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Ask HN: What happens to the global financial system if the USA has a coup?
What do you think will happen to the global financial system if the United States has an actual coup in 2024?
I am curious what smart people think (hopefully someone with an economics background who studies this type of thing when they happen to other countries).
Background: It looks likely that far-right secretaries of state and governors will be elected in 2022 and in position to disrupt the 2024 presidential election. I hope this is unlikely but given the power they wield it also is "possible".
My main questions are:
What happens to the dollar as a reserve currency? How quick if there are changes would you anticipate those being made?
How does this impact the American and global economy the next month / year from your POV?
- jleyank 4y agoPart of the world with give the euro a go (Swiss franc too small). Some will bite down hard and either keep using the US dollar or switch to the Chinese yuan. Political baggage in such a scenario for the latter currencies. Perhaps coup isn’t as much of a fear/problem than the chance of repudiating us debt.
- themodelplumber 4y agoIDK much, and I can't speak to reserve currency status, but in your given scenario I'd expect huge capital transfers. Volatility would be the bet there. You'd be crazy to bet against churn. Traditional value investors would get torched, albeit more slowly torched than growth. However the USA has an underappreciated stability-focused foundation which helps power its tight historic focus on systems of subjective ethics. You'd think the ethics would push the stability around, but IMO it's the exact reverse. So I personally look around and I see lots of stability-focused people mostly looking to buy the dip and get on with their lives the best way they know how (the united way). A similar lesson is true with the USA and economic growth. The lesson people are taking out of high gas prices and inflation isn't "the system is broken, so what needs to happen is..." (objective) so much as "stop messing with my life, what I need is..." (subjective) and this latter position rewards government stability. From a technical perspective the top charts for the US economy are showing an expected relief period, comparable to the duty cycle concept. Crypto growth, even given the USD-exit mindset, correlates amusingly well with bull markets for US economic growth leaders. I'd say there is at least some considerable disincentive to desire a coup, on the crypto-focused side, for that reason alone, even if the USD or reserve currency concept is annoying. I see considerable technical reasons to expect US markets to come out very strong after the current breather. There are some massively impressive businesses and tech behind this as well, and businesses are learning to take better care of employees, broadly speaking. Plus right now we are right in the middle of a panic-focused news cycle so there is systemic bias looking in that direction on even a month-to-month level. Sector rotation seems normal as well. Tons of new traders and even retail investors are also looking to BTD ASAP which also says a lot. They saw how COVID turned out and want to position for another springboard for personal returns. Just some thoughts...
- gsatic 4y ago"Too big to fail"
- hi5eyes 4y agoThe real worry is what happens when countries reallocate away from US treasury bonds? If the US/allies can just decide to confiscate Russia's assets, every country has to be looking at an alternative
- MrMan 4y agoAre any countries actually looking for an alternative except Russia? I feel you are projecting because you don't like the US standing up to the war against Ukraine
- MrWiffles 4y agoIMO, both you guys make excellent points. You're both right! > The real worry is what happens when countries reallocate away from US treasury bonds? If the US/allies can just decide to confiscate Russia's assets, every country has to be looking at an alternative With the US effectively having control over global market monetary flow via multiple means, I don't see other countries having too much choice there. They can absolutely diversify, sure, but I don't think they can ever fully reallocate away, at least not without "forking" the international order (such as it is) nearly in its entirety, and anyone trying that would never accomplish their objectives, just too much risk for too low-probability of success. Besides, nobody's crazy enough to dump the world's richest economy entirely. Though I would say that unless the extreme wealth inequality problem gets smoothed out by sometime in the next ~30-50 years or so, probably not even that long, we'll DEFINITELY see a MASSIVE DROP in foreign investment because there won't be anyone here with enough money to buy anything anymore. We've already seen huge reductions in consumer discretionary spending just in the last 6 months (war, pandemic recovery, consequences of treasure injecting tons of money into the economy, inflation, etc.). Food, energy, housing: you can't choose not to have any of these, not realistically. Which means cost increases there force cut-backs anywhere that IS optional (eating out, entertainment, charitible donations, vacations, etc.). My rent, for example, for a shoddy 1br, jumped from apprx $750/m to nearly $1000! And this is in a craptastic area, too! Others have had even larger jumps in cost of housing. The politicians tell us businesses invest where there's low taxes; that's bullshit. Businesses invest where PEOPLE BUY THEIR STUFF. But if US citizens no longer have enough money left over to buy things, why the hell would anybody invest in the US? So yeah, either we address this wealth inequality problem now, or we'll be FORCED to address it later when mobs start to gather because there's no food, no jobs, and no other options. > Are any countries actually looking for an alternative except Russia? I'd think China would be looking for not just one, but a handfull of trading partners to essentially "replace" the US, especially if those countries are somewhat more malleable when it comes to China's influence on their foreign and domestic policymaking. If China can groom and invest in a sorta "cabal" of various countries, that offers them a significant hedge against US volatility and insulates them against trade disruption with us while providing an eventually-equivalent investment vehicle, even if they do need half a century or more to build it up. Those folks think in terms of decades, centuries, and generations unlike us with our next-quarter shareholder earnings reports and such... Following that line of thinking, consider the various countries all over the world that the US has alienated with decades of...questionable...foreign policy. Much of Central and South America comes to mind, along with the middle east and parts of Asia. China has a real opportunity there to build out a major geopolitical partnership amongst many nations in those regions, and with wealth transfer from the US toward China over the last ~35-50 years already having taken place, there's definitely capital to flow from China to those other places, and therefore incentive for those other countries to play ball - by China's rules, not ours. And if another major player on the world stage, a UN Security Council member no less, offers those smaller, struggling economies that alternative option? Oh hell yes they'll be looking and interested. And with things being really bad in some of the aforementioned places, they'll have no choice but to jump in with both feet. Not much of a concern in the short to medium term, but could change the course of economic history over the next few hundred years.
- Maursault 4y agoI think we've recently had two "bloodless" coups, one in 2000 and one in 2016. In both cases, the loser, the one that did not receive the most votes, was made President. The result seems to be deregulation leading to global financial crisis.
- more_corn 4y agoExcept these situations followed the rules of our democracy. They were legal transfers of power. Compare to the outgoing president’s attempt to overturn a fair election after the 2020 election. That one was a coup attempt.
- Maursault 4y agoThe rules of democracy do not permit fraud, which is exactly how Republicans get elected. Bush did not win in Florida in 2000, the recount was stopped and the FL Supreme Court incorrectly declared Bush winner. Eventually we learned that Gore won FL by over 20K votes. A President winning the Electoral College and losing the popular vote has only occurred 5 times. Two of them were Bush and Trump.
- ironmagma 4y agoAll our presidents have been corrupt as all get-out. If those are the leaders of coups, those are some pretty tame and un-revolutionary coups.
- Maursault 4y agoThe first 6 US Presidents were decent, incorruptible men. Also, Abraham Lincoln is notable for his suffering, winning the Civil War and freeing the slaves. And, regardless of politics, anyone can see Jimmy Carter is a saint. He could be the first and last US President to be beatified and canonized... but let's hope it will be awhile before that occurs.
- 4y ago
- junofan 4y agoYou mean a constitutional coup? We had that in 2000. Higher volatility. That’s about it.
- tunesmith 4y agoCome on, we did not. The EC came down to one state. The one state came down to a close vote. It would have been controversial either way. It was a close election, and everything after the point of interpreting that vote result went through the normal process. A coup would be where there's a clear convincing result pointing one way, and then the other thing happens.
- smcl 4y ago> The one state came down to a close vote You stopped telling the story at the moment the GP was referring to as a coup. I'll complete the story: The EC came down to one state. The one state came down to a very close vote. When there is a very close vote a recount should be conducted. A recount began but was halted with help from one candidate's brother and was declared in that candidate's favour.
- tunesmith 4y agoI agree, but that was beside the point. The SC ruling was lousy. But there is no evidence that the election was clearly and convincingly won by Gore. The AP recount afterward demonstrated otherwise, anyway (edit: by which I mean the standard of recount requested by Gore's camp: Bush still would have won). It was a lousy expression of democracy and you can even say it was a corrupt SC ruling, but it wasn't a coup.
- nescioquid 4y agoThe Supreme Court also had a major role here. That was a 5-4 decision where the wife of one of the jurors was actively working for Bush's campaign/administration; said juror refused to recuse himself. Maybe that's the moment "even the appearance of impropriety" left the political phrasebook.
- wmf 4y agoBoth parties more or less let Wall Street run so it wouldn't change much. A civil war would be a different story but that's much less likely.
- sharemywin 4y agoGenerally the stock market would probably do very well over the medium term. More corporate profits due to: dismantling the EPA, FDA, all that federal land that will get turned over to corporations. The states will have to lower their environmental, consumer, employment regulations to compete with other states for campaign donations I mean jobs from the mega corporations.
- tmaly 4y agoPolitical parties win and lose all the time. If you look at what the winners get done, it’s often not that much. The bureaucracy kinda runs most of the day to day. Losing reserve status would be an exception. Look at the strength of the Ruble now. Look at where all the oil tankers in middle east are heading for delivery.
- deleted 4y ago[deleted]
- givemeethekeys 4y ago> far-right The left has gone so far left, that the right feels "far"
- landa 4y ago> actual coup > will be elected An election is not a coup just because you disagree with the elected peoples' views.
- Hasu 4y agoNot the same elections. There are people running for state positions now who say that in future elections, they will overturn the results in favor of their party's side if the future election doesn't go their way. The coup isn't the current election, it's the future one in which the votes of the people are thrown out.
- AnimalMuppet 4y agoNote also the people on the Democrat side who claimed that the election of 2016 was invalid. They were fewer in number and didn't get any traction, and they didn't do anything, just shot their mouths off. Still, it's concerning that both sides have people who are willing to go down that road. Imagine that in 2024, Trump runs again. (Please, God, no!) And imagine that he wins - legitimately, genuinely wins, with no funny business in any state. Are the Democrats going to accept it? Or are they going to say, no, that's illegitimate, because all these states have extreme Republicans fudging the numbers? Now imagine that it's the exact same scenario, except that Trump wins because those people fudge the numbers. Will you be able to tell which scenario actually happened? That's why the Democrats crying "illegitimate" in 2016 was so bad. They cried wolf when there wasn't one. (Nothing in this post is intended to deny or minimized the insanity and the moral bankruptcy of the Republicans' response to Trump's 2020 loss.)
- TMWNN 4y ago>Note also the people on the Democrat side who claimed that the election of 2016 was invalid. Including Hillary Clinton herself, who withdrew her acceptance of the 2016 election results <https://news.yahoo.com/hillary-clinton-maintains-2016-election-160716779.html https://news.yahoo.com/hillary-clinton-maintains-2016-electi...>.
- silicon2401 4y ago
- jonahbenton 4y agoPersonally I would be emotionally and in other ways devastated but nothing from a financial system perspective would change in the initial month/year timeframe. Business as usual. What happens over the 10 year timeframe as the wheels of power are spun in potentially radically different directions is impossible to project with any fidelity but I would be receptive to predictions of a "slowly then all at once" variety. [edit] Will also say that I think there is a bright line difference between a "coup" and a corrupted election process. We saw an attempt at a coup on Jan 6. We have had corrupted election processes in the small since there have been elections, and in a couple of cases potentially in the medium. A successful coup, despite Jan 6, to my jaundiced eyes, is very unlikely, but would accelerate the slowly-then-suddenly shift, tho in what directions would take a book to discuss. (Trump stood down the US military in ways that were totally counter to US power/national interest and instead revealed his own corruption, etc). A corrupted election process is likely, but would not cause much in the way of external disruption, again not until the intent of the exercise of power was more evident.
- nathanaldensr 4y agoGet this crap speculation off HN. This belongs on Reddit.
- TMWNN 4y ago>Background: It looks likely that far-right secretaries of state and governors will be elected in 2022 and in position to disrupt the 2024 presidential election. I hope this is unlikely but given the power they wield it also is "possible". You win the "I believe everything I read on /r/politics and /r/worldnews" award of the week.
- ianai 4y agoThis doesn’t belong here. But I will say this: Those suggesting the world would be largely unchanged in a post-coup USA fail to grasp the scope of the ramifications. No where on the planet would be safe/unchanged. Do not go there.
- Layke1123 4y agoHow does this not belong here if it could potentially have this big of an impact? This is exactly the type of thing hackers would be curious about. We want to know how a system would react to a change in the parameters and figure out if it is useful and how so. Why would we not be curious about something like this?