock markets are a bit irrational. They don't crash just because there are good rational reasons. And then some irrational thing triggers a mass panic when you least expected and the whole thing crashes.
The circumstances and timing (it's been a while) suggest we are probably closer to a crash happening.
From a loan/interest point of view, the dollar de-valuating a bit is actually not a bad thing for the US. It stimulates exports and inflation. And at the same time that reduces the value of the debt (and that is paid in dollars). The downside is that inflation going up usually also means interest going up. And Trump resisting that because he wants to accelerate the economy might not be a good thing.
The big picture here is oil. The world is slowly moving away from oil as the key driver for economies and paying for it in dollars. China is well on its way electrifying large parts of its economy. To the point where it is starting to import less diesel. And they border on Russia with whom they trade in Yen, not dollars. A world that is going to trade less and less oil is going to be less dependent on dollars.
I'm not an economist though. But planning for some kind of crash/correction seems prudent.
Re: Surely the crash of the US economy has to be soon
#438I feel like there's some credibility to 'this time it's different' The US economy depends on the country's position of world hegemon - the US dollar is the world's main reserve currency, the US enforces international order and trade rules via its military strength, it dominates technology and culture through 'US defaultism'. I dont think AI even factors in to this. The US economy is priced for global reach - if it ma…
> It's mostly in forms of treasuries purchased in USD that pay in USD - this means the indebtedness creates a huge amount of dollars abroad that foreigners have to then spend on US services, driving demand. Strangely enough, this is exactly the opposite of how it works. The dollars abroad tend to stay abroad, as either a more stable alternative to local currencies, or a reserve currency. Likewise, treasuries held abr…
I, a foreign entity, have sold something to an american and now have 10 dollars and zero treasuries.
I purchase a treasury. I have zero product, zero dollars and one treasury.
At some point in future i have zero product, maybe 12 dollars and zero treasuries. Presumably i now either repeat the cycle or use my winnings to spend on us output.
GP’s version checks out, your assertion about dollars staying abroad doesnt track? What am i misunderstanding - How did these dollars get abroad, how did they repatriate to buy treasuries, how did a treasury become a reserve, how did the dollars still exist abroad after being exchanged for treasuries?
Re: Surely the crash of the US economy has to be soon
#439The US was in decline, a vote for Trump was a vote to accelerate that decline.
Re: Surely the crash of the US economy has to be soon
#440Earlier quoted context omitted.
The international "rules-based order" is a good idea when most nations play by the rules most of the time, and when the most powerful at least pretend to follow the same rules as everyone else. A world order based on rules makes it possible to live at a much higher level of abstraction. Abstractions like rule of law, democracy, government currencies and stock exchanges are intangible and imaginary. They're mostly jus…
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