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> It just needs to be making enough stuff that the rest of the world needs to justify holding their currency in reserve. If you're holding a currency in reserv

> It just needs to be making enough stuff that the rest of the world needs to justify holding their currency in reserve. If you're holding a currency in reserve, you're explicitly not using it to purchase goods and services. I don't remember if it was in this video, or the "Weaponization of the Dollar" video that he discusses this. > When the US became the reserve currency it didn't run a deficit. It's a benefit of being a reserve currency that you can do that, not a prerequisite. The non-deficit was under Bretton Woods, where gold was the ultimate reserve underlying the dollar. Is it coincidental that the US started running a trade deficit in the decade it abandoned Bretton Woods? https://research.stlouisfed.org/publications/economic-synopses/2019/05/17/historical-u-s-trade-deficits https://research.stlouisfed.org/publications/economic-synops... "Starting in about 1970, the United States began to run trade deficits again, which have continued to this day. These shifts in the long-term U.S. trade balance appear to correspond well with U.S. industrialization in a global setting." If your currency becomes a reserve currency it tends to appreciate in value, which makes your own products more expensive (especially as exports). You can call being able to import things cheaply a benefit, but it's a detriment to those in the reserve currency country who make their living as producers. For instance, the US farm system is, in part, propped up by subsidies. And even those didn't save the small farms. https://usafacts.org/articles/federal-farm-subsidies-what-data-says/ https://usafacts.org/articles/federal-farm-subsidies-what-da... "Government payments (excluding crop insurance payments) to farms have fluctuated since 1933, from a low of $1.5 billion in 1949 to $32.1 billion in 2000. In 1949, government payments made up 1.4% of total net farm income — a measure of profit — while in 2000 government payments made up 45.8% of such profits. In 2019, farms received $22.6 billion in government payments, representing 20.4% of $111.1 billion in profits."

pydry 3y ago
>If you're holding a currency in reserve, you're explicitly not using it to purchase goods and services. Right. The point is you need confidence that it will be possible to use it for that in the future for a large portion of your (or somebody else's) basic needs. The US gained reserve currency status when it became the world's factory in the aftermath of WW2 while the rest of the world's factories had been destroyed. >Is it coincidental that the US started running a trade deficit in the decade it abandoned Bretton Woods? After it became the world's reserve currency? No, it's not coincidental. As I said before it's a perk of being a reserve currency. How could they resist? Well, they couldn't. >If your currency becomes a reserve currency it tends to appreciate in value, which makes your own products more expensive (especially as exports). You can call being able to import things cheaply a benefit, but it's a detriment to those in the reserve currency country who make their living as producers. I never said that being the world's reserve currency was good for America. It went from the world's industrial powerhouse (a title now claimed by China) to a having its entire industrial ecosystem hollowed out for profit. It did take a long time though. That could be the case for China also. This is the kind of shift that can take up to 2-3 generations though, whereas a run on a currency takes a day.

pydry 3y ago

>If you're holding a currency in reserve, you're explicitly not using it to purchase goods and services. Right. The point is you need confidence that it will be possible to use it for that in the future for a large portion of your (or somebody else's) basic needs. The US gained reserve currency status when it became the world's factory in the aftermath of WW2 while the rest of the world's factories had been destroyed. >Is it coincidental that the US started running a trade deficit in the decade it abandoned Bretton Woods? After it became the world's reserve currency? No, it's not coincidental. As I said before it's a perk of being a reserve currency. How could they resist? Well, they couldn't. >If your currency becomes a reserve currency it tends to appreciate in value, which makes your own products more expensive (especially as exports). You can call being able to import things cheaply a benefit, but it's a detriment to those in the reserve currency country who make their living as producers. I never said that being the world's reserve currency was good for America. It went from the world's industrial powerhouse (a title now claimed by China) to a having its entire industrial ecosystem hollowed out for profit. It did take a long time though. That could be the case for China also. This is the kind of shift that can take up to 2-3 generations though, whereas a run on a currency takes a day.