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This argument's been made since Bretton Woods was ended by Nixon in 1971. A few years ago, I was convinced that the euro would take over reserve currency statu

This argument's been made since Bretton Woods was ended by Nixon in 1971. A few years ago, I was convinced that the euro would take over reserve currency status from the dollar eventually, but cracks are showing in the euro now - there's competing interests in the European governments for what to do with the currency. The euro will look strong during booms, but look shakier during busts. As for China - maybe in 15-20 years. They're liberalizing and trending upwards at a fantastic rate, but nobody trusts the Chinese government to do right by the currency instead of their own interests. This doesn't mean it's a good idea to hold a bunch of liquid dollars right now. But barring something really crazy, I think USD holds reserve currency standard for at least the next decade or two.

jerf 16y ago
The decline of the dollar is a choice that we are making by spending with wild abandon with no heed to the consequences (and indeed, somehow managing to convince quite a lot of us that we have some sort of moral imperative to bankrupt ourselves because not spending like drunken sailors is somehow morally wrong... to be honest I have a hard time following this argument, it's long since become unmoored from even Keynesian economic theory which at least had some basis in reality and is now just some vaguely moral imperative to spend spend spend). If we, you know, stop that, there isn't really a credible competitor on the horizon that could dethrone the dollar for quite a while. We're not talking about competition because the other currencies are really all that strong, we're talking about the end of the dollar as a reserve currency because we are behaving like idiots.
- lukifer 16y ago
  This makes sense, except that we've been spending with wild abandon since (at least) Reagan. If we've managed to keep it afloat that long, why is it so improbable that we might continue to do so for another decade or two (or longer)? (I'm not sure myself either way, just playing devil's advocate.)
  - jerf 16y ago
    There's been a sea change in the "wild abandon" in the past few years: http://www.businessinsider.com/us-federal-government-outlays-vs-median-household-income-2010-9 http://www.businessinsider.com/us-federal-government-outlays... (Look carefully at the X and Y axes; that's not a traditional chart and time is not X or Y. But it's one of the more interesting ones I came up with.) Bush started it, Obama made pretty sounding noises about fixing it but has doubled down on it, and shows no signs of stopping even though the "recession" excuse is fading away.
  - dantheman 16y ago
    Interest on the debt, currently it's about 200 Billion (10% of tax receipts). In 2020, it will be 800 Billion (40% of the federal budget), if you add in medicare and SS then boom you're over 100%. Exponential growth while slow at the start, can relatively quickly become quite large. http://investmentwatchblog.com/interest-expense-on-the-us-debt-is-expected-to-jump-to-800-billion-in-2020/ http://investmentwatchblog.com/interest-expense-on-the-us-de...
- krschultz 16y ago
  Except that prior to it even being a question of Keynesian economics and fixing a recession we were driving down the dollar to make US exports more "competitve" with the rest of the world.
khafra 16y ago
Bitcoin seems about ready to take over...

jerf 16y ago

The decline of the dollar is a choice that we are making by spending with wild abandon with no heed to the consequences (and indeed, somehow managing to convince quite a lot of us that we have some sort of moral imperative to bankrupt ourselves because not spending like drunken sailors is somehow morally wrong... to be honest I have a hard time following this argument, it's long since become unmoored from even Keynesian economic theory which at least had some basis in reality and is now just some vaguely moral imperative to spend spend spend). If we, you know, stop that, there isn't really a credible competitor on the horizon that could dethrone the dollar for quite a while. We're not talking about competition because the other currencies are really all that strong, we're talking about the end of the dollar as a reserve currency because we are behaving like idiots.

lukifer 16y ago
This makes sense, except that we've been spending with wild abandon since (at least) Reagan. If we've managed to keep it afloat that long, why is it so improbable that we might continue to do so for another decade or two (or longer)? (I'm not sure myself either way, just playing devil's advocate.)
- jerf 16y ago
  There's been a sea change in the "wild abandon" in the past few years: http://www.businessinsider.com/us-federal-government-outlays-vs-median-household-income-2010-9 http://www.businessinsider.com/us-federal-government-outlays... (Look carefully at the X and Y axes; that's not a traditional chart and time is not X or Y. But it's one of the more interesting ones I came up with.) Bush started it, Obama made pretty sounding noises about fixing it but has doubled down on it, and shows no signs of stopping even though the "recession" excuse is fading away.
- dantheman 16y ago
  Interest on the debt, currently it's about 200 Billion (10% of tax receipts). In 2020, it will be 800 Billion (40% of the federal budget), if you add in medicare and SS then boom you're over 100%. Exponential growth while slow at the start, can relatively quickly become quite large. http://investmentwatchblog.com/interest-expense-on-the-us-debt-is-expected-to-jump-to-800-billion-in-2020/ http://investmentwatchblog.com/interest-expense-on-the-us-de...
krschultz 16y ago
Except that prior to it even being a question of Keynesian economics and fixing a recession we were driving down the dollar to make US exports more "competitve" with the rest of the world.

khafra 16y ago

Bitcoin seems about ready to take over...