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> More troublesome, the inherent flaw of having the global reserve currency, in a theme that goes back to economist Robert Triffin from over half a century ago,
by aazaa 6y ago
> More troublesome, the inherent flaw of having the global reserve currency, in a theme that goes back to economist Robert Triffin from over half a century ago, is that in order to maintain the global reserve currency, the country must supply the world with its currency via structural deficits in one form or another.
That "structural deficit" means allowing manufacturing to move overseas.
The trade war is a distraction. Trade imbalances with the rest of the world could be solved very quickly by making it clear the the dollar is going down in flames and that policies will be put in place to make that happen:
1. massive federal budget deficit spending
2. purchase of all the debt by the Federal Reserve (yield curve control)
Holders of bonds would be absolutely wrecked. That's a lot of institutions and wealthy individuals.
The only question is whether the political will to do this can be mustered. So far it hasn't.
- lifty 6y agoIsn’t this happening now to a significant degree?
- api 6y agoI’ve seen fretting for years about the collapse of the dollar as the global reserve. Lately I have started wondering if this might not be good in the long run, and if maintaining the dollar as a global reserve is actually a very costly and economically distorting thing.
- tastyfreeze 6y agoI think the only reason that a global reserve currency hasnt changed yet is that there are no sound currencies to use. USD was selected as the global reserve because it was backed by gold. We went and fucked that up. Now there are no currencies left backed by anything but promises. If there was a large enough country with gold backed money the reserve currency would have switched decades ago.
- sidlls 6y agoI have not read one single serious justification (as in, empirical) for using gold as the backing of a currency. There are many indications that, historically, the boom and bust cycles that exist naturally are exacerbated when tying the value of currency to (often easily manipulated to be artificially) scarce things like gold. The world has moved beyond tying the value of our currencies to material goods. Digital "coins" aren't any better, and the same group of fringe types who push the gold standard have taken that over as well.
- api 6y agoThe only credible one is that it limits certain kinds of bad behavior, but that may come at a substantial cost.
- tastyfreeze 6y agoIt doesnt have to be gold. But sound money is a necessity for a thriving economy. Gold standard prevented bad monetary policy that leads to runnaway inflation. Its not a perfect system but it stops power and greed from destroying the economy. Addition: Every historical case of a government switching to fiat currency has resulted in runnaway inflation. The reason that gold and silver are the only constitutional money is it forces the government to do the right thing. No gold standard permits those in power to manipulate the currency for whatever reason they wish. The rules should force the wrong people to do the right thing. Relying on people in power to do the "right" thing will always fail.
- SubiculumCode 6y agoInflation inflation inflation, gold proponents always want to talk about inflation, never about the steering wheel that fiat currencies provide: Steering that allows us to right the course of our economic ships. When you link to gold, you go where the wind blows you. No control. No steering. Moreover your historical argument is weak. By analogy, we should also not have government, because every society that has formed a government has failed to keep it: Every government falls, eventually, be it Rome or the Aztecs.
- CuriouslyC 6y agoInflating the dollar is probably the only way we're going to get out of the hole we're in, so that'd kill two bird with one stone.
- ikiris 6y agoSuicide is an solution, but it's not a very recommended one.
- CuriouslyC 6y agoNeither is keeping a patient on life support when they're persistently vegetative and you need the hospital bed. If you have a non-austerity solution that doesn't assume infinite exponential economic expansion I'm all ears.
- tastyfreeze 6y agoDefault is another option. Inflation hurts everybody. Cutting spending is the only way to start repairing the economy for the long term. Government consumes 31% of the fruit of our labor. Money that could be left in the hands of people to drive the economy.
- CuriouslyC 6y agoThe beauty of inflation is that it hurts you in direct proportion to how well off you are, and it can't be dodged (i.e. it's like a wealth tax, only actually achievable). We could drive inflation while also ameliorating a lot of the pain it would cause by implementing UBI (in fact, I'm pretty sure big deficit spending is the only way UBI will ever happen). Defaulting would screw a lot of institutional pension investors, while a lot of the super-wealthy could just dodge into less vulnerable assets, potentially worsening wealth inequality.
- tw8f969ae5b6f4 6y agoThe effects of inflation are neither instantaneous nor uniformly distributed. Those who obtain the new money first are able to spend it before prices have had time to adjust. As that new money propagates, the prices of the relevant goods and services are bid up. As such, inflation gives an economic advantage to those who receive the new money sooner, and the consequent higher prices harm those further down the flow. In short, and contrary to the implication of the above comment, inflation benefits banks and corporations (and by extension, the wealthy and powerful), and harms workers and those on fixed incomes.
- buildawesome 6y ago> Holders of bonds would be absolutely wrecked. That's a lot of institutions and wealthy individuals. Not only institutions, but those who are in power (government) who have risk-tolerant positions in the market with nothing to gain but their own discomfort and retirement.
- deleted 6y ago[deleted]
- tharne 6y ago> Holders of bonds would be absolutely wrecked. That's a lot of institutions and wealthy individuals. That's also a lot of people with 401k's, college savings for their kids, pension funds, and non-profit endowments. I have a feeling that most wealthy individuals and institutions will be just fine, it's the little guy and middle class families that will feel the pain, as usual.
- AnimalMuppet 6y agoYeah, it's people in the US who would be wrecked. Sure, people outside, too, but the point of the idea was to help the American workers. If you help them, but destroy their pensions and their 401ks and their IRAs... are they actually better off? (And the answer is, some are and some aren't, but it's not a clearly good idea.)