"Instead of drawing down our gold reserves, however, we gradually draw down our domestic manufacturing base and it gets replaced piece-by-piece in foreign countries."
To me, this is the money shot. I hadn't seen this expressed before and it makes perfect sense. I'm baffled that we (the US) caused this to happen to the US. I'm (unhappily) registered Republican but I argued vociferously to a Dem friend in 2000 that our inability to manufacture critical components was going to kill us. Kind of literally: AFAIK, the last LCD panel manufacturer in the US closed around then and we could no longer manufacture LCD for our military vehicles... (Even if this anecdote is untrue, the point remains valid...) I argued that, even in the presence of free trade, a country should have the ability to tariff imports to the extent that that country could maintain a 25% (or something) domestic market share.
My father was one of the last tool makers in the US working for Molex. They spent years teaching the Chinese, the Chinese would disassemble all molds sent over to China and often break them, so my fathers team would have to fix / rebuild them.
They spent years training the Chinese side-by-side in the US.
In the end they still haven’t exactly caught up to the quality we had in the US. However, they now have 5x the tool & die makers in China.
To compete, you really do have to cut minimum wage. You have to loosen regulations, and importantly, you have to do massive tariffs / sanctions on China for the next decade.
There are enough people still here to teach and expand the Industry. However, if you don’t start now. Like today. We won’t ever recover. Once enough manufacturing is gone, it’ll be impossible to come back - we are almost there.
You are competing against a foreign power who uses slaves. You either let free people work for what ever wage they can achieve or we risk becoming slaves ourselves.
This happened in part thanks to bain capital, those following the same business model of theivery, and the deregulation in the 80's. https://en.wikipedia.org/wiki/Bain_Capital Republican lawmakers and party members have been destroying America for generations. Goes back even further to 1971 when Nixon opened talks with the CCCP and then went there in 1972 cutting the ground out from beneath American workers. And now if we even wanted to rebuild our manufacturing base, we have to deal with the same problems the few remaining factories do, finding people not on some kind of illegal substance that can work. The bodies are there, but they aren't in any shape to bring back what we had.
There was a recent youtube of a Chinese professor discussing how china has gotten along so well with the US while the great migration of manufacturing occurred. It boiled down to wall street being fine with moving manufacturing abroad, as they don't identify with, and in fact despise, the American working class.
I think people are starting to realise that globalisation needs to be balanced with other kinds of security especially around tech, hence TSMC being given a stack of cash to build a fab in the US.
I wouldn’t say globalisation is dead more that it’s going to be more balanced going forward with local concerns.
Consider Elon's move from California to Texas. His energy costs are vastly reduced, expenses generally are reduced, and he can continue to hire directly in the US and draw directly on US machine shop production capacity.
There should be more machining and making in the US; everyone would like to have solid US-made hardware, but success in small-business machining and manufacturing, and scaling to large scale without off-shoring, requires a discipline and commitment to self-improvement that is difficult to cultivate.
This monetary policy, and the consequent industrial policy ("free trade"), is, more than any other factor, the cause of the so-called "Great Stagnation." Its persistence is why the Great Stagnation is not over, despite some recent noises to the contrary. US growth will not resume until energy production does. With shale seemingly spent, nuclear too scary for most, and fusion perpetually 10 years off, growth is unlikely. The US will continue to "print" oil by printing dollars (h/t to Luke Gromen), care of Saudi Arabia, until it can't. The US will do anything and everything to ensure this continues, history is proof of that. When the US finally fails there will be a war. Not like Vietnam or Iraq or Afghanistan. A very, very bad war. And the winner will determine monetary policy for the next century or so.
Had you shorted the US stock market in 2000 on that prediction/hunch, you would be down a lot. The economy has moved beyond manufacturing. Data, payment, and information processing and intellectual ropery have taken over manufacturing in importance.
It's a bi-partisan issue. Hell, I would agree it's not even a exclusively US issue but is pretty much generalized throughout the west.
Shifting manufacturing to China makes absolute sense when you look and care about the the quarterly/yearly performance. And if you decide not to do it well tough luck because your competitor is and will have better results than you.
If you look at it with a 20/30 years perspective then it becomes obvious that outsourcing is completely the wrong move. You basically get rid of your local expertise, train your replacements, slim down your middle class (the folks buying the products!). Then your manufacturing partner starts vertically integrating and designing it's own competing products and you are pretty much left out of the equation. It's almost as if, thanks to support from the party, Chinese businesses can plan for 20 years ahead but western companies can't because they HAVE to maximize the quarterly results!
> I argued that, even in the presence of free trade, a country should have the ability to tariff imports to the extent that that country could maintain a 25% (or something) domestic market share.
Tariffs and trade wars seem completely useless to me when done between G7 countries because we're all in the same situation regarding China. To achieve any sort of paradigm shift we'd need to stop each having a 1:1 relationship with China and start negotiating as a block.
I agree with some part of what you are saying, but tariffs are a miserably blunt instrument.
Think of the supply chain of something immensely complex like the Boeing 787, which has, quite literally, millions of parts (including LCD screens). Many if not most of those parts are imported. If there are tariffs on imports, either:
1. Boeing will pay tariffs, increasing the cost of each plane. Great for Airbus, bad for Boeing.
2. The parts are sourced locally instead. These parts will invariably be more expensive, as if there were cheaper local options, they would have been sourced locally before. Again, Boeing planes get more expensive, great for airbus, bad for Boeing.
3. Boeing, to avoid raising prices and giving market share to airbus, decides to move manufacturing outside the US.
What applies here for Boeing, is also going to apply to Tesla, Caterpillar, and hundreds of other companies. Tariffs create incentives to source locally, but they simultaneously create incentives to manufacture abroad. It is a very thin tightrope to walk and I haven't seen any evidence that Washington can.
On the topic of national security: “When goods don’t cross borders, soldiers will.”
I'm far less concerned about a war breaking out between two countries with healthy trade relations and cultural exchange. Do we want China to be our enemy? Why?
Correct me if I'm wrong, but it seems like the US does not need any factories, as it can print any amount of money and buy whatever it wants from any country has factories. Money talks. Or not?
It has enough military for safely making this again and again for tens of years at least.
It was done for 2 reasons and planned out by Paul Volcker, and there is a speech to go with it if someone can find it.
1) USD reserves allow us to import more value than we export so it offers a better standard of life for the consumer than otherwise.
2) It allows us to have a bigger consumer market than we would otherwise have and incentive for countries to partner with us to sell their stuff to. If you've lived outside the US you know every business wants to sell their stuff here either as #1 or just after their home market.
Under those purposes it seems to have worked very well. Of course theres the risks of crashes along with it too.
I agree, but this seems to me to be something which unfortunately requires a generational strategy to repair, and I don't see how any government that's possible in this country could achieve it. The time horizons aren't long enough and the incentives aren't aligned enough to permit even a credible start.
The uncompetitiveness in manufacturing is due to two factors:
1. Regulations. Both the OSHA and EPA had a measurable negative impact on manufacturing productivity growth. [1] I suspect the most harmful regulations are those that constrain contract freedom by requiring employers to give unions a negotiating monopoly, aka collective bargaining, over any work unit where they emerge. This would devastate any of the bright spots in American industry today, whether it's Tesla, or Amazon, or Google. The threat of unionization also discourages these firms from expanding into areas that require employing high concentrations of less-skilled workers in immobile capital intensive projects, as these are the most susceptible to unionization.
2. The massive rise in social welfare spending [2], diverting capital from productive uses to unproductive ones.
Tariffs just cause US buyers to pay more without much help. Tariffs have no way to make a US manufacturer competitive globally. US made goods would just be that 25% more expensive. At its best its a regressive subsidy from one set of Americans to another.
Why not just a direct subsidy to US manufacturing under the usual tax code?
> Even if this anecdote is untrue, the point remains valid...
I mean, I guess the point remains valid in that everyone can see that a lot of manufacturing has left the US in the past, I dunno, fifty years. But if you don't even know whether the anecdote you mention is true, why bring it up? Why comment at all?
This was actually one of the good things that I thought -might- happen with the Trump regime despite all the other negatives. Guess what, nothing happened :( . We're still losing the ability to make stuff which is very scary in a world that is becoming China vs. The USA . There is price that isn't easy to express in $ that goes with the national security lost through losing a manufacturing base.
Before spending the rest of the day reading articles on this site, I have to say this is a comprehensive and easily understood history for how the U.S. got to this point financially.
Being a cynic, I've studied many aspects of this system for some time. I have to say I'm shocked how obvious the PR has been for some of this stuff.
A favorite example is the Iraq war. Clearly a mafioso protection racket type of move. Nice country you got here, quit using Dollars and see what happens...
The 1970s in can be almost explained in the sense of a 1930s style run on the bank, except this time it's allies and foreign countries after their gold.
The Saudi benefit from attacking Iraq probably even mirrored what France thought it was getting in "French Indonesia and French Vietnam". You can almost imagine a scene playing out between French and U.S. diplomats where the French ask for their gold and the U.S. goes, "well... here's the thing about your gold, tell you what let us call it even and we will spend a decade or more at war for you? Deal?"
The entire thing is absolutely crazy and the way it is taught to average people is complete bullshit.
> At this stage, instead of just blue-collar labor in America being hurt by the system, the geopolitical ambitions of United States hegemony are also subverted. As far as Americans were concerned, for 40+ years the petrodollar system used to work for the top half of the income spectrum but not really the bottom half, and now it neither particularly works for the top half nor the bottom half. It’s now a system without a purpose.
This is the article’s key insight. Dollar hegemony no longer works for anyone.
The Fed needs to support international payments in multiple currencies
and build its non-dollar reserves. Congress should prioritise domestic manufacturing and wage growth.
I'm here to tell you that Democrat controlled Congress will NEVER support the regulatory reforms necessary for domestic manufacturing to flourish in the US. At best, they will enact protectionist legislation that will result in a modest increase in US MFG, but nothing on the order necessary to make the US a major player in the global supply chain.
> More troublesome, the inherent flaw of having the global reserve currency, in a theme that goes back to economist Robert Triffin from over half a century ago, is that in order to maintain the global reserve currency, the country must supply the world with its currency via structural deficits in one form or another.
That "structural deficit" means allowing manufacturing to move overseas.
The trade war is a distraction. Trade imbalances with the rest of the world could be solved very quickly by making it clear the the dollar is going down in flames and that policies will be put in place to make that happen:
1. massive federal budget deficit spending
2. purchase of all the debt by the Federal Reserve (yield curve control)
Holders of bonds would be absolutely wrecked. That's a lot of institutions and wealthy individuals.
The only question is whether the political will to do this can be mustered. So far it hasn't.
Lyn Alden has become my favorite macroeconomist through the Covid crisis. I bought a bunch of puts in February 2020, they went way up in March till the Fed stepped in and then went down. I went looking for answers on how to understand macroeconomics and Alden has had a lot of interesting takes on it.
The collapse of the dollars strength and rise of crypto being thought of as 'a store of wealth' may lead to the next financial revolution.
Imagine a world where etheruem has enough market cap where it's volatility decreases, smart contracts for services are wide spread, everyone works free-lance giving the economy a inherent conflict of interest problem that rockets innovation forward while at the same time of having the effect of directly capturing some of the wealth you create by charging on a 'free-lance' model.
No need for the dollar, but it does change the inventives built into the system and will have radical effects on globalism.
I like the open, competitive, low-middle-man economic vision.
I'm not sure whether the volatility of ETH price matters much when stablecoins are readily available.
Generally: I'll switch to ethereum for daily spending when I can spend through a proxy that allows revert an erroneous transaction (e.g. a overcharge or wrong recipient), perhaps necessarily arbitrated by a 3rd party. It's just a little too stressful sending >$100-500 frequently w/ ethereum right now.
This week, I bought a little airbnb pre-ipo, then sold post-ipo through Ethereum->FTX exchange.
Also bought some 24 hr traded synthetic tesla stock on eth.mirror.finance. (completely anonymously)
Wild times. Hard to go back once you have a taste of financial freedom.
>This article places an emphasis on where the bottlenecks and problems have been forming in the system, explains why a continued weak dollar over a 3-5 year period remains my base case, and shows why some of these growing pains seem to be leading to a new re-ordering of the global monetary system over this decade.
3-5 years isn't really saying much especially given that the US dollar does not have much movement, and that this is effectively the same as being bullish on the Euro and Pound and Yen, which are the biggest competing currencies. I do not see any reason why those currencies will see a sudden inflow. That last time that happened was in 2002-2008, but that was when there are much more interest in foreign assets , whereas today foreign assets are shunned in favor of domestic assets and tech. Pensions, hedge funds seek safe US assets such as investment-grade corporates bonds and treasury bonds, not riskier foreign assets.
I do not expect any sort of fraying of the US dollar as the global reserve currency system though.
Some of the conclusions the author draws are wrong or dubious, such as the purported inverse relationship between the US dollar and corporates profits. The dollar surged in 2014 but corporates profits did not fall.
Economists writing about the end of the dollar as a reserve currency is not a new thing. With the Fed printing money tho at record rates this would be the time for a shift to happen.
The problem is there is no alternative. The Euro has it's own structural issues and as we saw in March when folks got scared they sold alternatives like Bitcoin down hard. In short, there is no alternative without international cooperation to make a change which doesn't appear likely any time soonish.
Peter Thiel bet against the US dollar and lost big.
> Subsequent down years have reduced the fund's assets under management to $681 million as of December 2010.[4] Clarium Capital Management was reported to have had big losses in 2010.[14] The firm has continued to struggle with bets that it made on inflation and the US dollar.
I interviewed there years ago, at the time it solely managed Peter Thiels personal money because all the other investors had pulled out. Strange and funny dynamic, I’ve never heard of someone running and staffing an entire hedge fund just for themselves. Traders said that you had to be on call at all times in case Thiel called you from some other time zone to execute a particular trade he wanted.
David Graebers book “Debt” also argues, successfully in my opinion, that credit predates coinage. The first written documents from Sumeria support this view.
The article is wrong about that but not about other things. Overall is an interesting reading.
It's also interesting to see how step by step some myths are disappearing. For instance, the article recognize the importance of taxes as a main drive of giving value to a fiat currency.
By the way, though I agree with your sentiment re history of money, his allusion to the progression of economies from barter to coinage to credit was really just an aside and not relevant to any other part of the article.
I did read the rest of the piece and found it very informative and enlightening, I highly recommend reading it, especially if you are interested in the nature of money.
It seems to me that those taking the position that the minimum wage should be lowered/abolished and those taking the opposite position are both accepting the premise that absent the minimum wage, wages would fall. Is there any real-world basis for that premise?
From basic supply and demand:
1. a downward pressure on wages emerges from workers competing with workers (competition among suppliers of labor)
2. an upward pressure on wages emerges from employers competing with employers (competition among consumers of labor)
And, ceteris paribus, some equilibrium wages emerge.
The minimum wage ostensibly exists to interfere with #1 (though usually framed as protecting workers from employers), assuming the minimum wage is set above the would-be equilibrium wage.
But what if the minimum wage is set below the would-be equilibrium wage? Perhaps the minimum wage instead serves to interfere with #2 by allowing a point of collusion among employers, and thereby keep wages artificially low.
Meh. India similarly trues hard to manufacture stuff on its own buys weaponry from USA and Israel and France and other countires? Why ? Cant they produce gunmetal ? Yes they can but the ministers who take the decision get kickbacks from countries. Essentially for a minister, it is a financial incentive to buy from USA because he/she will get a share of the deal. If India starts making their own, this revenue stream will dry up and they cant let that happen.
This was a fascinating look at the history of a subject i must admit i know very little about.
However the author lost me a bit when he started talking about bitcoin. I get why bitcoin might be appealing to a country like Iran with cheap energy and sanctions preventing them from participating in the world economy. I also get why it would be appealing to individuals in developing countries with unstable local currencies, and perhaps limited access to harder assets. I don't get what the benefit would be to national reserve banks and finance between countries in the general case, where special circumstances (like Iran) don't apply.
This has more or less happened already. The Fed is by far the largest buyer of treasuries right now.
Total treasury supply has nearly doubled this year, and yet foreign owned treasuries is only up 2% - meaning The Fed has bought close to 98% of it [1].
There is no treasury market. There is only The Fed. Considering that this market is about 30% of the size of the entire US economy, this should probably concern people. That's a large part of the US economy to be price fixed. Especially when you consider this essentially fixes prices for the housing market.
“ What the next system will look like is an open question. I’ve seen multiple proposals. Whatever form it takes, it’ll be decentralized in the sense that it won’t be completely tied to any one country’s currency, since no country is big enough for that anymore. It’ll be based around neutral reserve assets, and/or a more regional-reserve model based on a handful of key country currencies, with an expanded variety of payment channels.”
No wonder Facebook continues to fight hard for their Libra / Diem project
> The COVID-19 pandemic hit in early 2020, which halted global trade and contributed (along with a structural oil oversupply issue) to a collapse in oil prices. The dollar quickly spiked, foreigners began outright selling Treasuries and other US assets to get dollars
Earlier on the article explains that in the petrodollar system, foreigners need dollars to buy oil. If they can now buy oil for less dollars, then why do they want to get more dollars?
Luckily none of this has any military implications.
All the people who have dollars or bonds will be happy to see their money evaporate. And no one will be concerned if the US defaults, because they have nothing of value anyway worth liquidating or foreclosing.
And we could never have another global war. We are completely passed that now of course. All of the recent wars have been totally isolated incidents, mainly caused by evil dictators.
[+] [-] CoffeeDregs|5 years ago|reply
To me, this is the money shot. I hadn't seen this expressed before and it makes perfect sense. I'm baffled that we (the US) caused this to happen to the US. I'm (unhappily) registered Republican but I argued vociferously to a Dem friend in 2000 that our inability to manufacture critical components was going to kill us. Kind of literally: AFAIK, the last LCD panel manufacturer in the US closed around then and we could no longer manufacture LCD for our military vehicles... (Even if this anecdote is untrue, the point remains valid...) I argued that, even in the presence of free trade, a country should have the ability to tariff imports to the extent that that country could maintain a 25% (or something) domestic market share.
[+] [-] lettergram|5 years ago|reply
They spent years training the Chinese side-by-side in the US.
In the end they still haven’t exactly caught up to the quality we had in the US. However, they now have 5x the tool & die makers in China.
To compete, you really do have to cut minimum wage. You have to loosen regulations, and importantly, you have to do massive tariffs / sanctions on China for the next decade.
There are enough people still here to teach and expand the Industry. However, if you don’t start now. Like today. We won’t ever recover. Once enough manufacturing is gone, it’ll be impossible to come back - we are almost there.
You are competing against a foreign power who uses slaves. You either let free people work for what ever wage they can achieve or we risk becoming slaves ourselves.
[+] [-] downrightmike|5 years ago|reply
[+] [-] recursivedoubts|5 years ago|reply
Pretty depressing.
[+] [-] mbesto|5 years ago|reply
And funny enough our gov't (I'll let you guess which political party) struck a deal with Foxconn to produce LCDs in Wisconsin. It has failed miserably: https://www.theverge.com/2020/4/12/21217060/foxconn-wisconsi...
[+] [-] vinniejames|5 years ago|reply
On the other end, how do you compete with slave labor in the Chinese factories?
[+] [-] andy_ppp|5 years ago|reply
I wouldn’t say globalisation is dead more that it’s going to be more balanced going forward with local concerns.
[+] [-] ehvatum|5 years ago|reply
There should be more machining and making in the US; everyone would like to have solid US-made hardware, but success in small-business machining and manufacturing, and scaling to large scale without off-shoring, requires a discipline and commitment to self-improvement that is difficult to cultivate.
[+] [-] hanuman|5 years ago|reply
[+] [-] paulpauper|5 years ago|reply
[+] [-] 908B64B197|5 years ago|reply
Shifting manufacturing to China makes absolute sense when you look and care about the the quarterly/yearly performance. And if you decide not to do it well tough luck because your competitor is and will have better results than you.
If you look at it with a 20/30 years perspective then it becomes obvious that outsourcing is completely the wrong move. You basically get rid of your local expertise, train your replacements, slim down your middle class (the folks buying the products!). Then your manufacturing partner starts vertically integrating and designing it's own competing products and you are pretty much left out of the equation. It's almost as if, thanks to support from the party, Chinese businesses can plan for 20 years ahead but western companies can't because they HAVE to maximize the quarterly results!
> I argued that, even in the presence of free trade, a country should have the ability to tariff imports to the extent that that country could maintain a 25% (or something) domestic market share.
Tariffs and trade wars seem completely useless to me when done between G7 countries because we're all in the same situation regarding China. To achieve any sort of paradigm shift we'd need to stop each having a 1:1 relationship with China and start negotiating as a block.
[+] [-] jaredklewis|5 years ago|reply
Think of the supply chain of something immensely complex like the Boeing 787, which has, quite literally, millions of parts (including LCD screens). Many if not most of those parts are imported. If there are tariffs on imports, either:
1. Boeing will pay tariffs, increasing the cost of each plane. Great for Airbus, bad for Boeing.
2. The parts are sourced locally instead. These parts will invariably be more expensive, as if there were cheaper local options, they would have been sourced locally before. Again, Boeing planes get more expensive, great for airbus, bad for Boeing.
3. Boeing, to avoid raising prices and giving market share to airbus, decides to move manufacturing outside the US.
What applies here for Boeing, is also going to apply to Tesla, Caterpillar, and hundreds of other companies. Tariffs create incentives to source locally, but they simultaneously create incentives to manufacture abroad. It is a very thin tightrope to walk and I haven't seen any evidence that Washington can.
On the topic of national security: “When goods don’t cross borders, soldiers will.”
I'm far less concerned about a war breaking out between two countries with healthy trade relations and cultural exchange. Do we want China to be our enemy? Why?
[+] [-] passerby1|5 years ago|reply
It has enough military for safely making this again and again for tens of years at least.
[+] [-] Reggi55|5 years ago|reply
1) USD reserves allow us to import more value than we export so it offers a better standard of life for the consumer than otherwise.
2) It allows us to have a bigger consumer market than we would otherwise have and incentive for countries to partner with us to sell their stuff to. If you've lived outside the US you know every business wants to sell their stuff here either as #1 or just after their home market.
Under those purposes it seems to have worked very well. Of course theres the risks of crashes along with it too.
[+] [-] throwanem|5 years ago|reply
[+] [-] CryptoPunk|5 years ago|reply
1. Regulations. Both the OSHA and EPA had a measurable negative impact on manufacturing productivity growth. [1] I suspect the most harmful regulations are those that constrain contract freedom by requiring employers to give unions a negotiating monopoly, aka collective bargaining, over any work unit where they emerge. This would devastate any of the bright spots in American industry today, whether it's Tesla, or Amazon, or Google. The threat of unionization also discourages these firms from expanding into areas that require employing high concentrations of less-skilled workers in immobile capital intensive projects, as these are the most susceptible to unionization.
2. The massive rise in social welfare spending [2], diverting capital from productive uses to unproductive ones.
[1] https://www.jstor.org/stable/1810223?seq=1
[2] https://fivethirtyeight.com/features/what-is-driving-growth-...
[+] [-] jayd16|5 years ago|reply
Why not just a direct subsidy to US manufacturing under the usual tax code?
[+] [-] stdbrouw|5 years ago|reply
I mean, I guess the point remains valid in that everyone can see that a lot of manufacturing has left the US in the past, I dunno, fifty years. But if you don't even know whether the anecdote you mention is true, why bring it up? Why comment at all?
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] stjohnswarts|5 years ago|reply
[+] [-] kopakabana|5 years ago|reply
In which sense?
[+] [-] Threeve303|5 years ago|reply
Being a cynic, I've studied many aspects of this system for some time. I have to say I'm shocked how obvious the PR has been for some of this stuff.
A favorite example is the Iraq war. Clearly a mafioso protection racket type of move. Nice country you got here, quit using Dollars and see what happens...
The 1970s in can be almost explained in the sense of a 1930s style run on the bank, except this time it's allies and foreign countries after their gold. The Saudi benefit from attacking Iraq probably even mirrored what France thought it was getting in "French Indonesia and French Vietnam". You can almost imagine a scene playing out between French and U.S. diplomats where the French ask for their gold and the U.S. goes, "well... here's the thing about your gold, tell you what let us call it even and we will spend a decade or more at war for you? Deal?"
The entire thing is absolutely crazy and the way it is taught to average people is complete bullshit.
[+] [-] JumpCrisscross|5 years ago|reply
This is the article’s key insight. Dollar hegemony no longer works for anyone.
The Fed needs to support international payments in multiple currencies and build its non-dollar reserves. Congress should prioritise domestic manufacturing and wage growth.
[+] [-] howmayiannoyyou|5 years ago|reply
[+] [-] aazaa|5 years ago|reply
That "structural deficit" means allowing manufacturing to move overseas.
The trade war is a distraction. Trade imbalances with the rest of the world could be solved very quickly by making it clear the the dollar is going down in flames and that policies will be put in place to make that happen:
1. massive federal budget deficit spending
2. purchase of all the debt by the Federal Reserve (yield curve control)
Holders of bonds would be absolutely wrecked. That's a lot of institutions and wealthy individuals.
The only question is whether the political will to do this can be mustered. So far it hasn't.
[+] [-] silexia|5 years ago|reply
[+] [-] RhodoYolo|5 years ago|reply
Imagine a world where etheruem has enough market cap where it's volatility decreases, smart contracts for services are wide spread, everyone works free-lance giving the economy a inherent conflict of interest problem that rockets innovation forward while at the same time of having the effect of directly capturing some of the wealth you create by charging on a 'free-lance' model.
No need for the dollar, but it does change the inventives built into the system and will have radical effects on globalism.
[+] [-] elevenoh|5 years ago|reply
I'm not sure whether the volatility of ETH price matters much when stablecoins are readily available.
Generally: I'll switch to ethereum for daily spending when I can spend through a proxy that allows revert an erroneous transaction (e.g. a overcharge or wrong recipient), perhaps necessarily arbitrated by a 3rd party. It's just a little too stressful sending >$100-500 frequently w/ ethereum right now.
This week, I bought a little airbnb pre-ipo, then sold post-ipo through Ethereum->FTX exchange.
Also bought some 24 hr traded synthetic tesla stock on eth.mirror.finance. (completely anonymously)
Wild times. Hard to go back once you have a taste of financial freedom.
[+] [-] paulpauper|5 years ago|reply
3-5 years isn't really saying much especially given that the US dollar does not have much movement, and that this is effectively the same as being bullish on the Euro and Pound and Yen, which are the biggest competing currencies. I do not see any reason why those currencies will see a sudden inflow. That last time that happened was in 2002-2008, but that was when there are much more interest in foreign assets , whereas today foreign assets are shunned in favor of domestic assets and tech. Pensions, hedge funds seek safe US assets such as investment-grade corporates bonds and treasury bonds, not riskier foreign assets.
I do not expect any sort of fraying of the US dollar as the global reserve currency system though.
Some of the conclusions the author draws are wrong or dubious, such as the purported inverse relationship between the US dollar and corporates profits. The dollar surged in 2014 but corporates profits did not fall.
[+] [-] jboydyhacker|5 years ago|reply
The problem is there is no alternative. The Euro has it's own structural issues and as we saw in March when folks got scared they sold alternatives like Bitcoin down hard. In short, there is no alternative without international cooperation to make a change which doesn't appear likely any time soonish.
[+] [-] ketamine__|5 years ago|reply
> Subsequent down years have reduced the fund's assets under management to $681 million as of December 2010.[4] Clarium Capital Management was reported to have had big losses in 2010.[14] The firm has continued to struggle with bets that it made on inflation and the US dollar.
https://en.wikipedia.org/wiki/Clarium_Capital
[+] [-] m-ee|5 years ago|reply
[+] [-] etothepii|5 years ago|reply
It's not a universally accepted opinion but I take Martin Felix's view, articulated in "Money," that credit predates coinage.
It's turned me off the article and as a consequence I can't read any more.
[+] [-] oa335|5 years ago|reply
[+] [-] RobertoG|5 years ago|reply
It's also interesting to see how step by step some myths are disappearing. For instance, the article recognize the importance of taxes as a main drive of giving value to a fiat currency.
[+] [-] oa335|5 years ago|reply
I did read the rest of the piece and found it very informative and enlightening, I highly recommend reading it, especially if you are interested in the nature of money.
[+] [-] aflessner|5 years ago|reply
https://www.google.com/amp/s/www.wsj.com/amp/articles/edward...
[+] [-] tw8f969ae5b6f4|5 years ago|reply
From basic supply and demand:
1. a downward pressure on wages emerges from workers competing with workers (competition among suppliers of labor)
2. an upward pressure on wages emerges from employers competing with employers (competition among consumers of labor)
And, ceteris paribus, some equilibrium wages emerge.
The minimum wage ostensibly exists to interfere with #1 (though usually framed as protecting workers from employers), assuming the minimum wage is set above the would-be equilibrium wage.
But what if the minimum wage is set below the would-be equilibrium wage? Perhaps the minimum wage instead serves to interfere with #2 by allowing a point of collusion among employers, and thereby keep wages artificially low.
Is anyone aware of any research on this?
[+] [-] I-M-S|5 years ago|reply
[+] [-] eli_gottlieb|5 years ago|reply
[+] [-] 2Gkashmiri|5 years ago|reply
https://i.redd.it/wjxa2s4dbr461.jpg
2 billion usd I presume. This money could build many megafactories but again, kickbacks
[+] [-] bawolff|5 years ago|reply
However the author lost me a bit when he started talking about bitcoin. I get why bitcoin might be appealing to a country like Iran with cheap energy and sanctions preventing them from participating in the world economy. I also get why it would be appealing to individuals in developing countries with unstable local currencies, and perhaps limited access to harder assets. I don't get what the benefit would be to national reserve banks and finance between countries in the general case, where special circumstances (like Iran) don't apply.
[+] [-] economusty|5 years ago|reply
[+] [-] RobertoG|5 years ago|reply
"As of this year, the US Federal Reserve (blue line) now owns more Treasuries than all foreign central banks combined [..]"
So, if your debt is to the Federal Reserve, how much debt can you accumulate before it's too much? Does the question even makes sense?
[+] [-] api|5 years ago|reply
[+] [-] onlyrealcuzzo|5 years ago|reply
Total treasury supply has nearly doubled this year, and yet foreign owned treasuries is only up 2% - meaning The Fed has bought close to 98% of it [1].
There is no treasury market. There is only The Fed. Considering that this market is about 30% of the size of the entire US economy, this should probably concern people. That's a large part of the US economy to be price fixed. Especially when you consider this essentially fixes prices for the housing market.
[1] https://seekingalpha.com/article/4379154-fed-is-almost-out-o...
[+] [-] myth_buster|5 years ago|reply
[+] [-] chaostheory|5 years ago|reply
No wonder Facebook continues to fight hard for their Libra / Diem project
[+] [-] ruuda|5 years ago|reply
> The COVID-19 pandemic hit in early 2020, which halted global trade and contributed (along with a structural oil oversupply issue) to a collapse in oil prices. The dollar quickly spiked, foreigners began outright selling Treasuries and other US assets to get dollars
Earlier on the article explains that in the petrodollar system, foreigners need dollars to buy oil. If they can now buy oil for less dollars, then why do they want to get more dollars?
[+] [-] ilaksh|5 years ago|reply
All the people who have dollars or bonds will be happy to see their money evaporate. And no one will be concerned if the US defaults, because they have nothing of value anyway worth liquidating or foreclosing.
And we could never have another global war. We are completely passed that now of course. All of the recent wars have been totally isolated incidents, mainly caused by evil dictators.
/s