12 ms·

The US Dollar Could Outlast the American Empire

129 points by hunglee2 6y ago

fuoqi 6y ago
I think the following article covers this problem much better: https://www.lynalden.com/fraying-petrodollar-system/ https://www.lynalden.com/fraying-petrodollar-system/
- vsskanth 6y ago
  Excellent article. Thanks for sharing.
  - victor106 6y ago
    Very good article. From the article:- “ At the heart of all of these systems would be the fact that the dollar would no longer be the world’s only currency for energy pricing. The euro, yuan, and perhaps a few others, or a neutral reserve currency, could be used in trade agreements to buy oil, gas, and various commodities, which unlocks the prospect for more global trade and reserve holdings in those currencies.” While this makes total sense the fundamental problem with this is a consensus mechanism to control liquidity in a localized crisis. If you have one currency it’s easier for that country to make a decision rather than convince all the other countries.
    - Pet_Ant 6y ago
      I wonder why people don’t use something “a multi-buck”. A multi-buck would be something like $1 USD + £1 + €1 + ¥1000. That would isolate you more from volatility. It’s useful for European companies if the dollar goes yup it minimizes the effect. Likewise for American companies. Guaranteed some movement but it seems like fairer than doing deals in a single currency.
      - xtacy 6y ago
        A multi-buck is essentially an SDR / Special Drawing Rights: https://www.investopedia.com/terms/s/sdr.asp https://www.investopedia.com/terms/s/sdr.asp
      - biolurker1 6y ago
        You are describing Facebook diem
throw0101a 6y ago
In a maybe-parallel, an empire's language has gone on to live as a lingua franca long after the empire that spawned it collapsed: * https://www.worldcat.org/oclc/748390958 https://www.worldcat.org/oclc/748390958 * https://www.penguin.co.uk/books/133/133183/the-last-lingua-franca/9780141922218.html https://www.penguin.co.uk/books/133/133183/the-last-lingua-f... * https://www.theguardian.com/books/2010/dec/04/last-lingua-franca-ostler-review https://www.theguardian.com/books/2010/dec/04/last-lingua-fr... The Romans spoke (Koine) Greek even though they had the empire at the time and Alexander the Great was long-dead.
- djohnston 6y ago
  And many tendrils of the Roman empire continued to use imperial coinage for centuries after Rome was sacked.
  - Turing_Machine 6y ago
    See: https://en.wikipedia.org/wiki/Maria_Theresa_thaler https://en.wikipedia.org/wiki/Maria_Theresa_thaler The Austro-Hungarian Empire hasn't been a thing for over a hundred years now, but their coinage is still circulating.
    - anonunivgrad 6y ago
      The coin is made of silver. That's totally different than American currency, which has no intrinsic value.
      - throw0101a 6y ago
        > no intrinsic value. You say this as if silver has "intrinsic" value. It (and gold) have no intrinsic value to humans I would argue, and are simply assigned arbitrary psychological value. They could have industrial or even aesthetic uses, but those are culturally defined and not something innate to the material. IMHO the only things with "intrinsic" value for humans are air, shelter (especially against 'extreme' temperatures), water, and food.
xiphias2 6y ago
,,With interest rates at zero, how can a dollar whose supply is rising, in M2 terms, by 24% annually compete with gold, whose supply increases are limited by mining technology, or Bitcoin, with a supply encoded in algorithms?'' It can't. The world doesn't work long term with 25% yearly inflation. All the reasons written in the article are ,,USD is the biggest currency, so it will remain the biggest forever''. Historically currencies were swinging between store of value and medium of exchange (gold can't be transferred digitally, USD can). It seems like Bitcoin is a great balance between the two.
- bladegash 6y ago
  I don’t think increase in money supply is the only factor that contributes to inflation. Its been a while, but I think inflation is caused by a combination of factors, including the availability of a currency, demand for that currency, availability of goods and services that can purchased using that currency, etc. An increase in supply of the US dollar, may just be due to the increased demand for the currency, as well as increases in the availability/demand for goods and services (e.g., reduction in scarcity).
  - deleted 6y ago
    [deleted]
- DSingularity 6y ago
  What happens when the ubiquity of the dollar is combined with a globalized world? It seems like it will take the combination of failure in the dollar + abandonment of globalization by world powers for a shift to deflationary reserves to occur. Regardless, the only loser is the poor and middle class. The wealthy will have enough Bitcoin and gold.
  - ianai 6y ago
    Huh, interesting point there. Do the rich benefit from a deflationary spiral? It seems like either they do or they might perceive themselves as benefiting in the short term. That’s pretty disastrous.
1cvmask 6y ago
After the breakdown of Bretton Woods, the petro-dollar was created by the US being a hegemonic power. https://www.bloomberg.com/news/features/2016-05-30/the-untold-story-behind-saudi-arabia-s-41-year-u-s-debt-secret https://www.bloomberg.com/news/features/2016-05-30/the-untol... Any threats to the petro-dollar have been met with death and invasion like Libya and Iraq. It seems that any new hegemon has a chance at a reserve currency if they can force their currency as the default for commodities. China has a voracious appetite for commodities and if it pays for them in Yuan (like in Russia-China gas pipeline) this could be mean that we might be heading for a multiple reserve currency scenario globally. Fiat currency as a reserve currency requires being a hegemon and military might. So wars are not just for taking over the resources of other countries but also in how they are priced and sold. Also the rise of crypto and the “return” of gold could change matters as well as money supply of fiat currency continues to increase beyond economic growth. https://eurasiantimes.com/petro-dollar-vs-petro-yuan-is-china-set-to-replace-u-s-as-the-biggest-player-in-m-east-as-ties-grow-with-saudi-arabia/ https://eurasiantimes.com/petro-dollar-vs-petro-yuan-is-chin... https://www.reuters.com/article/us-saudi-usa-oil-exclusive-idUSKCN1RH008 https://www.reuters.com/article/us-saudi-usa-oil-exclusive-i...
- JMTQp8lwXL 6y ago
  The question boils down to, do people trust China (and its renminbi) or the US (and its dollar) more? Even if China is greatly involved in commodities, or has an ever-growing GDP, the political forces concerning the administration of the currency are a factor.
  - sroussey 6y ago
    Trade between China and Russia has gone from 90% USD to 90% Yuan. The question is, how many bilateral agreements does it take to make it fait accompli?
    - Iolaum 6y ago
      Enough that it 'd consist a sizable amount of the trading volume. Then businesses will bother to figure out the FX costs associated with trading in Yuan. And then trading in Yuan has to be more profitable than trading in USD. Don't know enough to evaluate possible outcomes for each step.
arminiusreturns 6y ago
Doubt it. The banskters have been positioning for its demise for some time now, telegraphing their moves openly. The pheonix coin economist run was how long ago? More recently I've heard a lot of talk of central banks starting to use a global currency based on SDRs, a sort of digital SDR coin... scary shit.
Daho0n 6y ago
Well, it likely already almost have.
claydavisss 6y ago
80% of global transactions clear in dollars A nation can either earn dollars or get a credit line from the US. Credit lines come with strings attached. Bolinsaro changed his policy on regime change in Venezuela on approximately the same day a credit line was approved.
nix23 6y ago
I love it that the US is called empire..on point.
tibbydudeza 6y ago
Cyberpunk 2077 features EuroDollars (Eddies) , they might be onto something.
- grkvlt 6y ago
  Or maybe they are just talking about EDs or https://en.wikipedia.org/wiki/Eurodollar https://en.wikipedia.org/wiki/Eurodollar (although they are just dollars held outwith the juristiction of the Federal Reserve, and I can't remember if they are meant to be the thing in the games)
cryptica 6y ago
The problem is that the distribution of fiat has become too centralized. Fiat is far too easy to earn for some and far too difficult to earn for others. The only thing holding the fiat system together are the elite's willingness to hold onto it in spite of the fact that it is worth nothing to them (particularly in our risk-free bailout-driven economy). The elites only hold fiat to create artificial scarcity; to create an anti-competitive moat around all their existing businesses. At this stage, from a capitalist point of view, the elites who hold fiat are doing charity work at a loss to themselves... It's a purely idealistic pursuit which is not grounded in their own self-interest. The ideological basis of this charity work is dubious and in the end, the real capitalists will throw their cronies under the bus for profit. The artificial fiat manipulation that we're seeing now is setting the stage for a massive wealth transfer. The incentives for betrayal between members of the elite keep getting bigger now that their freedoms are at stake.
- amanaplanacanal 6y ago
  Mostly elites don't hold fiat, though, they trade dollars for real assets as fast as they get it. Who are these elites who hold large quantities of dollars?
  - hakfoo 6y ago
    But aren't most of those "real" assets intangible too? Share and bond wealth relies on the existence of a functional government who is willing to honour your property rights. The fact you nominally own 25% of Amazon.com means very little if the server farms have been cut off, the employees have abandoned their posts and the warehouses have been ransacked and plundered
  - cryptica 6y ago
    They do hold fiat via corporate stocks like AAPL and MSFT and many others which hold a lot of fiat on their books.
- pbrb 6y ago
  > The artificial fiat manipulation that we're seeing now is setting the stage for a massive wealth transfer. What is the wealth transfer?
dragonwriter 6y ago
> With interest rates at zero, how can a dollar whose supply is rising, in M2 terms, by 24% annually compete with gold, whose supply increases are limited by mining technology, or Bitcoin, with a supply encoded in algorithms? Compete for what? Market as a store of value? It doesn't, by design. For use as a currency? By being actively managed for relatively stable value, which is more important than available quantity.
bkovacev 6y ago
Will the value of US Dollar drop further? In comparison vs euro it has been dropping steadily for the past six months or a bit more. I am unsure if I should convert now, or wait for the bounce back.
- Technically 6y ago
  Long-term, there's little reason to think that the dollar will remain (arbitrarily) stronger than other currencies. The currency manipulation (non-pejorative) that does take place should, in fact, raise concerns with holders of the dollar: the government is willing to dilute the value of the dollar to support domestic businesses close to k street at the expense of every other holder of the dollar.
leoplct 6y ago
Bitcoin could be a solution?
michaelyoshika 6y ago
I don’t believe usd will hold value as US is technically bankrupted now. I also don’t use yuan or other currencies as they are not globally accepted now. So I believe in technology evolvement and use crypto currencies which solve both problems. If you believed distributed databases would replace centralized databases, why wouldn’t you believe distributed money would replace centralized money?
gumby 6y ago
> Meanwhile, the U.S. tradition of militarism has coevolved with its status as a reserve currency issuer, meaning that other countries think twice before threatening America’s economic interests. This is what surprised me the most at first about the September ‘01 attacks: I was certain that no state would try to attack NYC as that would disrupt their own financial system. Of course the attack was by a non-state actor who was deliberately trying to attack the financial system of Saudi Arabia (plus recruit followers by publicly “striking back against Rome”). It also showed their non-state naïveté by attacking a grandly-named office building rather than an actual organ of world trade (e.g. the CBOT).
- 6d6b73 6y ago
  The attacked was backed by Saudis, why would they want to attack their own currency?
  - gumby 6y ago
    I don't know what you mean by "backed by Saudis" -- do you mean that the participants (including bin Laden) were mostly Saudis? Certainly, but it was not at all backed by the Haus of Saudi or any other governmental function (to the extent that the two can even be separated). After Afghanistan (and perhaps before, I don't know), Osama Bin Laden's objective was the overthrow of the Saudi monarchy -- despite (or because?) he was part of a large, wealthy family in the upper echelons of Saudi society. This is very clear in his writings and videos, and in particular the ones just before and on the subject of the 2001 attacks. As he became a worldwide figure he broadened his scope (PR is everything, amirite?) but could never let go of the "venomous" house of Saud. It's not like there was a conspiracy to cover up his blathering -- understandably a lot of the English published in the USA focused on the attack on the US and then on the wider "jihad" topic that was important to the government and overall was more important to Americans. It would be surprising if that had not been the case. But academic work, and translations in other countries (Western Europe, Indonesia, likely other places whose translations I could not read), were more comprehensive, presumably as the direct risks seemed less acute than they were felt by the government and general public in the USA.
georgeplusplus 6y ago
something I found interesting was the authors comments regarding a trade deficit. The author states that a larger trade deficit is good for the USA and the dollar since it means more demand for dollars with little given back in return save for debt. and yet Donald trump has repeatedly called for closing the gap with China while the new admin will return to the status quo. Certainly if the economics work out then why not. How could it be bad? But I cant help but feel there is something so perverse about such a system. What ultimately feels like encouragement to consume and rack up debt to detriment to others. I don’t claim to understand the forces behind the economics of this at all but my intuition tells me the pandemic has created more cracks to such a system.
fny 6y ago
Thesis: The dollar will not be dethroned soon and it will not outlast the American Empire. 1. US rate cuts during crises and deficit spending is necessary for the global financial system. If the US responded otherwise, it would have been dethroned. the Fed's response to both the global financial crisis and coronavirus crash further entrench the US as the global reserve currency precisely because the "American Empire" exists. Allow me to elaborate. During the GFC, the US became the de facto central bank of the world thanks to Bernanke's liquidity swaps with other central banks. There a great video of him responding to a congress person about this. [0] Remember, since the USD is the global reserve currency, all debt is denominated in dollars, so it's necessary for the survival of the entire system for the primary supplier of USD to relax its policies and ensure devaluation so that other countries don't suffocate from a dollar shortage. The coronavirus crash entrenched the US's role as the global central bank even further since their response was swift and immediate. Dollar swap lines appeared in weeks rather than years and months, and we did not see a global financial collapse as we did in 2008. This liquidity event was just a blip. 2. Debt to GDP is a nonsense metric in this environment. Everyone has massive deficits. The US is at 100%. Let's look at the other countries. Debt to GDP in Japan is 240%. We have EU countries Greece at 174% and Italy at 133% other EUs like France, Belgium and Spain near 100%, Germany at 56%, and the more frugal countries operating at 30-40% debt to GDP. UK is at 85%. Sure China is at 50%, but it has a lot of other problems. 3. Interest rates are negative almost everywhere else. Every country I mentioned in 2 has negative interest rates save China. This will buoy dollar demand over the long run. 4. Other viable alternatives have unstable and untrustworthy government regimes. Let's take China as an example. Do you trust an authoritarian government who has not demonstrated willingness or ability to do 1 to take over as the central bank for the globe? This is a country who has also manipulated its currency in the past. --- Remember fiat currency has power through enforcement and governance. Power in this regime comes from the ability to govern a currency well. Bitcoin will never be a global reserve currency precisely because its supply is restricted and cannot be manipulated to give governments the flexibility to respond to crises. Bretton-Woods collapsed for the same reason. For as long as the US is in good relative standing to other trusted fiat currencies, it will remain the global reserve currency. Over time I could see a system where different currencies dominate different geographies thereby chipping away at US hegemony, but if the American Empire were ever to collapse, the dollar would be a fiat currency with a power vacuum. Who's going to print them dollars? [0]: https://www.youtube.com/watch?v=Rk56d6mPNG0 https://www.youtube.com/watch?v=Rk56d6mPNG0

129 points by hunglee2 6y ago

I think the following article covers this problem much better: https://www.lynalden.com/fraying-petrodollar-system/ https://www.lynalden.com/fraying-petrodollar-system/

vsskanth 6y ago
Excellent article. Thanks for sharing.
- victor106 6y ago
  Very good article. From the article:- “ At the heart of all of these systems would be the fact that the dollar would no longer be the world’s only currency for energy pricing. The euro, yuan, and perhaps a few others, or a neutral reserve currency, could be used in trade agreements to buy oil, gas, and various commodities, which unlocks the prospect for more global trade and reserve holdings in those currencies.” While this makes total sense the fundamental problem with this is a consensus mechanism to control liquidity in a localized crisis. If you have one currency it’s easier for that country to make a decision rather than convince all the other countries.
  - Pet_Ant 6y ago
    I wonder why people don’t use something “a multi-buck”. A multi-buck would be something like $1 USD + £1 + €1 + ¥1000. That would isolate you more from volatility. It’s useful for European companies if the dollar goes yup it minimizes the effect. Likewise for American companies. Guaranteed some movement but it seems like fairer than doing deals in a single currency.
    - xtacy 6y ago
      A multi-buck is essentially an SDR / Special Drawing Rights: https://www.investopedia.com/terms/s/sdr.asp https://www.investopedia.com/terms/s/sdr.asp
    - biolurker1 6y ago
      You are describing Facebook diem

throw0101a 6y ago

In a maybe-parallel, an empire's language has gone on to live as a lingua franca long after the empire that spawned it collapsed: * https://www.worldcat.org/oclc/748390958 https://www.worldcat.org/oclc/748390958 * https://www.penguin.co.uk/books/133/133183/the-last-lingua-franca/9780141922218.html https://www.penguin.co.uk/books/133/133183/the-last-lingua-f... * https://www.theguardian.com/books/2010/dec/04/last-lingua-franca-ostler-review https://www.theguardian.com/books/2010/dec/04/last-lingua-fr... The Romans spoke (Koine) Greek even though they had the empire at the time and Alexander the Great was long-dead.

djohnston 6y ago
And many tendrils of the Roman empire continued to use imperial coinage for centuries after Rome was sacked.
- Turing_Machine 6y ago
  See: https://en.wikipedia.org/wiki/Maria_Theresa_thaler https://en.wikipedia.org/wiki/Maria_Theresa_thaler The Austro-Hungarian Empire hasn't been a thing for over a hundred years now, but their coinage is still circulating.
  - anonunivgrad 6y ago
    The coin is made of silver. That's totally different than American currency, which has no intrinsic value.
    - throw0101a 6y ago
      > no intrinsic value. You say this as if silver has "intrinsic" value. It (and gold) have no intrinsic value to humans I would argue, and are simply assigned arbitrary psychological value. They could have industrial or even aesthetic uses, but those are culturally defined and not something innate to the material. IMHO the only things with "intrinsic" value for humans are air, shelter (especially against 'extreme' temperatures), water, and food.

xiphias2 6y ago

,,With interest rates at zero, how can a dollar whose supply is rising, in M2 terms, by 24% annually compete with gold, whose supply increases are limited by mining technology, or Bitcoin, with a supply encoded in algorithms?'' It can't. The world doesn't work long term with 25% yearly inflation. All the reasons written in the article are ,,USD is the biggest currency, so it will remain the biggest forever''. Historically currencies were swinging between store of value and medium of exchange (gold can't be transferred digitally, USD can). It seems like Bitcoin is a great balance between the two.

bladegash 6y ago
I don’t think increase in money supply is the only factor that contributes to inflation. Its been a while, but I think inflation is caused by a combination of factors, including the availability of a currency, demand for that currency, availability of goods and services that can purchased using that currency, etc. An increase in supply of the US dollar, may just be due to the increased demand for the currency, as well as increases in the availability/demand for goods and services (e.g., reduction in scarcity).
- deleted 6y ago
  [deleted]
DSingularity 6y ago
What happens when the ubiquity of the dollar is combined with a globalized world? It seems like it will take the combination of failure in the dollar + abandonment of globalization by world powers for a shift to deflationary reserves to occur. Regardless, the only loser is the poor and middle class. The wealthy will have enough Bitcoin and gold.
- ianai 6y ago
  Huh, interesting point there. Do the rich benefit from a deflationary spiral? It seems like either they do or they might perceive themselves as benefiting in the short term. That’s pretty disastrous.

1cvmask 6y ago

After the breakdown of Bretton Woods, the petro-dollar was created by the US being a hegemonic power. https://www.bloomberg.com/news/features/2016-05-30/the-untold-story-behind-saudi-arabia-s-41-year-u-s-debt-secret https://www.bloomberg.com/news/features/2016-05-30/the-untol... Any threats to the petro-dollar have been met with death and invasion like Libya and Iraq. It seems that any new hegemon has a chance at a reserve currency if they can force their currency as the default for commodities. China has a voracious appetite for commodities and if it pays for them in Yuan (like in Russia-China gas pipeline) this could be mean that we might be heading for a multiple reserve currency scenario globally. Fiat currency as a reserve currency requires being a hegemon and military might. So wars are not just for taking over the resources of other countries but also in how they are priced and sold. Also the rise of crypto and the “return” of gold could change matters as well as money supply of fiat currency continues to increase beyond economic growth. https://eurasiantimes.com/petro-dollar-vs-petro-yuan-is-china-set-to-replace-u-s-as-the-biggest-player-in-m-east-as-ties-grow-with-saudi-arabia/ https://eurasiantimes.com/petro-dollar-vs-petro-yuan-is-chin... https://www.reuters.com/article/us-saudi-usa-oil-exclusive-idUSKCN1RH008 https://www.reuters.com/article/us-saudi-usa-oil-exclusive-i...

JMTQp8lwXL 6y ago
The question boils down to, do people trust China (and its renminbi) or the US (and its dollar) more? Even if China is greatly involved in commodities, or has an ever-growing GDP, the political forces concerning the administration of the currency are a factor.
- sroussey 6y ago
  Trade between China and Russia has gone from 90% USD to 90% Yuan. The question is, how many bilateral agreements does it take to make it fait accompli?
  - Iolaum 6y ago
    Enough that it 'd consist a sizable amount of the trading volume. Then businesses will bother to figure out the FX costs associated with trading in Yuan. And then trading in Yuan has to be more profitable than trading in USD. Don't know enough to evaluate possible outcomes for each step.

arminiusreturns 6y ago

Doubt it. The banskters have been positioning for its demise for some time now, telegraphing their moves openly. The pheonix coin economist run was how long ago? More recently I've heard a lot of talk of central banks starting to use a global currency based on SDRs, a sort of digital SDR coin... scary shit.

Daho0n 6y ago

Well, it likely already almost have.

claydavisss 6y ago

80% of global transactions clear in dollars A nation can either earn dollars or get a credit line from the US. Credit lines come with strings attached. Bolinsaro changed his policy on regime change in Venezuela on approximately the same day a credit line was approved.

nix23 6y ago

I love it that the US is called empire..on point.

tibbydudeza 6y ago

Cyberpunk 2077 features EuroDollars (Eddies) , they might be onto something.

grkvlt 6y ago
Or maybe they are just talking about EDs or https://en.wikipedia.org/wiki/Eurodollar https://en.wikipedia.org/wiki/Eurodollar (although they are just dollars held outwith the juristiction of the Federal Reserve, and I can't remember if they are meant to be the thing in the games)

cryptica 6y ago

The problem is that the distribution of fiat has become too centralized. Fiat is far too easy to earn for some and far too difficult to earn for others. The only thing holding the fiat system together are the elite's willingness to hold onto it in spite of the fact that it is worth nothing to them (particularly in our risk-free bailout-driven economy). The elites only hold fiat to create artificial scarcity; to create an anti-competitive moat around all their existing businesses. At this stage, from a capitalist point of view, the elites who hold fiat are doing charity work at a loss to themselves... It's a purely idealistic pursuit which is not grounded in their own self-interest. The ideological basis of this charity work is dubious and in the end, the real capitalists will throw their cronies under the bus for profit. The artificial fiat manipulation that we're seeing now is setting the stage for a massive wealth transfer. The incentives for betrayal between members of the elite keep getting bigger now that their freedoms are at stake.

amanaplanacanal 6y ago
Mostly elites don't hold fiat, though, they trade dollars for real assets as fast as they get it. Who are these elites who hold large quantities of dollars?
- hakfoo 6y ago
  But aren't most of those "real" assets intangible too? Share and bond wealth relies on the existence of a functional government who is willing to honour your property rights. The fact you nominally own 25% of Amazon.com means very little if the server farms have been cut off, the employees have abandoned their posts and the warehouses have been ransacked and plundered
- cryptica 6y ago
  They do hold fiat via corporate stocks like AAPL and MSFT and many others which hold a lot of fiat on their books.
pbrb 6y ago
> The artificial fiat manipulation that we're seeing now is setting the stage for a massive wealth transfer. What is the wealth transfer?

dragonwriter 6y ago

> With interest rates at zero, how can a dollar whose supply is rising, in M2 terms, by 24% annually compete with gold, whose supply increases are limited by mining technology, or Bitcoin, with a supply encoded in algorithms? Compete for what? Market as a store of value? It doesn't, by design. For use as a currency? By being actively managed for relatively stable value, which is more important than available quantity.

bkovacev 6y ago

Will the value of US Dollar drop further? In comparison vs euro it has been dropping steadily for the past six months or a bit more. I am unsure if I should convert now, or wait for the bounce back.

Technically 6y ago
Long-term, there's little reason to think that the dollar will remain (arbitrarily) stronger than other currencies. The currency manipulation (non-pejorative) that does take place should, in fact, raise concerns with holders of the dollar: the government is willing to dilute the value of the dollar to support domestic businesses close to k street at the expense of every other holder of the dollar.

leoplct 6y ago

Bitcoin could be a solution?

michaelyoshika 6y ago

I don’t believe usd will hold value as US is technically bankrupted now. I also don’t use yuan or other currencies as they are not globally accepted now. So I believe in technology evolvement and use crypto currencies which solve both problems. If you believed distributed databases would replace centralized databases, why wouldn’t you believe distributed money would replace centralized money?

gumby 6y ago

> Meanwhile, the U.S. tradition of militarism has coevolved with its status as a reserve currency issuer, meaning that other countries think twice before threatening America’s economic interests. This is what surprised me the most at first about the September ‘01 attacks: I was certain that no state would try to attack NYC as that would disrupt their own financial system. Of course the attack was by a non-state actor who was deliberately trying to attack the financial system of Saudi Arabia (plus recruit followers by publicly “striking back against Rome”). It also showed their non-state naïveté by attacking a grandly-named office building rather than an actual organ of world trade (e.g. the CBOT).

6d6b73 6y ago
The attacked was backed by Saudis, why would they want to attack their own currency?
- gumby 6y ago
  I don't know what you mean by "backed by Saudis" -- do you mean that the participants (including bin Laden) were mostly Saudis? Certainly, but it was not at all backed by the Haus of Saudi or any other governmental function (to the extent that the two can even be separated). After Afghanistan (and perhaps before, I don't know), Osama Bin Laden's objective was the overthrow of the Saudi monarchy -- despite (or because?) he was part of a large, wealthy family in the upper echelons of Saudi society. This is very clear in his writings and videos, and in particular the ones just before and on the subject of the 2001 attacks. As he became a worldwide figure he broadened his scope (PR is everything, amirite?) but could never let go of the "venomous" house of Saud. It's not like there was a conspiracy to cover up his blathering -- understandably a lot of the English published in the USA focused on the attack on the US and then on the wider "jihad" topic that was important to the government and overall was more important to Americans. It would be surprising if that had not been the case. But academic work, and translations in other countries (Western Europe, Indonesia, likely other places whose translations I could not read), were more comprehensive, presumably as the direct risks seemed less acute than they were felt by the government and general public in the USA.

georgeplusplus 6y ago

something I found interesting was the authors comments regarding a trade deficit. The author states that a larger trade deficit is good for the USA and the dollar since it means more demand for dollars with little given back in return save for debt. and yet Donald trump has repeatedly called for closing the gap with China while the new admin will return to the status quo. Certainly if the economics work out then why not. How could it be bad? But I cant help but feel there is something so perverse about such a system. What ultimately feels like encouragement to consume and rack up debt to detriment to others. I don’t claim to understand the forces behind the economics of this at all but my intuition tells me the pandemic has created more cracks to such a system.

fny 6y ago

Thesis: The dollar will not be dethroned soon and it will not outlast the American Empire. 1. US rate cuts during crises and deficit spending is necessary for the global financial system. If the US responded otherwise, it would have been dethroned. the Fed's response to both the global financial crisis and coronavirus crash further entrench the US as the global reserve currency precisely because the "American Empire" exists. Allow me to elaborate. During the GFC, the US became the de facto central bank of the world thanks to Bernanke's liquidity swaps with other central banks. There a great video of him responding to a congress person about this. [0] Remember, since the USD is the global reserve currency, all debt is denominated in dollars, so it's necessary for the survival of the entire system for the primary supplier of USD to relax its policies and ensure devaluation so that other countries don't suffocate from a dollar shortage. The coronavirus crash entrenched the US's role as the global central bank even further since their response was swift and immediate. Dollar swap lines appeared in weeks rather than years and months, and we did not see a global financial collapse as we did in 2008. This liquidity event was just a blip. 2. Debt to GDP is a nonsense metric in this environment. Everyone has massive deficits. The US is at 100%. Let's look at the other countries. Debt to GDP in Japan is 240%. We have EU countries Greece at 174% and Italy at 133% other EUs like France, Belgium and Spain near 100%, Germany at 56%, and the more frugal countries operating at 30-40% debt to GDP. UK is at 85%. Sure China is at 50%, but it has a lot of other problems. 3. Interest rates are negative almost everywhere else. Every country I mentioned in 2 has negative interest rates save China. This will buoy dollar demand over the long run. 4. Other viable alternatives have unstable and untrustworthy government regimes. Let's take China as an example. Do you trust an authoritarian government who has not demonstrated willingness or ability to do 1 to take over as the central bank for the globe? This is a country who has also manipulated its currency in the past. --- Remember fiat currency has power through enforcement and governance. Power in this regime comes from the ability to govern a currency well. Bitcoin will never be a global reserve currency precisely because its supply is restricted and cannot be manipulated to give governments the flexibility to respond to crises. Bretton-Woods collapsed for the same reason. For as long as the US is in good relative standing to other trusted fiat currencies, it will remain the global reserve currency. Over time I could see a system where different currencies dominate different geographies thereby chipping away at US hegemony, but if the American Empire were ever to collapse, the dollar would be a fiat currency with a power vacuum. Who's going to print them dollars? [0]: https://www.youtube.com/watch?v=Rk56d6mPNG0 https://www.youtube.com/watch?v=Rk56d6mPNG0