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The US dollar is the world's reserve currency So countries keep huge stores of dollars in their reserves because they need it for trade Then what happens is the

by slifin 2y ago

The US dollar is the world's reserve currency So countries keep huge stores of dollars in their reserves because they need it for trade Then what happens is the US starts the money printer to pay for US government services This inflates the dollar and means that everyone who holds the dollar has lost value Including Americans who are paid for their labour with dollars and do not own assets So wealthy Americans/companies see an influx of money, asset prices rise and every other country gets poorer relative to the USA

agp2572 2y ago
I would argue the opposite. If you compare US dollar to every other currency the value of their currency has decreased a lot compares to US dollar. This would be a plus to hold US dollar as their own currency has depreciated and holding more dollars has helped them reduce their losses. But it has one down side is that if you hold too much US dollar the country exposes itself to US monetary policy.
- trts 2y ago
  not sure there is a country on earth that you could save your money in the national currency and not watch inflation rip away the value of your earnings. The purchasing power of USD has declined 95% over the past century. Prettiest horse in the glue factory
  - RandomLensman 2y ago
    Is that with or without interest on holding the USD?
  - feoren 2y ago
    My hot take: currency is not meant to be held, it's meant to be spent. I know, I know: "store of value" is one of its definitions, but it's OK to have short-term and long-term stores of value. Money velocity is a healthy thing for the economy. Hoarding wealth isn't, and besides, everyone with significant wealth is already storing most of it in assets anyway. There's really no reason to want a particular currency to retain its value over 100 years; 1% to 2% inflation is quite healthy. It doesn't rip away the value of your earnings as long as salaries keep up with inflation -- which they don't, but that's the real problem.
    - tsunamifury 2y ago
      That’s not a hot take it’s literally the agreed upon monetary policy of the planet. Only on HN would a bunch of self righteous engineers argue with you about how you are wrong based on some localized wish fulfillment of how a perfect system works in their head.
    - jrk 2y ago
      Your main point is the well-established modern consensus among economists, and nicely put. But what makes you think salaries don't keep up with inflation? In the postwar US, they absolutely have kept up over the long term. There are ups and downs depending on the strength of the labor market, and they don't always react instantly to short-term bursts of inflation (as in 2021-22), but over the long term they are steadily up even in the "great stagnation" period of the past 50 years: https://fred.stlouisfed.org/series/MEPAINUSA672N https://fred.stlouisfed.org/series/MEPAINUSA672N (individual) https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N (household)
      - photonthug 2y ago
        Economics is a weird kind of physics that only requires some critical mass of people to believe or act like they believe and then it’s true, so arguing against the 2% ideal for inflation is a bit like debating gravity. From most people’s perspective it just is and understanding much less changing it is an impossible dream. Whether salaries track inflation is also irrelevant as long as there are markets (like housing/education) that you are basically required to enter, and which have different dynamics. Would it matter if wages and inflation were in lock step if the toilet paper market was wildly out of control? Could people work around this issue by wisely waiting for a better time to use the toilet?
        jrk 2y ago
        My first point was not that economics as a discipline is infallible, just that this was the opposite of a “hot take.” Regarding some costs (especially housing) growing faster than the overall rate of inflation: of course they do, just as some grow more slowly or even deflate. The index here is computed based on the average amount people spend on these different categories (the consumer price index), so the need to spend a large share on housing (or toilet paper) *is already included* in the inflation measure.
  - staticman2 2y ago
    Your expectation is that the money hidden under your couch should never go down in value? And you are upset that the world doesn't work that way?
    - frenchy 2y ago
      This is just the modern version of the parable of the talents.
    - deleted 2y ago
      [deleted]
    - throwawayqqq11 2y ago
      I would expect less feudal outcomes in a world that calls itself free. Capital income does not reflect economic performance, its just a inheritable privilege. Are you upset about seeing those unfortunate suckers, that dont have this privilege maybe coming to your country? Upset, that the world does work this way?
    - bko 2y ago
      > Your expectation is that the money hidden under your couch should never go down in value? Why should it go down? If there were a fixed or slowly growing monetary base (i.e. slower than productivity), the dollar would appreciate and this would be a good thing as we would all benefit from the gains of productivity and living in a prosperous society. I never bought the idea that we need to inflate our monetary base and have inflation. It seems too convenient as the government uses it as a backdoor form of taxation. And every few decades it gets out of control. The argument pro moderate inflation never rang true to me. The biggest one is "people wouldn't spend money if they knew everything will get cheaper", which is on its face wrong because the hottest selling goods in this economy are quickly depreciating. This year's iPhone or car model depreciates very quickly but somehow people keep buying it and the world doesn't fall apart.
      - staticman2 2y ago
        You ask why should it go down? My understanding is we tried other banking policy during the great depression and it didn't work out so well. When the economy collapses and the government lacks gold backed dollars to do counter cyclical spending because there's not enough gold reserves it doesn't go well. So my response would be because great depressions are not desirable. But what I really don't understand is the outrage that the money under the couch should go down- when assets like treasury inflation protected securities are available. (Yes they are not always available at profitable rates- though they currently are- and I don't think the people complaining about inflation are whining when stocks or Treasuries or bank accounts are paying more than inflation.)
psychlops 2y ago
Close, but inflation also makes Americans poorer. Global asset holders (US included) are just fine as the dollar cost simply rises against the asset. Holders of dollars will lose value. Holders of dollar denominated debt (mortgages) are winners. The US Government does gain a lot of wealth doing this, but it doesn't necessarily trickle down to Americans or American companies.
- PittleyDunkin 2y ago
  > but it doesn't necessarily trickle down to Americans or American companies. It absolutely does go to american companies—that's the entire point of the privatization movement america's been experiencing the last forty years. It's much more difficult to articulate how this reaches americans and builds actual wealth, though, and certain industries benefit more highly from being basically a private form of government (the defense industry, finance, airlines, critical tech companies, etc) than others. If americans want to reap any windfalls from their "economy" (whatever americans even think that is—as best I can tell it functions in political discourse essentially the same way the Pontifex Maximus performing an augury functioned in ancient Rome) they're going to have to start demanding more concrete things than "jobs" and "stock performance" and "real estate markets".
  - dr-detroit 2y ago
    How about less H1Bs massuh or is dat too much ta ask of da rich boss families?
ffitch 2y ago
modern version of printing money is Quantitative Easing, but the US is in the opposite, Quantitative Tightening mode since 2022. Federal Reserve is essentially taking money out of circulation for the last two years.
- Timber-6539 2y ago
  To the contrary the M2 supply [0] indicates that the Fed's QT policy has barely taken any money out of circulation. [0]https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL
  - BurdensomeCount 2y ago
    On a log scale (you can select this on your graph) we're basically moving on the same trend line as we have been since 1960. Covid caused a big jump but the years of stagnation since then mean we're back to normal.
jjtheblunt 2y ago
i think of it as prices of good inflating, not the dollar itself.
- DontchaKnowit 2y ago
  Theres literally 0 difference
insane_dreamer 2y ago
> everyone who holds the dollar has lost value right, but it makes it easier for the US gov to pay its dollar denominated debts to foreign holders; the huge advantage of being able to borrow in your own currency!
immibis 2y ago
The incoming president wants to end the trade deficit, which is the same as ending world reserve currency status.

by slifin 2y ago

agp2572 2y ago

I would argue the opposite. If you compare US dollar to every other currency the value of their currency has decreased a lot compares to US dollar. This would be a plus to hold US dollar as their own currency has depreciated and holding more dollars has helped them reduce their losses. But it has one down side is that if you hold too much US dollar the country exposes itself to US monetary policy.

trts 2y ago
not sure there is a country on earth that you could save your money in the national currency and not watch inflation rip away the value of your earnings. The purchasing power of USD has declined 95% over the past century. Prettiest horse in the glue factory
- RandomLensman 2y ago
  Is that with or without interest on holding the USD?
- feoren 2y ago
  My hot take: currency is not meant to be held, it's meant to be spent. I know, I know: "store of value" is one of its definitions, but it's OK to have short-term and long-term stores of value. Money velocity is a healthy thing for the economy. Hoarding wealth isn't, and besides, everyone with significant wealth is already storing most of it in assets anyway. There's really no reason to want a particular currency to retain its value over 100 years; 1% to 2% inflation is quite healthy. It doesn't rip away the value of your earnings as long as salaries keep up with inflation -- which they don't, but that's the real problem.
  - tsunamifury 2y ago
    That’s not a hot take it’s literally the agreed upon monetary policy of the planet. Only on HN would a bunch of self righteous engineers argue with you about how you are wrong based on some localized wish fulfillment of how a perfect system works in their head.
  - jrk 2y ago
    Your main point is the well-established modern consensus among economists, and nicely put. But what makes you think salaries don't keep up with inflation? In the postwar US, they absolutely have kept up over the long term. There are ups and downs depending on the strength of the labor market, and they don't always react instantly to short-term bursts of inflation (as in 2021-22), but over the long term they are steadily up even in the "great stagnation" period of the past 50 years: https://fred.stlouisfed.org/series/MEPAINUSA672N https://fred.stlouisfed.org/series/MEPAINUSA672N (individual) https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N (household)
    - photonthug 2y ago
      Economics is a weird kind of physics that only requires some critical mass of people to believe or act like they believe and then it’s true, so arguing against the 2% ideal for inflation is a bit like debating gravity. From most people’s perspective it just is and understanding much less changing it is an impossible dream. Whether salaries track inflation is also irrelevant as long as there are markets (like housing/education) that you are basically required to enter, and which have different dynamics. Would it matter if wages and inflation were in lock step if the toilet paper market was wildly out of control? Could people work around this issue by wisely waiting for a better time to use the toilet?
      - jrk 2y ago
        My first point was not that economics as a discipline is infallible, just that this was the opposite of a “hot take.” Regarding some costs (especially housing) growing faster than the overall rate of inflation: of course they do, just as some grow more slowly or even deflate. The index here is computed based on the average amount people spend on these different categories (the consumer price index), so the need to spend a large share on housing (or toilet paper) *is already included* in the inflation measure.
- staticman2 2y ago
  Your expectation is that the money hidden under your couch should never go down in value? And you are upset that the world doesn't work that way?
  - frenchy 2y ago
    This is just the modern version of the parable of the talents.
  - deleted 2y ago
    [deleted]
  - throwawayqqq11 2y ago
    I would expect less feudal outcomes in a world that calls itself free. Capital income does not reflect economic performance, its just a inheritable privilege. Are you upset about seeing those unfortunate suckers, that dont have this privilege maybe coming to your country? Upset, that the world does work this way?
  - bko 2y ago
    > Your expectation is that the money hidden under your couch should never go down in value? Why should it go down? If there were a fixed or slowly growing monetary base (i.e. slower than productivity), the dollar would appreciate and this would be a good thing as we would all benefit from the gains of productivity and living in a prosperous society. I never bought the idea that we need to inflate our monetary base and have inflation. It seems too convenient as the government uses it as a backdoor form of taxation. And every few decades it gets out of control. The argument pro moderate inflation never rang true to me. The biggest one is "people wouldn't spend money if they knew everything will get cheaper", which is on its face wrong because the hottest selling goods in this economy are quickly depreciating. This year's iPhone or car model depreciates very quickly but somehow people keep buying it and the world doesn't fall apart.
    - staticman2 2y ago
      You ask why should it go down? My understanding is we tried other banking policy during the great depression and it didn't work out so well. When the economy collapses and the government lacks gold backed dollars to do counter cyclical spending because there's not enough gold reserves it doesn't go well. So my response would be because great depressions are not desirable. But what I really don't understand is the outrage that the money under the couch should go down- when assets like treasury inflation protected securities are available. (Yes they are not always available at profitable rates- though they currently are- and I don't think the people complaining about inflation are whining when stocks or Treasuries or bank accounts are paying more than inflation.)

psychlops 2y ago

Close, but inflation also makes Americans poorer. Global asset holders (US included) are just fine as the dollar cost simply rises against the asset. Holders of dollars will lose value. Holders of dollar denominated debt (mortgages) are winners. The US Government does gain a lot of wealth doing this, but it doesn't necessarily trickle down to Americans or American companies.

PittleyDunkin 2y ago
> but it doesn't necessarily trickle down to Americans or American companies. It absolutely does go to american companies—that's the entire point of the privatization movement america's been experiencing the last forty years. It's much more difficult to articulate how this reaches americans and builds actual wealth, though, and certain industries benefit more highly from being basically a private form of government (the defense industry, finance, airlines, critical tech companies, etc) than others. If americans want to reap any windfalls from their "economy" (whatever americans even think that is—as best I can tell it functions in political discourse essentially the same way the Pontifex Maximus performing an augury functioned in ancient Rome) they're going to have to start demanding more concrete things than "jobs" and "stock performance" and "real estate markets".
- dr-detroit 2y ago
  How about less H1Bs massuh or is dat too much ta ask of da rich boss families?

ffitch 2y ago

modern version of printing money is Quantitative Easing, but the US is in the opposite, Quantitative Tightening mode since 2022. Federal Reserve is essentially taking money out of circulation for the last two years.

Timber-6539 2y ago
To the contrary the M2 supply [0] indicates that the Fed's QT policy has barely taken any money out of circulation. [0]https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL
- BurdensomeCount 2y ago
  On a log scale (you can select this on your graph) we're basically moving on the same trend line as we have been since 1960. Covid caused a big jump but the years of stagnation since then mean we're back to normal.

jjtheblunt 2y ago

i think of it as prices of good inflating, not the dollar itself.

DontchaKnowit 2y ago
Theres literally 0 difference

insane_dreamer 2y ago

> everyone who holds the dollar has lost value right, but it makes it easier for the US gov to pay its dollar denominated debts to foreign holders; the huge advantage of being able to borrow in your own currency!

immibis 2y ago

The incoming president wants to end the trade deficit, which is the same as ending world reserve currency status.