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The reason for this is that the USD is the global reserve currency. The petrodollar (OPEC only trades oil for dollars) is kinda how we solidified it. However, b

by alert0 6y ago

The reason for this is that the USD is the global reserve currency. The petrodollar (OPEC only trades oil for dollars) is kinda how we solidified it. However, being the global reserve currency forces you to be a net importer. You have to run trade deficits. Running trade deficits is not sustainable over the long term [1] and we're probably nearing the end of it. So we should continue to invest in defense because it is a massive industry for the US. To solve the trade imbalances though, the dollar should be weakened (it may occur naturally). That will allow us to rebuild our manufacturing base as our products will be more competitive on the international stage. Additionally, right now we're in a low interest rate period of the long term debt cycle and will probably remain there for about a decade (at least). This is great because it means there is a ton of money exiting bonds looking for yield. There is a lot of capital ready to invest in projects. Combined with a weaker dollar, we're at a critical point for on-shoring and rebuilding US manufacturing. I'm pretty hyped about the next 10 years for this reason. It will allow us to shore up the DoD supply chain as we currently rely on adversaries for defense critical parts. 1. https://en.wikipedia.org/wiki/Triffin_dilemma https://en.wikipedia.org/wiki/Triffin_dilemma

baybal2 6y ago
> So we should continue to invest in defense because it is a massive industry for the US. To solve the trade imbalances though, the dollar should be weakened (it may occur naturally). That will allow us to rebuild our manufacturing base as our products will be more competitive on the international stage. A side effect of this not talked often is that the bigger you economy, and currency is globally, the more deficit spending by the government hit your balance of payment. US can't devalue the USD dramatically for as long as its debt is held of special value inside the country, and around the world. Americans, want slash, and murder your trade deficit? Run state budged at surplus for a few years, and you will see it melt away.

by alert0 6y ago

baybal2 6y ago

> So we should continue to invest in defense because it is a massive industry for the US. To solve the trade imbalances though, the dollar should be weakened (it may occur naturally). That will allow us to rebuild our manufacturing base as our products will be more competitive on the international stage. A side effect of this not talked often is that the bigger you economy, and currency is globally, the more deficit spending by the government hit your balance of payment. US can't devalue the USD dramatically for as long as its debt is held of special value inside the country, and around the world. Americans, want slash, and murder your trade deficit? Run state budged at surplus for a few years, and you will see it melt away.