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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.

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.