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72% of the dollar's purchasing power was destroyed in just four episodes

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Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#261

Post by dhosek »

znnajdla wrote: post #13

This supports my hunch that the current Iran war creates a lethal trifecta that could potentially cause a dollar collapse. 1. Massive military overspend. 2. Petrodollar squeeze (Strait of Hormuz). 3. Allies pulling out: Europe and the Gulf diversifying both their investments and defense purchases. #1 creates oversupply of dollars and #2 and #3 lower demand. This study supports the idea that wars can indeed destroy pu…

One of the biggest myths that people believe is that war is an economic stimulus. In fact, the US entry into World War II delayed the economic recovery from the Great Depression (and created conditions for a recession after the war). One of the reasons that Republicans were so opposed to entry into the war was because they (correctly) believed that it would delay the US economic recovery. Wars have never been correlated with economic growth.

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#262

Post by kasey_junk »

fakedang wrote: post #258
kasey_junk wrote: post #167

Earlier quoted context omitted.

You can’t largely. At least not with offshore yuan. To do that you have to go through the controlled settlement channels to get onshore yuan. That’s tightly controlled to protect the peg. So no one is going to use a controlled currency for a hard liquid commodity. So if China wants petro yuan they have to liberalize that, which will break their peg. China could have more international trade in the yuan before all of…

Saudi Arabia was literally negotiating with China for payments in yuan for petroleum way before the war started, in 2023. The Gulf countries' largest trading partner is China - such a transaction is effectively a barter enabling programme. Russia and now Iran already accept yuan. The mainland vs offshore renminbi restrictions disappear in Hong Kong, Singapore, etc. where most mainland Chinese trading companies and ot…

The negotiations were literally about how to manage the currency risk to Riyadh. And none of the offshore trading houses are handling the currency transactions at the size necessary to handle large oil transactions.

This is as near an iron law as there is economics, you can’t keep a peg and have a large trade in a large liquid commodity market. China is trying to slowly thread this needle and they can get away with it with Iran and Russia because they are approaching vassal status because the petrodollars are closed to them. Everyone in the world can see this and wants to avoid it.

If you are an oil producer what you want is to diversify your currency risk. Right now China is _preventing_ this, because there is no way for them to become a major player in that market without huge impact on their economy and probably their political system.

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#263

Post by robocat »

bobthepanda wrote: post #234
triceratops wrote: post #155

Earlier quoted context omitted.

> a currency that can’t be spent You can spend it in China, right?

If they let you when you want to. One big thing that has prevented CNY from becoming a reserve currency is that China has explicitly said it wants to preserve its ability to heavily and suddenly restrict capital flows in and out of China. If all of a sudden you can't redeem CNY outside of China inside it that makes it a very poor storage of value.

You actually mean CNH as per https://news.ycombinator.com/item?id=47577249

CNY is internal to China! See https://simplefx.com/education/usdcnh-differences-between-ch...

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#264

Post by kasey_junk »

robocat wrote: post #263
bobthepanda wrote: post #234

Earlier quoted context omitted.

If they let you when you want to. One big thing that has prevented CNY from becoming a reserve currency is that China has explicitly said it wants to preserve its ability to heavily and suddenly restrict capital flows in and out of China. If all of a sudden you can't redeem CNY outside of China inside it that makes it a very poor storage of value.

You actually mean CNH as per https://news.ycombinator.com/item?id=47577249 CNY is internal to China! See https://simplefx.com/education/usdcnh-differences-between-ch...

To be clear cnh is a convention while cny is the iso standard.

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#265

Post by znnajdla »

mrguyorama wrote: post #228
fwipsy wrote: post #98

Earlier quoted context omitted.

I'm having trouble reconciling this comment with reports that US stockpiles are already being depleted by the Iran war. At this point the US weapons production seems relatively specialized and inefficient, not "huge scale." Someone more informed care to weigh in?

Raytheon is about half the size of Pepsico, with about the same profit margin. The supposed "Military Industrial Complex" that Ike warned about died years later, and the end of the Cold War buried what little remained. The F-35 is basically the only big military construction project we've had in a very long time, and it comes at a few hundred airframes per year. In WW2, we were producing 10k+ rather advanced airframe…

I don’t think central planning is the only factor. Ukraine is leading a massively heroic drone innovation effort with very good results. In 2026 there are internet blackouts in Russia to hide the social chaos created by 1000+ drone strikes daily in deep Russian territory. It’s not a centrally planned war effort in Ukraine. It’s dozens of startups which started in people’s basements and bombed out ruins. The main factor is not central planning, but rather an existential threat which forced a massively heroic war effort.

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#266

Post by rightbyte »

elictronic wrote: post #29
tines wrote: post #16

Why do wars tend to devalue the dollar?

Weapons cost ALOT and do very little to increase the future economy. It's the issue Russia is facing right now in Ukraine. Even if Putin wanted to stop, his economy has turned entirely wartime, when it ends the country crashes on itself.

Crashes? How is that possible. You could take the money spent on bombs and do anything with it including helicopter money or digging holes and it would be better spent.

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#267

Post by fwipsy »

mrguyorama wrote: post #228
fwipsy wrote: post #98

Earlier quoted context omitted.

I'm having trouble reconciling this comment with reports that US stockpiles are already being depleted by the Iran war. At this point the US weapons production seems relatively specialized and inefficient, not "huge scale." Someone more informed care to weigh in?

Raytheon is about half the size of Pepsico, with about the same profit margin. The supposed "Military Industrial Complex" that Ike warned about died years later, and the end of the Cold War buried what little remained. The F-35 is basically the only big military construction project we've had in a very long time, and it comes at a few hundred airframes per year. In WW2, we were producing 10k+ rather advanced airframe…

Thanks, this is interesting and makes sense.

> A lot of the supposed "graft" and pork of the defense industry is about giving it a lot of leeway just to stick around.

Even if they stick around, will they maintain an edge? Seems like their incentives are similar to a professor on tenure - do the minimum, collect paycheck. Even if they are still creating cutting-edge weapons, could they scale up efficiently when needed? Just read Casey Handmer's extremely critical posts on Orion/SLS; I would not trust the side of Lockheed/Boeing he describes with critical national security capabilities.

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#268

Post by Gud »

wat10000 wrote: post #198
Gud wrote: post #135

Earlier quoted context omitted.

Weapons are only expensive if you want them to be expensive. Ukraine are butchering Russians for 870 USD per dead soldier. The USA has the most expensive weapons in the world, the problem is that much of it is obsolete.

Ukraine butchers soldiers for cheap. The US drops a bomb through the Atatollah’s bedroom window for not-cheap. It’s not clear to me which is more cost effective in the end. (Ignoring for a moment that US strategy in this war seems to be nonexistent. Imagine these capabilities were being used with some actual goal in mind besides “if we take their king then we win.”)

There is a big difference between defending against an unprovoked invasion vs assassinating an unsuspecting target.

Ukraine has shown themselves very capable of surgical offensive strikes using cheap drones deep inside enemy territory , so your comparison is not valid.

The US is also bombing girls going to school.

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#269

Post by wat10000 »

Gud wrote: post #268
wat10000 wrote: post #198

Earlier quoted context omitted.

Ukraine butchers soldiers for cheap. The US drops a bomb through the Atatollah’s bedroom window for not-cheap. It’s not clear to me which is more cost effective in the end. (Ignoring for a moment that US strategy in this war seems to be nonexistent. Imagine these capabilities were being used with some actual goal in mind besides “if we take their king then we win.”)

There is a big difference between defending against an unprovoked invasion vs assassinating an unsuspecting target. Ukraine has shown themselves very capable of surgical offensive strikes using cheap drones deep inside enemy territory , so your comparison is not valid. The US is also bombing girls going to school.

You seem to be confusing my comment about cost effectiveness with an analysis of morality.

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#270

Post by empthought »

rationalist wrote: post #181
empthought wrote: post #49

Earlier quoted context omitted.

Dollars that people hold onto, instead of using to purchase something else of value, are effectively worthless to everyone.

That means there are less dollars in circulation, which is the opposite of inflation.

Yes, I wasn’t clear.

I was offering a reason why dollars “losing value” is not actually a thing to worry about. If they didn’t lose value, people would hold onto them instead of spending them. Which is objectively a loss to everyone, regardless of how you decide to denominate it.

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