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In broad terms, USA is largely funded by global economy. This is done by setting US$ as master currency, so in effect, America's biggest export is dollar that g
by sytelus 6y ago
In broad terms, USA is largely funded by global economy. This is done by setting US$ as master currency, so in effect, America's biggest export is dollar that gets consumed by rest of the world. When Fed prints out $6T, the inflation transfers to rest of the world and little to US. The ownership of US$ allows Americans to buy expensive goods manufactured by labor and materials in rest of the world by merely manufacturing currency as primary export.
I think it is possible that in future, Americans don't have to work and rely completely on their export of US$ as world currency. The global currency must be protected military might and a constitution that allows for fairness, justice and ability to challenge authority. This is necessary for the trust and stability in global economics. The country owning the global currency would also need to setup military restrictions so that other countries may not be allowed to match military power. All this might look bad but it is truly an economic service that is needed to be provided by someone. US citizens job is then to protect constitution, military powers and the currency. For that job, they get goods and services from rest of the world. As merely 5% of population is engaged in providing this economic service, it is probably not an inefficient either.
- nine_zeros 6y agoGood points. But will the real manufacturers goods, and now tech, accept such a currency in the future? Especially, in the light of erratic political leadership that could renege on agreements and impose sanctions unilaterally??
- maurimo 6y agoVery interesting comment. That being the case, the biggest fallacy is the ability of challenging the authority, as long as the US politics are protected by US sovereignty (even if they involve and affect the rest of the world).
- sytelus 6y agoYou don't have to be perfect every day, you just need to be better than everyone else averaged over some long period of time.
- ciarannolan 6y agoThis is fascinating. What is this theory called? I'd like to read more.
- IfOnlyYouKnew 6y agoIt's called "a wild overstatement of generally accepted mechanisms". As but one rebuttal: The European Central Bank has acted mostly in concert with the FED since 2008, "printing" about as much money via quantitative easing and similar mechanisms. The Euro is nowhere close to the US$ as a reserve currency, and even less as a trade currency. And yet inflation in Europe has been just as non-existent as it has in the US.
- sjg007 6y agoWell China is absorbing the inflation basically.
- sytelus 6y agoEuro isn’t a reserve currency because of absence of true military powers and dependable justice system that is overly complicated and fragmented to the whims of individual countries. Further, Euro is always risk of countries leaving it and weakening its strength and future. China is still far from developing military powers and world cannot trust that reserve currency won’t be manipulated outright. So, no, there are no real options right now to provide the same economic service.
- pphysch 6y ago> The global currency must be protected military might At the current state of geopolitics, this is basically calling for WW3 in the next decade. US economic hegemony is on super shaky ground right now.
- AndrewKemendo 6y agoI'd be curious what geopolitical framework/elements/theory of power you're basing your analysis on.
- pphysch 6y agoThesis: US global power will continue to wane as long as the domestic situation (socioeconomic, cultural, institutional) worsens and geopolitical multipolarity is established by China. And that's okay, time's up! As long as the US doesn't do something enormously stupid in retaliation. It's not coming out of a textbook if that's what you're wondering.
- coliveira 6y agoSo now exploiting the rest of the world is viewed by some as an "economic service"? It is funny how low people will craw to protect their privileges.
- DataGata 6y agoThis post is the true meaning of "grift". Anybody that talks about reserve currencies as some sort of military tool instead of because it's the best financial instrument is showing themselves to be deeply disconnected from reality. Here are the things that make up a reserve currency: 1. Floated 2. No capital controls 3. Respect property rights 4. Have a bond market big enough 5. Have global trust 6. Be willing to have trade deficits 7. Stop export priority mercantilism 8. Have a currency market big enough Only the US dollar satisfies all of these rules.