6 ms·

If you enjoyed this, I recommend Lyn's more recent article, post-covid: https://www.lynalden.com/great-depression/ https://www.lynalden.com/great-depression/

guiambros 6y ago
What a fantastic read; thank you for sharing!
echelon 6y ago
That paints an astonishingly bleak picture. I'm not an economist, but that seems almost unreal. We have a lot of levers (some unpleasant) that we can tweak that aren't mentioned. Getting into a cold war with China and shaping trade seems like something America is uniquely positioned to do. It may even be possible to cancel US treasury debt to China if the entire world gets on board with that plan (suing the CCP over covid-19 coverups and unanimously agreeing to prevent credit rating downgrades). I've seen this idea floated around the internet, and it doesn't sound implausible.
- chrisco255 6y ago
  Getting into a kind of cold war with China will lead to an actual war. But, here's the kicker. Our economy has been decimated over the last 30 years as we've exported our production to 3rd world countries (like China). We now have the strongest currency and it's going to get harder to export as a result. Meanwhile, all the factory and production skills we had 30 years ago are gone now. Those people are retired or dead. We now have 2 generations (Gen Z and Millenials) who fundamentally lack production skills. We are in a bad spot. It will take years to retool our economy.
  - echelon 6y ago
    > Getting into a kind of cold war with China will lead to an actual war. China does not want that, and we don't want to go to war with them either. MAD makes this an extremely unattractive option. > It will take years to retool our economy. No it won't. We're already manufacturing more high-skill goods domestically than at any point in our history, and now we have an opportunity to expand upon it. We can replace China with manufacturing in Vietnam, India, Mexico, Ethiopia, etc. and own the factories. China is already starting to shift expensive manufacturing out with One Belt One Road, but we can do the same with even more immediacy and effectiveness. India, Viet Nam, and Taiwan are itching to further distance themselves from China. There's no reason we can't be at the top of the manufacturing game worldwide in fifteen years. Especially if we use trade as a means to get partners on board. The G7 would do it.
    - pishpash 6y ago
      It doesn't need any of that. Automation will take care of most of manufacturing. The issue is, and always has been, redistribution of economic gains. China is a convenient red herring.
    - angry_octet 6y ago
      This is sadly quite ridiculous. The US can't move production out of China through sheer will power, and China is incredibly dominant in production in many industries -- the know-how simply doesn't exist in the US.
  - gnopgnip 6y ago
    A huge part of our military spending is to ensure that we have the requisite domestic production to fight a war, without spending years retooling the economy. Additionally domestic manufacturing output is at an all time high for a huge number of products, even while overall employment numbers are down.
- kccqzy 6y ago
  > It may even be possible to cancel US treasury debt to China Then the credibility of the United States would be forever harmed. If the U.S. can do this to China as retaliation, what guarantees that it won't do something similar to another country when the United States doesn't like that country? Plenty of countries aren't allies with the U.S., and they'd be dumping their treasuries like there's no tomorrow. The downward price pressure then wreaks havoc on investors in the U.S. and U.S. allies: treasuries are supposed to be the safest asset classes; when they crash, plenty of things will crash. Credit ratings don't even matter; without a credit downgrade everyone would know these ratings aren't objective any more. Not to mention that would potentially trigger total chaos in the U.S. sovereign CDS market, and potentially bankrupt financial institutions that sold these CDSs. I can't even imagine the scale of damage this would do.
  - ThrustVectoring 6y ago
    It wouldn't get cancelled, it would get frozen for the duration of hostilities. Being able to transfer US treasuries is only really possible with the consent of various pieces of US banking machinery, and that consent is revokable. For what it's worth, this is the fate of whatever treasury debt the sanctioned Iranian regime owns. Really hasn't been all that much of a problem in terms of causing dollar flight.
    - pishpash 6y ago
      You're getting over-excited. The US has a vested economic interest in China that despite rhetoric, it cannot extract itself from immediately, maybe not even in ten years. It doesn't have that entanglement in Iran. Trying to crash China's economy is in shooting-own-foot territory, and trying to do it by reneging on Treasury securities that are a part of complex financial transactions (they might be lent out, have you thought of that?) must be the dumbest way of all.
- ilaksh 6y ago
  My comment will probably just be removed or buried, but I am going to put some "crazy" beliefs out there. 1) The financial system is hopelessly oversimplified and hopelessly unfair. 2) It does need to be completely redone. We should understand that money is a fundamental _technology_ and actually come up with a totally new set of high technologies that replace its current incarnations with things that are much more sophisticated. 3) Failing that, it is quite possible that countries other than the US may see so much death and destruction due to the failing financial system (excessive debt etc.) that they become desperate for a way to unhook from the dollar. A certain amount of hunger and chaos could motivate a global war. 3) Up until just recently, it seemed pretty clear that it was not feasible to defeat the United States in war. 4) The Covid-19 pandemic _may_ have unfortunately proven that there is now a type of warfare that the United States cannot win - bio-warfare. I am not suggesting that Covid-19 was actually a bioweapon, but due to the very feasibility that a _similar_ virus could have originated in a lab in China, the effect of this disaster could nevertheless be seen to be the bio-warfare equivalent of Hiroshima. Again, does not appear to actually be the case, but research in similar microorganisms was documented to occur in Wuhan. So you can't say it isn't potentially plausible in the future. And so this is an effective demonstration of the power of such a weapon, and the way that tight controls on citizens and information makes it a feasible type of weapon for China. I am not writing this to try to create a rumor or something. But people have to realize that if money doesn't work for a certain number of entire countries they will fight for survival. And the US and it's outdated dollar system could actually be what they have to fight against.
  - khuey 6y ago
    An actual act of biowarfare, which this is almost certainly not, can be responded to with all the other tools of warfare, such as ICBMs.
    - pinkfoot 6y ago
      … can be responded to with all the other tools of warfare, such as ICBMs. Once
  - sbierwagen 6y ago
- pishpash 6y ago
  "Some random idea floated around the internet ... doesn't sound implausible" ... lol
- neutraloutsider 6y ago
  Have you heard this joke? "If you owe the bank a million dollars, you are in trouble. If you owe the bank a billion dollars, the bank is in trouble." Follow up joke - if you owe a billion dollars to a bank, and no one likes you or the bank, no one will care about either of you going down. As a neutral outsider, I see that there are actually three scenarios which can play out: 1 US comes out ahead after this 2 China comes out ahead after this 3 Both countries engage in a lot of tit-for-tat, impoverishing both sides, and making the world significantly more multi-polar. As a neutral, I would prefer 3. What I am saying is that no neutral country has an incentive right now to come on board to help either of these economic superpowers because both have been abusing and exploiting their powers for a long time now, and neither have been particularly trustworthy in their dealings with their friends and allies.
  - christophilus 6y ago
    There’s a great talk by Peter Zeihan that makes me think #3 is the likeliest scenario.
Tarq0n 6y ago
Slightly off-topic, but does anyone know where I can find good sources of similar analysis for the eurozone? I feel like I know more about U.S. monetary policy by now than my own area's.

guiambros 6y ago

What a fantastic read; thank you for sharing!

echelon 6y ago

That paints an astonishingly bleak picture. I'm not an economist, but that seems almost unreal. We have a lot of levers (some unpleasant) that we can tweak that aren't mentioned. Getting into a cold war with China and shaping trade seems like something America is uniquely positioned to do. It may even be possible to cancel US treasury debt to China if the entire world gets on board with that plan (suing the CCP over covid-19 coverups and unanimously agreeing to prevent credit rating downgrades). I've seen this idea floated around the internet, and it doesn't sound implausible.

chrisco255 6y ago
Getting into a kind of cold war with China will lead to an actual war. But, here's the kicker. Our economy has been decimated over the last 30 years as we've exported our production to 3rd world countries (like China). We now have the strongest currency and it's going to get harder to export as a result. Meanwhile, all the factory and production skills we had 30 years ago are gone now. Those people are retired or dead. We now have 2 generations (Gen Z and Millenials) who fundamentally lack production skills. We are in a bad spot. It will take years to retool our economy.
- echelon 6y ago
  > Getting into a kind of cold war with China will lead to an actual war. China does not want that, and we don't want to go to war with them either. MAD makes this an extremely unattractive option. > It will take years to retool our economy. No it won't. We're already manufacturing more high-skill goods domestically than at any point in our history, and now we have an opportunity to expand upon it. We can replace China with manufacturing in Vietnam, India, Mexico, Ethiopia, etc. and own the factories. China is already starting to shift expensive manufacturing out with One Belt One Road, but we can do the same with even more immediacy and effectiveness. India, Viet Nam, and Taiwan are itching to further distance themselves from China. There's no reason we can't be at the top of the manufacturing game worldwide in fifteen years. Especially if we use trade as a means to get partners on board. The G7 would do it.
  - pishpash 6y ago
    It doesn't need any of that. Automation will take care of most of manufacturing. The issue is, and always has been, redistribution of economic gains. China is a convenient red herring.
  - angry_octet 6y ago
    This is sadly quite ridiculous. The US can't move production out of China through sheer will power, and China is incredibly dominant in production in many industries -- the know-how simply doesn't exist in the US.
- gnopgnip 6y ago
  A huge part of our military spending is to ensure that we have the requisite domestic production to fight a war, without spending years retooling the economy. Additionally domestic manufacturing output is at an all time high for a huge number of products, even while overall employment numbers are down.
kccqzy 6y ago
> It may even be possible to cancel US treasury debt to China Then the credibility of the United States would be forever harmed. If the U.S. can do this to China as retaliation, what guarantees that it won't do something similar to another country when the United States doesn't like that country? Plenty of countries aren't allies with the U.S., and they'd be dumping their treasuries like there's no tomorrow. The downward price pressure then wreaks havoc on investors in the U.S. and U.S. allies: treasuries are supposed to be the safest asset classes; when they crash, plenty of things will crash. Credit ratings don't even matter; without a credit downgrade everyone would know these ratings aren't objective any more. Not to mention that would potentially trigger total chaos in the U.S. sovereign CDS market, and potentially bankrupt financial institutions that sold these CDSs. I can't even imagine the scale of damage this would do.
- ThrustVectoring 6y ago
  It wouldn't get cancelled, it would get frozen for the duration of hostilities. Being able to transfer US treasuries is only really possible with the consent of various pieces of US banking machinery, and that consent is revokable. For what it's worth, this is the fate of whatever treasury debt the sanctioned Iranian regime owns. Really hasn't been all that much of a problem in terms of causing dollar flight.
  - pishpash 6y ago
    You're getting over-excited. The US has a vested economic interest in China that despite rhetoric, it cannot extract itself from immediately, maybe not even in ten years. It doesn't have that entanglement in Iran. Trying to crash China's economy is in shooting-own-foot territory, and trying to do it by reneging on Treasury securities that are a part of complex financial transactions (they might be lent out, have you thought of that?) must be the dumbest way of all.
ilaksh 6y ago
My comment will probably just be removed or buried, but I am going to put some "crazy" beliefs out there. 1) The financial system is hopelessly oversimplified and hopelessly unfair. 2) It does need to be completely redone. We should understand that money is a fundamental _technology_ and actually come up with a totally new set of high technologies that replace its current incarnations with things that are much more sophisticated. 3) Failing that, it is quite possible that countries other than the US may see so much death and destruction due to the failing financial system (excessive debt etc.) that they become desperate for a way to unhook from the dollar. A certain amount of hunger and chaos could motivate a global war. 3) Up until just recently, it seemed pretty clear that it was not feasible to defeat the United States in war. 4) The Covid-19 pandemic _may_ have unfortunately proven that there is now a type of warfare that the United States cannot win - bio-warfare. I am not suggesting that Covid-19 was actually a bioweapon, but due to the very feasibility that a _similar_ virus could have originated in a lab in China, the effect of this disaster could nevertheless be seen to be the bio-warfare equivalent of Hiroshima. Again, does not appear to actually be the case, but research in similar microorganisms was documented to occur in Wuhan. So you can't say it isn't potentially plausible in the future. And so this is an effective demonstration of the power of such a weapon, and the way that tight controls on citizens and information makes it a feasible type of weapon for China. I am not writing this to try to create a rumor or something. But people have to realize that if money doesn't work for a certain number of entire countries they will fight for survival. And the US and it's outdated dollar system could actually be what they have to fight against.
- khuey 6y ago
  An actual act of biowarfare, which this is almost certainly not, can be responded to with all the other tools of warfare, such as ICBMs.
  - pinkfoot 6y ago
    … can be responded to with all the other tools of warfare, such as ICBMs. Once
- sbierwagen 6y ago
pishpash 6y ago
"Some random idea floated around the internet ... doesn't sound implausible" ... lol
neutraloutsider 6y ago
Have you heard this joke? "If you owe the bank a million dollars, you are in trouble. If you owe the bank a billion dollars, the bank is in trouble." Follow up joke - if you owe a billion dollars to a bank, and no one likes you or the bank, no one will care about either of you going down. As a neutral outsider, I see that there are actually three scenarios which can play out: 1 US comes out ahead after this 2 China comes out ahead after this 3 Both countries engage in a lot of tit-for-tat, impoverishing both sides, and making the world significantly more multi-polar. As a neutral, I would prefer 3. What I am saying is that no neutral country has an incentive right now to come on board to help either of these economic superpowers because both have been abusing and exploiting their powers for a long time now, and neither have been particularly trustworthy in their dealings with their friends and allies.
- christophilus 6y ago
  There’s a great talk by Peter Zeihan that makes me think #3 is the likeliest scenario.

Tarq0n 6y ago

Slightly off-topic, but does anyone know where I can find good sources of similar analysis for the eurozone? I feel like I know more about U.S. monetary policy by now than my own area's.