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The Dollar Is Dead

mathmeetsmoney.substack.com

151–160 of 367 posts

Re: The Dollar Is Dead

#151

The country is getting forced by markets into realizing pain for overspending, and only congress can manage this pain. Manage the pain, not remove it is key here. Manage it. Conrgess is totally inept and ridiculously politicized, so it's unlikely they will do anything except make the problem worse. That leaves only the natural fall out of refusing to acknowledge a financial injury before going out on the field to pla…

>Which means that people who cannot bury their wealth in (non-treasury!) assets will pay off the debt. I.e. people who need to work, which means it disproportionately affects the young. This is what has to happen in a democratic society with a flattened and eventual top heavy population pyramid that will not vote to reduce old people benefits.

> I.e. people who need to work, which means it disproportionately affects the young.

In general currency devaluation causes nominal wages to increase along with the price of everything else.

The people who get screwed are creditors, especially creditors who issued debt at a fixed interest rate. Which is kind of not that bad, except that creditors tend to have a lot of political power and then use it to either get bailed out by the taxpayer or get policies put in place to prevent inflation from eroding existing debts even if those policies have harsh consequences for other people.

Re: The Dollar Is Dead

#152
post #96

Earlier quoted context omitted.

I think a lot depends on whether the US keeps being an unreliable actor and thus a pain to deal with. If there's enough pain, it'll outweigh the pain of switching.

People read FUD articles like this then start ignoring any common sense, including even their own senses, because apparently the world must be ending and we're all going to die. There's no pain. What pain is anyone (except a couple dictators under sanctions) feeling? Almost every major currency has lost value relative to the US Dollar over the past 10 years. Not just, like, a little bit. Like, a lot a bit. The Indian…

You didn't mention Euros or Swiss Francs - the Euro being the obvious candidate for next reserve currency.

Re: The Dollar Is Dead

#153
post #75
post #24

Earlier quoted context omitted.

What, if I (a European) decide not to buy American treasuries, a squad of Marines is going to bust my front door?

What will you buy instead? The point is that the dollar is strong not purely because the American economy has been (and continues to be) the largest on the planet, but also because it is not currently possible to topple the US since its global activities are tied strongly to its military. The only realistic options that exist at the moment are going back to the gold standard (not viable for most countries) or shiftin…

When Trump was elected, I clicked the sell button on the US treasuries and the buy button on the European ones. Was pretty easy.

It will be more costly for the people doing this later, of course.

Re: The Dollar Is Dead

#154

Three projections that signal the dollar's demise: 1. The Fed has lost control of the Yield Curve, 2. One term presidents will become the norm, and fail to cut deficit spending 3. Powell will be the last multi-term Fed chair, and monetary policy will begin to oscillate in lock step with fiscal policy.

I don't see #1, at least not yet. The Fed hasn't lost control of the yield curve compared to the amount of control that the Fed normally has over it (which is less than total control).

For me, the second half of #3 is the real death knell. If Congress or the president is setting monetary policy, the dollar is in for a world of hurt.

Re: The Dollar Is Dead

#155
post #32
post #17

USD strength comes from military. Just as it was the case with all other currencies in the past. Do you see anyone challenging the US in a conflict? China won’t even invade Taiwan because they are afraid. ‘Nuff said.

My friends in Taiwan think they will be invaded before 2030 so we’ll see

They won’t do it until they actually know how to make SOTA AI chips which won’t be for a very long time.

Re: The Dollar Is Dead

#156
post #149
post #24

Earlier quoted context omitted.

What, if I (a European) decide not to buy American treasuries, a squad of Marines is going to bust my front door?

No, we just won’t rescue you next time you guys do stupid things.

Your president said we had "not a great day" the last time you rescued us.

Re: The Dollar Is Dead

#157

I am reading the book from Ray Dalio, "Principles for Dealing with the Changing World Order". This article seems a little reductive in its analysis, but this is actually a huge topic. I have not finished the book yet, I don't claim to understand all its implications, but I really like it because it analyzes many empires over the centuries, and tries to track multiple determinants for all of them (also a lot of pretty…

He also published animated video versions:

45min https://youtu.be/xguam0TKMw8

5min https://youtu.be/BB2r_eOjsPw

Re: The Dollar Is Dead

#158

The idea that a basket of foreign currencies or "BRIC+" will replace the dollar is absolutely not going to happen. If the dollar goes down it takes the entire world with it. Nobody is insulated from the risk of a dedollarization.

Things like this don’t happen overnight, just like the decline of empires doesn’t happen overnight.

Have you heard of the Portuguese real? Or the Spanish real? Maybe the Dutch guilder? They were all global reserve currencies in the past.

If you haven’t heard of them, don’t worry, someday, people will ask “Do you know the United States dollar?”

Re: The Dollar Is Dead

#159
post #66

One thing I desperately wish the markets would finally recognize is that the call is coming from inside the house: by letting private enterprise capture government, they are destroying the very currency that gives them power through unnecessary subsidies, preferential tax policies, socialization of losses and privatization of profits. Through corporate mass media manipulating voters and outright corruption in donatio…

Does anyone NOT know that? Devaluing the dollar is literally the key item on the current president’s financial agenda, as they’ve explained repeatedly

Listening to my fellow Americans? Lots of them either don’t know that’s the policy, don’t know the consequences of such a policy, or want it because they believe it’ll harm their enemies.

Re: The Dollar Is Dead

#160

The country is getting forced by markets into realizing pain for overspending, and only congress can manage this pain. Manage the pain, not remove it is key here. Manage it. Conrgess is totally inept and ridiculously politicized, so it's unlikely they will do anything except make the problem worse. That leaves only the natural fall out of refusing to acknowledge a financial injury before going out on the field to pla…

There is no "overspending." There is only undertaxing. The debt is literally just the accumulated difference between spending and taxation. If extreme wealth was taxed, the debt would be zero. The point isn't even to "pay for spending" but to enforce a functional social contract, and to limit the political and democratic distortions created by extreme inequality. "Markets" should not have a veto on policy in a democr…

You think that Bezos and Musk have billions in their own personal bank account?

So what do you mean be "extreme wealth"? Companies? Dividend payouts? House? Yachts?

I agree that luxury items that are out of reach of the middle class (eg sport cars etc...) should be taxed highly, but a toy that a rich person can buy vs a rich person investing money into his own or other companies is a problem if you want to tax that since no-one will then create new companies and invest in R&D.

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