5 ms·

I can't see one single indicator to suggest that the USD isn't in a long term decline. The only reason this isn't yet glaringly obvious to everyone, is that th

by ra 16y ago

I can't see one single indicator to suggest that the USD isn't in a long term decline. The only reason this isn't yet glaringly obvious to everyone, is that the Euro and GBP are also stuck on a downward trend. Speculatively, I believe the Euro and GBP will 'save' themselves out of trouble within the next 5-7 years, whereas the US will practically have to reinvent the earnings foundation of it's entire economy before it can break out of this current downward spiral of excessive debt.

ck2 16y ago
Time to start hording mid-1900's coins eh? http://en.wikipedia.org/wiki/Junk_silver#Common_U.S._coins http://en.wikipedia.org/wiki/Junk_silver#Common_U.S._coins
- presidentender 16y ago
  The time to start that was years ago. When I started.
fauigerzigerk 16y ago
Why does the US have to reinvent its earnings foundation and the EU and the UK don't? I believe the US dollar is in a long term downward trend because it is slowly slowly losing its reserve currency status as the US is losing its economic predominance. That's not a bad thing. It's just a reflection of Asia becoming less bad economically, which is neither difficult nor surprising considering how bad they used to be.
- anonymous246 16y ago
  My uneducated two cents: 1) The USA's economy is "financialized" to a much greater extent than Europe's. 2) Lots of "phantom" GDP in USA which makes US "productivity" and per-capita GDP look higher than corresponding Europe figures (it's not an "apples to apples comparison"), thereby hiding US economy's weaknesses (e.g., high college tuition costs, health insurance costs, high healthcare costs (paid out by insurance companies to hospitals), doctor liability insurance etc all inflate the GDP but the corresponding figures for Europe are smaller).
- lupatus 16y ago
  The USA is not going to lose its reserve currency status because it will continue being the world's sole superpower for the for the next 30 - 100 years, at least. For an in-depth analysis, see: http://www.singularity2050.com/2008/06/why-the-us-will-still-be-the-only-superpower-in-2030-v20.html http://www.singularity2050.com/2008/06/why-the-us-will-still...
  - fauigerzigerk 16y ago
    I don't doubt the strength of the US economy or its military power, but in relative terms the US is slowly getting less important. The article doesn't dispute that. It just says that it will take a long time until anyone will surpass the US. Also, the article works on the assumption of linear development, which is kind of questionable, but that's a different story. The US used to be the biggest user of commodities, so it was pretty logical that the dollar should be the currency in which commodities are priced. Today China is the biggest user of commodities and it is only logical that countries like Brazil are going to take a little more RMB in exchange for their iron ore than they used to. And considering they import a lot of stuff from China as well, why should they sell their RMB for USD immediately? They won't. Exchange rates are not based on absolutes but on relative strength. So the question is not wether the USD will or will not lose its reserve currency status. The question is how fast. My totally scientific characterization of that pace was "slowly slowly".
    - lupatus 16y ago
      The USA, however, isn't exactly "declining". As the article I linked to above noted, the USA is continuing to grow across a broad spectrum of measures. Yes, China and the EU may be growing at a faster rate in some of those categories, but the USA has such a great initial advantage that it will be a long, long time until another country catches or surpases the USA in even one of those categories. So, let us take your simplified example and expand it a little to see a broader macroeconomic picture that illustrates why Brazil and China would want to do that trade in dollars. Let's say that Brazil wants to use the cash from that commodity sale to improve the living conditions of their citizens and purchase some Catepillar brand forest-clearing bulldozers and some crude oil to refine into gasoline for those bulldozers because their local sugar-cane ethanol would wear-out the engines too quickly. Well, Catepillar is a American company so it makes sense for them to bill Brazil in USD instead RMB. The middle east oil exporter also charges Brazil in USD because the US Navy protects their shipping lanes and the CIA and State Dept maintains (or doesn't) the internal stability of that country. Last, China has USD coming out of its ears and is more than happy to trade pieces of paper for real assets like Brazillian ore. Now, why would the Chinese want Brazil to pay them in USD for some Chinese goods? The Chinese are smart and recognize that if the USD sank too far in value that the manufacturing jobs in China would return to the USA. This is a problem for the Communists because they do not have a sufficient internal economy to continue employing hundreds of millions of peasants. And, that would be a dangerous political problem for the Communist leadership in China. Now, I will agree that this assumes linear development, but it would take a situation like WWII to knock the USA out of reserve currency status, and I don't think that is very likely. In conclusion, welcome to Pax Americana; you should learn to love it.
espeed 16y ago
For a different perspective, see... 1. "Credit Suisse: America Is Not Broke" (http://pragcap.com/credit-suisse-america-is-not-broke http://pragcap.com/credit-suisse-america-is-not-broke) 2. "Understanding The Modern Monetary System" (http://pragcap.com/resources/understanding-modern-monetary-system http://pragcap.com/resources/understanding-modern-monetary-s...).
- Lost_BiomedE 16y ago
  People saying America is broke are looking at future obligations. Doing this, the 12T figure presented by the Credit Suisse link is a joke. The obligations that become current will rise so fast that GDP and household wealth have no chance in catching up and alleviating them. Add in our current run rate, and it is the straw that broke the camels back.
  - espeed 16y ago
    There is more to it than that -- read the article it links to about "Understanding the Modern Monetary System" (http://pragcap.com/resources/understanding-modern-monetary-s... http://pragcap.com/resources/understanding-modern-monetary-s...). "Government deficit spending and tax collection should be maintained at a rate that does not impose financial hardship on the private sector. Because the Federal government is not a state or household it should not manage its balance sheet for its own benefit. Rather, taxes and government spending should be managed in a way that most benefits the private sector and encourages private sector prosperity." "The key takeaway here is that the government balance sheet is not like a household or a state. It does not finance spending via revenues or debt issuance. The US government, as a monopoly supplier of currency in a floating exchange rate system never really has nor doesn’t have money."
    - Lost_BiomedE 16y ago
      Yes, it is a, broke relative to what. If human costs are not taken into account, it is a much easier equation.

by ra 16y ago

ck2 16y ago

Time to start hording mid-1900's coins eh? http://en.wikipedia.org/wiki/Junk_silver#Common_U.S._coins http://en.wikipedia.org/wiki/Junk_silver#Common_U.S._coins

presidentender 16y ago
The time to start that was years ago. When I started.

fauigerzigerk 16y ago

Why does the US have to reinvent its earnings foundation and the EU and the UK don't? I believe the US dollar is in a long term downward trend because it is slowly slowly losing its reserve currency status as the US is losing its economic predominance. That's not a bad thing. It's just a reflection of Asia becoming less bad economically, which is neither difficult nor surprising considering how bad they used to be.

anonymous246 16y ago
My uneducated two cents: 1) The USA's economy is "financialized" to a much greater extent than Europe's. 2) Lots of "phantom" GDP in USA which makes US "productivity" and per-capita GDP look higher than corresponding Europe figures (it's not an "apples to apples comparison"), thereby hiding US economy's weaknesses (e.g., high college tuition costs, health insurance costs, high healthcare costs (paid out by insurance companies to hospitals), doctor liability insurance etc all inflate the GDP but the corresponding figures for Europe are smaller).
lupatus 16y ago
The USA is not going to lose its reserve currency status because it will continue being the world's sole superpower for the for the next 30 - 100 years, at least. For an in-depth analysis, see: http://www.singularity2050.com/2008/06/why-the-us-will-still-be-the-only-superpower-in-2030-v20.html http://www.singularity2050.com/2008/06/why-the-us-will-still...
- fauigerzigerk 16y ago
  I don't doubt the strength of the US economy or its military power, but in relative terms the US is slowly getting less important. The article doesn't dispute that. It just says that it will take a long time until anyone will surpass the US. Also, the article works on the assumption of linear development, which is kind of questionable, but that's a different story. The US used to be the biggest user of commodities, so it was pretty logical that the dollar should be the currency in which commodities are priced. Today China is the biggest user of commodities and it is only logical that countries like Brazil are going to take a little more RMB in exchange for their iron ore than they used to. And considering they import a lot of stuff from China as well, why should they sell their RMB for USD immediately? They won't. Exchange rates are not based on absolutes but on relative strength. So the question is not wether the USD will or will not lose its reserve currency status. The question is how fast. My totally scientific characterization of that pace was "slowly slowly".
  - lupatus 16y ago
    The USA, however, isn't exactly "declining". As the article I linked to above noted, the USA is continuing to grow across a broad spectrum of measures. Yes, China and the EU may be growing at a faster rate in some of those categories, but the USA has such a great initial advantage that it will be a long, long time until another country catches or surpases the USA in even one of those categories. So, let us take your simplified example and expand it a little to see a broader macroeconomic picture that illustrates why Brazil and China would want to do that trade in dollars. Let's say that Brazil wants to use the cash from that commodity sale to improve the living conditions of their citizens and purchase some Catepillar brand forest-clearing bulldozers and some crude oil to refine into gasoline for those bulldozers because their local sugar-cane ethanol would wear-out the engines too quickly. Well, Catepillar is a American company so it makes sense for them to bill Brazil in USD instead RMB. The middle east oil exporter also charges Brazil in USD because the US Navy protects their shipping lanes and the CIA and State Dept maintains (or doesn't) the internal stability of that country. Last, China has USD coming out of its ears and is more than happy to trade pieces of paper for real assets like Brazillian ore. Now, why would the Chinese want Brazil to pay them in USD for some Chinese goods? The Chinese are smart and recognize that if the USD sank too far in value that the manufacturing jobs in China would return to the USA. This is a problem for the Communists because they do not have a sufficient internal economy to continue employing hundreds of millions of peasants. And, that would be a dangerous political problem for the Communist leadership in China. Now, I will agree that this assumes linear development, but it would take a situation like WWII to knock the USA out of reserve currency status, and I don't think that is very likely. In conclusion, welcome to Pax Americana; you should learn to love it.

espeed 16y ago

For a different perspective, see... 1. "Credit Suisse: America Is Not Broke" (http://pragcap.com/credit-suisse-america-is-not-broke http://pragcap.com/credit-suisse-america-is-not-broke) 2. "Understanding The Modern Monetary System" (http://pragcap.com/resources/understanding-modern-monetary-system http://pragcap.com/resources/understanding-modern-monetary-s...).

Lost_BiomedE 16y ago
People saying America is broke are looking at future obligations. Doing this, the 12T figure presented by the Credit Suisse link is a joke. The obligations that become current will rise so fast that GDP and household wealth have no chance in catching up and alleviating them. Add in our current run rate, and it is the straw that broke the camels back.
- espeed 16y ago
  There is more to it than that -- read the article it links to about "Understanding the Modern Monetary System" (http://pragcap.com/resources/understanding-modern-monetary-s... http://pragcap.com/resources/understanding-modern-monetary-s...). "Government deficit spending and tax collection should be maintained at a rate that does not impose financial hardship on the private sector. Because the Federal government is not a state or household it should not manage its balance sheet for its own benefit. Rather, taxes and government spending should be managed in a way that most benefits the private sector and encourages private sector prosperity." "The key takeaway here is that the government balance sheet is not like a household or a state. It does not finance spending via revenues or debt issuance. The US government, as a monopoly supplier of currency in a floating exchange rate system never really has nor doesn’t have money."
  - Lost_BiomedE 16y ago
    Yes, it is a, broke relative to what. If human costs are not taken into account, it is a much easier equation.