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Maybe I’ve been spending too much time on FT, the Economist, and Bloomberg but is it just me or is this pretty low quality for an economics write up in a major

Maybe I’ve been spending too much time on FT, the Economist, and Bloomberg but is it just me or is this pretty low quality for an economics write up in a major paper? These two things can be simultaneous true: - The USD and it’s position in the world has never been as fragile as it is now - The Renminbi / Digital Chinese Yuan has no viable path to supplanting the USD as things stand today. Until there are no more capital controls on the mainland, a free floating exchange rate (that is not controlled by the central govt.), and a trust that the central government won’t step in and devalue (or possibly weaponize in some way) the RMB, I would put my money that it will never become THE reserve currency of the world, digital or not. Digital RMB news has generally felt like lots of hype machine and PR. While it would be beneficial to the CCP, Chinese economy and Chinese businesses - I still would bet it would be mostly relegated to the utility as a medium of exchange, not as a store of value (why do $$ mainlanders want to immediately turn their RMB to pretty much anything else that’s offshore?). Unless I am missing something major and obvious here..

nickthemagicman 6y ago
Can't the US government do the same thing? Step in and devalue their currency or weaponize it? What makes the US different? Because it's trustworthy?
- Armisael16 6y ago
  Yes, in at least this aspect. Obviously there is nothing the US couldn’t do to the dollar. Any law or policy can be passed or changed; the constitution can be amended.
- viraptor 6y ago
  There's been a response to the US credit position already. It's not impossible but it does get spotted when things go wrong. https://en.wikipedia.org/wiki/United_States_federal_government_credit-rating_downgrades https://en.wikipedia.org/wiki/United_States_federal_governme... The US is "different" here, because they have to be proven wrong after many years in this position. Any other country/currency instead needs to be proven better than USD and trustworthy in a long run.
  - crusty 6y ago
    And THIS is why the flu vaccine is still grown in eggs. It has a long history of working. For something as high-stakes as a vaccine or global financial exchange, the alternative needs so demonstrate not only superior efficacy but establish equivalent confidence. Traditionally, for vaccine manufacturing, where there is no option to start small and transact from the margins, the only possibility would be a competing interest willing to ignore the confidence factor in order to establish some base of confidence. And the comes a pandemic and a great deal of money is gambled on a new production technology, that otherwise would not have overcome the confidence deficit, because potential development and production time savings were so valuable, the lack of confidence was deemed a worthwhile risk. I suppose the US should beware the equivalent crisis to the global financial system. But also, the RMB can start small at the margins. How does China's transparency-averse system effect confidence-building though?
- poopypoopington 6y ago
  If the US devalues its currency, yes that does make American exports more attractive. However, the way the global financial system works with the dollar as its core, the Americans basically need to constantly serve as an importing nation, buying German BMWs and Chinese laptops so that the rest of the world has a fresh supply of dollars. Thus the dollar needs to be relatively stronger than these exporting countries' currencies to make sure the global financial system isn't starved of dollars. It's honestly an enviable position that the United States is in, because they can borrow money essentially for free (the 10 year treasury bond yield is 1.69% and inflation in 2021 was about 1.7%). So basically the US supplies the world with the dollars it needs to conduct global trade, and in return it can borrow for free from creditors.
  - pjmorris 6y ago
    > So basically the US supplies the world with the dollars it needs to conduct global trade, and in return it can borrow for free from creditors. ... and the US receives hard goods in exchange for that paper/credit.
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anonu 6y ago
I used to read The Gartman Letter, a popular wall street newsletter. Gartman would always say as long as USA has the biggest army and navy in the world, it will maintain it's status in many areas, including USD hegemony. Unfortunately there is a connection between military might and economics.
- throwaway_kufu 6y ago
  China has both the biggest army and navy in the world (US has the most aircraft carriers, but maybe not the most modern and technologically advanced)
  - anonu 6y ago
    Actually by your measure India is the biggest.
    - mkr-hn 6y ago
      It's probably more complicated than a writer's quotable phrase could convey.
    - throwaway_kufu 6y ago
      What exactly do you think “my measure” is?

nickthemagicman 6y ago

Can't the US government do the same thing? Step in and devalue their currency or weaponize it? What makes the US different? Because it's trustworthy?

Armisael16 6y ago
Yes, in at least this aspect. Obviously there is nothing the US couldn’t do to the dollar. Any law or policy can be passed or changed; the constitution can be amended.
viraptor 6y ago
There's been a response to the US credit position already. It's not impossible but it does get spotted when things go wrong. https://en.wikipedia.org/wiki/United_States_federal_government_credit-rating_downgrades https://en.wikipedia.org/wiki/United_States_federal_governme... The US is "different" here, because they have to be proven wrong after many years in this position. Any other country/currency instead needs to be proven better than USD and trustworthy in a long run.
- crusty 6y ago
  And THIS is why the flu vaccine is still grown in eggs. It has a long history of working. For something as high-stakes as a vaccine or global financial exchange, the alternative needs so demonstrate not only superior efficacy but establish equivalent confidence. Traditionally, for vaccine manufacturing, where there is no option to start small and transact from the margins, the only possibility would be a competing interest willing to ignore the confidence factor in order to establish some base of confidence. And the comes a pandemic and a great deal of money is gambled on a new production technology, that otherwise would not have overcome the confidence deficit, because potential development and production time savings were so valuable, the lack of confidence was deemed a worthwhile risk. I suppose the US should beware the equivalent crisis to the global financial system. But also, the RMB can start small at the margins. How does China's transparency-averse system effect confidence-building though?
poopypoopington 6y ago
If the US devalues its currency, yes that does make American exports more attractive. However, the way the global financial system works with the dollar as its core, the Americans basically need to constantly serve as an importing nation, buying German BMWs and Chinese laptops so that the rest of the world has a fresh supply of dollars. Thus the dollar needs to be relatively stronger than these exporting countries' currencies to make sure the global financial system isn't starved of dollars. It's honestly an enviable position that the United States is in, because they can borrow money essentially for free (the 10 year treasury bond yield is 1.69% and inflation in 2021 was about 1.7%). So basically the US supplies the world with the dollars it needs to conduct global trade, and in return it can borrow for free from creditors.
- pjmorris 6y ago
  > So basically the US supplies the world with the dollars it needs to conduct global trade, and in return it can borrow for free from creditors. ... and the US receives hard goods in exchange for that paper/credit.

deleted 6y ago

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anonu 6y ago

I used to read The Gartman Letter, a popular wall street newsletter. Gartman would always say as long as USA has the biggest army and navy in the world, it will maintain it's status in many areas, including USD hegemony. Unfortunately there is a connection between military might and economics.

throwaway_kufu 6y ago
China has both the biggest army and navy in the world (US has the most aircraft carriers, but maybe not the most modern and technologically advanced)
- anonu 6y ago
  Actually by your measure India is the biggest.
  - mkr-hn 6y ago
    It's probably more complicated than a writer's quotable phrase could convey.
  - throwaway_kufu 6y ago
    What exactly do you think “my measure” is?