"It is unavoidable that one day in the far far future, the U.S. loses reserved currency status. "<p>There are some opposing opinions on this being far far away. Recently the USD has lost a significant amount in global percentage mainly due to all the sanction the US imposes. The US treasury itself warned that these sanctions are bad for thr US. [1]<p>[1] <a href="https://www.livemint.com/news/world/yellen-says-sanctions-may-risk-hegemony-of-us-dollar-11681663258430.html" rel="nofollow">https://www.livemint.com/news/world/yellen-says-sanctions-ma...</a>
What is frequently lost in these discussions is what reserve currency status <i>costs</i> the US - namely in having an overvalued currency. This the primary reason why US labor is not cost competitive with the rest of the world except in the highest value-added industries.<p>Take away reserve currency status and you suddenly have one of the sharpest currency devaluations in human history without any immediate loss in productivity or value-add. Unleashing the US workforce at that price point is a good way to ensure that no country that isn't already highly-developed will become highly-developed in our lifetimes.<p>On the article itself, comparisons to the pound sterling are rather confusing. The UK faced financial problems not simply because of a shift in the monetary landscape but also <i>the loss of its former empire</i> which a significant portion of its domestic economy was tied up in.<p>The US, in comparison, is a resource-rich continental power which conducts most of its 'international' trade with Canada and Mexico (both of which the US is deeply interlinked with logistically).<p>The fact that people continue to draw comparisons between the UK and US economies is incredibly baffling. It smacks of some kind of 'great cycle' religion.
I’ve been thinking about an “equity only” currency where charging interest and debt are outlawed.<p>If you need to raise money for a project, to buy a property, or to finance a business, you must sell a portion of your venture/asset to raise the necessary capital.<p>The idea is to outlaw debt and money creating more money via interest.<p>I don’t see why this system can’t be as efficient as a debt and interest based financial system.<p>It would require getting rid of agencies like the SEC and replacing these regulatory bodies with a very efficient stock system, like ICOs.<p>Lending money to a business is essentially the same as investing in it anyway. If the business defaults the result is the same.<p>This would eliminate the parasitic effect of excessive interest from the economy. It would need to be combined with a basic social safety net set low enough to encourage people to remain productive.<p>An interesting thought experiment, what if people ICO’d their future earnings, selling themselves into indentured servitude to repay the hard currency they borrowed?<p>That’s what people are doing when they borrow money today. It’s also what happens when nations go deeper into debt to central banks!
This article seems to be extremely confused about the difference between increasing the supply of dollars (printing money or other tactics of the Federal Reserve) and deficit spending (moving already-created dollars from the public, including foreign holders, to the government and then right out to the U.S. public again).
I wonder to what extent the Ukraine war partly an attempt to break this remarkable reserve-monopoly that the US has acquired since the 90s. Using its global projection of military power, the US has managed to open up and secure world trade to the entire rich world, and in the process made the USD indispensable. The US can keep printing for decades , and the USD is not getting debased. People in tech startups are aware of the advantages of low interest rates, being awash with money and using it to outcompete every threat. Not only that created monopolies, but easy capital made US tech cities the default and mandatory destination for entrepreneurs from all over the world, which has added quite a few trillion to the US economy. The US enjoys the privilege of being the last empire in a post-empire world and maybe military action is a desperate attempt to change that. Maybe it even contributed to the rates rise
Do you really trust China to manage the World’s currency?<p>Scenario:
Monday: China buys 100 billion Yuan of oil from Saudi Arabia.<p>Tuesday; China prints 100 billion more Yuan.<p>Oops!<p>The only countries that the World mistrusts more than the U.S. … is everybody else.
Couldn't read the article.<p>Did the author not recognize that the BRICS and associated countries are getting very tired of this arrangement, especially because the US uses it for political leverage?
This article has some significant misunderstandings about how these things actually are. The only potential reason would be to mislead the reader because it surely does not educate when a significant portion of what's said is wrong in a way that a layperson wouldn't be able to tell.<p>Specifically, it acts as if this is business as usual when it is not. The debt to GDP, and inflation rates, are not correct. It makes no mention of the requirements imposed by Basel III which is what banks are being held to now.<p>There is no deposit requirements anymore. In 2020, they set this to 0 and haven't returned it. Boys and girls we no longer have a fractional banking system. Let that sink in for a moment.<p>Everything we know historically about banking and economic trends is largely based upon the banking system being a fractional banking system. You can't have a non-fractional banking system and claim its the same, or will operate remotely similar. Its unprecedented and was barely announced if you didn't follow all the metrics available through their site.<p>As they've redone their site again to hide stuff, here is the link for those that want to check it out themselves.<p><a href="https://www.federalreserve.gov/monetarypolicy/reservereq.htm" rel="nofollow">https://www.federalreserve.gov/monetarypolicy/reservereq.htm</a><p>Basel III sets up capital requirements but allows stock market capitalization to be counted against those requirements. Making any bank very susceptible to market attacks, synthetic shares can be indirectly created using the market maker as a patsy; just like commodities can be suppressed with net0 options contracts between colluding parties.<p>Worse, the banks have centralized to the point where if any of the big primary banks now fails, none of the others have the assets to take it over. Which means the next step is nationalization, or inflate the currency even more than is happening currently (as a bail-in).<p>Banks and other financial organizations don't have to disclose changes in the underlying assets (bonds specifically) when they intend to hold them to maturity. You've got funds holding 90%+ of 1.8% bonds whose value is significantly lower than actual market value (because interest rates went up how many times?). Value is worth approximately 1/3 when I last calculated, but the going market rate is well above that. For those that don't know, its the sum of all interest payments and principal discounting inflation above 2% up to present date as calculated in 1984, and adjusting for the difference of the current interest rate bond compared to the 1.8).<p>Not only that, it mistakes what really happened with Gamestop (a short squeeze, and market weighted index rebalancing) or the M2 triggered liquidity issues (in 2019) that prompted payouts to the general public amid the pandemic because the banks weren't lending due to liquidity.<p><a href="https://fred.stlouisfed.org/series/M2V" rel="nofollow">https://fred.stlouisfed.org/series/M2V</a><p>I seriously don't see much that is actually accurate in that post. Even the market growth part is misleading.<p>If you want a solid background on how these things work, read David Graeber ("Debt, The first 5,000 years") followed by the Economic calculation problem (essays). You run into the latter in non-market and market systems that deviate sufficiently from rational pricing.<p>Debt to GDP is well above 300% when you count all outstanding liabilities, the measure he references is what the government publishes but if you look at how they've changed that formula over time you'd see its just like inflation. Less about accuracy more about promoting a narrative.