91–100 of 119 posts
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I think Gold was the 'global reserve currency' before the 20th century.
Gold was never a currency, it's a commodity.
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Weakening currency and a bit of inflation would be great for most people in the US, reducing unemployment, strengthening US experts, and reducing debt load for all the folks struggling to pay off their mortgages and student loans. Prices on imported goods would of course rise a bit, but prices on non-tradeables like healthcare, housing, and education would probably stop rising so fast, or might even drop a bit. For t…
This is nonsense. By that logic every country should continuously weaken it's currency in order to gain an advantage. So we would get caught in a descending spiral of every country constantly trying to have a weaker currency relative to its trading partners. If the USD weakened, which other currencies would strengthen and how do you think those other central banks would react?
It might be an advantage for most people in the country (at least in the short term), but it would be a disadvantage (even in the short term) for the people with the most wealth, and, perhaps more specifically, for the people with the most power over monetary policy.
The advantages (particularly in the near term) that countries get from weakening currency is why the people who loan them money have come to insist than monetary policy should generally handled by independent central banks that are, while generally accountable in some way to government, also somewhat insulated from political pressure from the rest of government (and, often, with direct influence from the financial industry.)
Earlier quoted context omitted.
Weakening currency and a bit of inflation would be great for most people in the US, reducing unemployment, strengthening US experts, and reducing debt load for all the folks struggling to pay off their mortgages and student loans. Prices on imported goods would of course rise a bit, but prices on non-tradeables like healthcare, housing, and education would probably stop rising so fast, or might even drop a bit. For t…
This is nonsense. By that logic every country should continuously weaken it's currency in order to gain an advantage. So we would get caught in a descending spiral of every country constantly trying to have a weaker currency relative to its trading partners. If the USD weakened, which other currencies would strengthen and how do you think those other central banks would react?
But the point is, the US dollar has been kept “artificially” strong for a good while now, which goes along with a structural trade deficit, current account deficit, low domestic savings rate, unemployment, rising prices of non-tradeable goods, and struggling US export industries. On the other side, countries with artificially weak currencies like Germany or China have had high domestic savings rates, trade surpluses, current account surplus, etc. This kind of imbalance builds up pressure over time, and isn’t stable in the long term.
This story masks BAD news. http://blog.mpettis.com/2015/11/chinas-rebalancing-timetable... China's debt today is over 200% of its GDP and may exceed 300% in five years. One hopes the IMF and China agreed on concessions will assist China in rebalancing its economy quickly, because as Petits' posting points out -- a disruptive end is near for the current model.
Earlier quoted context omitted.
This is nonsense. By that logic every country should continuously weaken it's currency in order to gain an advantage. So we would get caught in a descending spiral of every country constantly trying to have a weaker currency relative to its trading partners. If the USD weakened, which other currencies would strengthen and how do you think those other central banks would react?
> By that logic every country should continuously weaken it's currency in order to gain an advantage. It might be an advantage for most people in the country (at least in the short term), but it would be a disadvantage (even in the short term) for the people with the most wealth , and, perhaps more specifically, for the people with the most power over monetary policy. The advantages (particularly in the near term) th…
We will be better off in the long run by not playing that game. Keeping the currency fairly stable helps to encourage long-term economic growth by allowing businesses and consumers to plan ahead. That's better than chasing a quick and unsustainable boost in exports through devaluation.
Before today, I think the US dollar was about 60% of the SDR bucket of currencies. For years I have read about probable problems if the US dollar was no longer the reserve currency, but it seems from what I have been reading that there is some sort of negotiated slow migration from the US dollar to using SDRs as the reserve currency. I like slow and steady change, even is it means that eventually my country (USA) wil…
What problems have you read about the U.S. facing if it stopped being a reserve currency? My understanding is that we would lose seigniorage, and maybe see a small increase in borrowing costs. But the upside is value of the dollar would drop, making U.S. exports more competitive.
Please note I'm not saying this will happen, but feel it should be a recognized risk if borrowing continues at the current trend. I believe this is an elephant in the room which is likely to cause a massive macroeconomic shock in 5-20 years. I simply cant see the current political parties making the sacrifice to address the unfettered debt growth. I too recognize most financial experts tend to disagree with this view.
A big deal has been made about this, however it was inevitable and the only logical thing to do. With the substantial Yen debasement, Japan's economy is now less than half the size of China's. That will fall to 1/4th in the next ten years. Even if China were to need to devalue their currency substantially over the coming years, as is being regularly argued now, that would pale in comparison to what Japan will do to i…
You are not saying anything original here that is not the complete median view on the Street. Eurozone 0%: check. UK bright spot: check. Japan a debt disaster: check. Russia suffering: check. China/US the future: check. There is nothing here that if followed, will allow anybody to outperform because this is complete consensus, it's what's priced in almost exactly. Yet the real alpha-generation skill is to challenge t…
I don't think Russia is interesting. They're incapable of doing anything economically outside of commodities, and so long as the dollar is strong, Russia will be a mess. Putin has wasted his time in power on consolidating power, rather than diversifying the economy. They're a very low innovation, stagnate economy. That has resulted in the facade coming off, it's clear now that Putin has no clothes and can never cultivate a truly prosperous economy (their GDP per capita is now below Romania and Poland). It's the typical command economy outcome. Russian culture seems to spend all of its time being angry at the outside world for their self-inflicted wounds, creating an us vs them mentality, and it leads them to the same place every time: isolation. They have an intense victim mentality, and extremely low national self-esteem (which is where the projecting comes from and why Putin has to pretend to be a strong-man when he's the exact opposite).
You watch these documentaries on their culture, and it's almost unbelievable how backwards they are:
https://www.youtube.com/watch?v=iZcUsdARY6o
https://www.youtube.com/watch?v=pv6ROkgsiNs
https://www.youtube.com/watch?v=IaoYKoImjys
I agree that China is in very, very serious trouble when it comes to debt. They may be the most indebted nation per dollar of GDP at this point, including the huge sums of shadow debt stalking around their economy. However, I think it's more likely they'll stagnate for the next 20 years, Japan style, rather than suffer any near term sharp event. They've practically copied the mistakes Japan made perfectly. China's debt will eat most of their growth potential, until they either grow beyond it enough, or start paying it down.
Earlier quoted context omitted.
Weakening currency and a bit of inflation would be great for most people in the US, reducing unemployment, strengthening US experts, and reducing debt load for all the folks struggling to pay off their mortgages and student loans. Prices on imported goods would of course rise a bit, but prices on non-tradeables like healthcare, housing, and education would probably stop rising so fast, or might even drop a bit. For t…
Can you explain how "weakening our currency" isn't equivalent to making us poorer overall? What's so bad about a strong currency?
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You are correct, currency and financial systems today are vastly different. That site seems to be pushing the "THE PETROLDOLLAR IS DYING ANY DAY NOW" agenda.
Well, because it is going to die. Holding assets in dollar makes little sense for most people on the planet, and when these people become richer, it makes sense they will use their own currencies. With them, their companies. With those, their governments. The EUR, despite current instability, and the Chinese Y have good chances.
You have a lot of misplaced faith in foreign central banks. A lot of foreigners absolutely do not trust their central banks, some even to the point of using the US dollar in their day-to-day transactions (Cambodia, various African nations, etc.)
If you're in the position where you don't trust your own central bank, why would you trust the Bank of China instead of the Federal Reserve? It's been around a lot less time and does not have the political independence the Fed does.
The dollar is going to be dominant for the rest of our lives IMO.
This story masks BAD news. http://blog.mpettis.com/2015/11/chinas-rebalancing-timetable... China's debt today is over 200% of its GDP and may exceed 300% in five years. One hopes the IMF and China agreed on concessions will assist China in rebalancing its economy quickly, because as Petits' posting points out -- a disruptive end is near for the current model.
Internal debt is also internal asset, which net out to zero. China is a net international creditor. Its internal debt structure may have implications for its economoic future, but is not nearly as relevant as its current account balance for foreign holders of RMB.