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> Would you care to spell out the connection between our military and preserving the dollar as reserve currency? I don't know much about it but quick introspec

> Would you care to spell out the connection between our military and preserving the dollar as reserve currency? I don't know much about it but quick introspection leads me to the conclusion that it is partially because the US military does a lot to ensure free trade continues smoothly around the world. Without military might, any transport ship would be at risk of piracy. But there are other factors. Most notably, the US dollar was once pegged to gold such that you could redeem a fixed amount of gold for a dollar. The US used this to sell the world on exchanging in dollars instead of gold because it was just as stable while being more efficient to exchange. Once the world switched to it, primarily to trade oil, FDR (decidely the worst president of all time) then pulled the rug out from everyone and decoupled the US dollar from gold. But everyone already traded in dollars and basically gave up their gold since they had the dollar guarantee, so it was not so easy going back. The US is living way above its means. Most counties have to export goods in exchange for imports. The US only has to export printed dollars for tangible goods, and they can do so while ignoring that those printed dollars decrease the value of all existing dollars precisely because there is still demand for dollars driven by petroleum trade (hence the common term, petrodollar). The adjacent sibling's comment is correct. Gadafi tried to take Libya out of the dollar market and into a gold based market, seeking to trade internationally with gold. The US knows that if this happens, the country will implode. The US has no goods to export and doesn't make hardly anything. If other countries switch to the gold standard, the US will almost instantly run out of goods, and will go straight into hyperinflation and die. I'm of the firm belief that the US will start WW3 if that ever happens so that they can throw up their hands when the dust settles and "reset" global debt if BRICS manages to achieve enough momentum or if any other countries try to start a gold trade standard. The US is way beyond default. Our politicans say that the US always pays it's debts, but then they openly don't! For example, our politicans say we need to keep increasing the debt limit because otherwise we would default on our debt obligations. That doesn't make any sense! By increasing the debt limit, we are definitionally defaulting. We are choosing not to pay. We could pay, but then how could we give away more unconstitutional welfare? Show me one credit card company that will let you borrow more to pay them back. Tell them it's fine, you'll pay last month's bill so long as they let you borrow another $5k. Peter Shiff's most recent podcast did a great job of describing how our past politicans described how we would fund social security in the future: we would never not pay, we would instead print and deliver, even if the money was worthless.

jjeaff 3y ago
Borrowing to pay off debt is extremely common. So common, it has a nice sounding name, "refinancing". You can sign up for a new credit card and as part of the process, "transfer" i.e. pay off the balance of any other card. And the US extending its self imposed credit limit is completely reasonable. In that the alternative, which would be actually defaulting on debt obligations, salaries, and other ways that we have already promised, which be absolutely catastrophic. The US has never defaulted on its debt. There was a politically motivated shutdown that caused a few debt payments to be a few days late, but that's the worst of it. and even that was very damaging to the financial reputation of the US. People are talking in this thread about how the military is why we are the world reserve currency. But the military is only a part of that. Our stability, predictability, and safety is what makes us a world reserve currency. Our court system is one of the most important parts of that as well.
- hellojesus 3y ago
  > And the US extending its self imposed credit limit is completely reasonable. In that the alternative, which would be actually defaulting on debt obligations, salaries, and other ways that we have already promised, which be absolutely catastrophic. The US has never defaulted on its debt. There is another option: the US could cut spending. In a refinance, you either (1) keep the same principal and adjust the rate or (2) take out a new loan for a greater amount than the former, using the new loan to pay off the former. The US is not doing (1). Maybe you could argue that it's doing (2). But there is a key difference: the US is the only debter that can print its own cash. Hence why I think it's more appropriate to compare it to a credit card borrower that just keeps increasing the limit, using the new money to pay the interest. The gov doesn't produce anything. It can only tax. The more it taxes, the less capital the private sector retains to produce. The less money the private sector has to produce, the lower the gdp. The US is not only devaluing it's currency by increasing the debt and then not taxing to pay it off (though here the devaluation acts as an indirect tax), but it's actively dampening the value of the underlying collateral. These things typically don't happen with refinances. I do not understand why anyone is still buying US treasuries. Speaking of refinances, it would have been wise of the US to actually refinance its existing debt while rates were at historic lows and the existing debt had short maturity timelines, but Yellen didn't do that. Instead she ignored refinancing it to 30 years and kept it on deck to mature, forcing it to be refinanced at rates more than double what it was. I argue that the US has defacto defaulted on its debt by devaluing the underlying collateral. No other entity gets to decide to pay back its loan by willfully deciding to pay less. Though there is some benefit to private borrowers, as the devaluation also means that private principal balances are worth less in real terms. > Our stability, predictability, and safety is what makes us a world reserve currency. Our court system is one of the most important parts of that as well. I'm interested in a source or your reasoning here. We aren't the only country with a western court system, and our Supreme Court routinely refuses to strike down unconstitutional laws (Medicare, social security, etc.).

jjeaff 3y ago

Borrowing to pay off debt is extremely common. So common, it has a nice sounding name, "refinancing". You can sign up for a new credit card and as part of the process, "transfer" i.e. pay off the balance of any other card. And the US extending its self imposed credit limit is completely reasonable. In that the alternative, which would be actually defaulting on debt obligations, salaries, and other ways that we have already promised, which be absolutely catastrophic. The US has never defaulted on its debt. There was a politically motivated shutdown that caused a few debt payments to be a few days late, but that's the worst of it. and even that was very damaging to the financial reputation of the US. People are talking in this thread about how the military is why we are the world reserve currency. But the military is only a part of that. Our stability, predictability, and safety is what makes us a world reserve currency. Our court system is one of the most important parts of that as well.

hellojesus 3y ago
> And the US extending its self imposed credit limit is completely reasonable. In that the alternative, which would be actually defaulting on debt obligations, salaries, and other ways that we have already promised, which be absolutely catastrophic. The US has never defaulted on its debt. There is another option: the US could cut spending. In a refinance, you either (1) keep the same principal and adjust the rate or (2) take out a new loan for a greater amount than the former, using the new loan to pay off the former. The US is not doing (1). Maybe you could argue that it's doing (2). But there is a key difference: the US is the only debter that can print its own cash. Hence why I think it's more appropriate to compare it to a credit card borrower that just keeps increasing the limit, using the new money to pay the interest. The gov doesn't produce anything. It can only tax. The more it taxes, the less capital the private sector retains to produce. The less money the private sector has to produce, the lower the gdp. The US is not only devaluing it's currency by increasing the debt and then not taxing to pay it off (though here the devaluation acts as an indirect tax), but it's actively dampening the value of the underlying collateral. These things typically don't happen with refinances. I do not understand why anyone is still buying US treasuries. Speaking of refinances, it would have been wise of the US to actually refinance its existing debt while rates were at historic lows and the existing debt had short maturity timelines, but Yellen didn't do that. Instead she ignored refinancing it to 30 years and kept it on deck to mature, forcing it to be refinanced at rates more than double what it was. I argue that the US has defacto defaulted on its debt by devaluing the underlying collateral. No other entity gets to decide to pay back its loan by willfully deciding to pay less. Though there is some benefit to private borrowers, as the devaluation also means that private principal balances are worth less in real terms. > Our stability, predictability, and safety is what makes us a world reserve currency. Our court system is one of the most important parts of that as well. I'm interested in a source or your reasoning here. We aren't the only country with a western court system, and our Supreme Court routinely refuses to strike down unconstitutional laws (Medicare, social security, etc.).