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Have you tried calculating what your tax bill is going to be when the US can no longer run a deficit after USD is no longer the world reserve currency? Funding

Have you tried calculating what your tax bill is going to be when the US can no longer run a deficit after USD is no longer the world reserve currency? Funding scientific research isn't a zero-sum "charity project", rather it's spending some of the proceeds from our demurrage currency on maintaining the leadership position that makes it still be considered a good store of value.

hgomersall 2y ago
Whether the US can or cannot run a deficit has nothing to do with the dollar being a reserve currency. It being a reserve currency means it probably will run a deficit but that's just a reflection of foreigners wanting to save US dollars, which is true for many country's currency. The deficit is just a reflection of the sectoral balances[1], which governments don't realistically influence through normal policy. They obviously can change them, but it generally results in significant undesirable outcomes. [1] https://en.m.wikipedia.org/wiki/Sectoral_balances https://en.m.wikipedia.org/wiki/Sectoral_balances
- tokioyoyo 2y ago
  US will have to prove that these big changes are a sogn towards more stability, for others to keep saving in USD. Gold markets are pretty insane nowadays, which makes me think of my own savings.
- mindslight 2y ago
  Sure, "deficit" is crappy political term that mostly serves as a martingale and rallying cry for kayfabe austerity politics. Forgive me for stooping. I'm really talking about monetary creation/inflation - the part of the budget deficit that is new "loans" from another branch of government (Federal Reserve), plus "loans" from the Federal Reserve into the financial industry to do things like grow the housing bubble. The belief that USD will continue to be redeemable for best in class future goods (technological widgets, military hardware, trade and military alliances, etc) combined with the stickiness of transaction costs (especially at nation-state scale) is what allows that ongoing monetary inflation without commensurate price inflation.
  - hgomersall 2y ago
    There's certainly a reasonable concern about what happens when China stops accepting IOUs in return for piles of actual stuff. That doesn't influence though the ability of the US to create what it needs, which is just a function of what resources it can draw on. As Keynes pointed out, anything we can actually do, we can afford. I'm not actually American, but you get the gist. I've taken the liberty of posting the full passage here since it's so good: For some weeks at this hour you have enjoyed the day-dreams of planning. But what about the nightmare of finance? I am sure there have been many listeners who have been muttering: “That’s all very well, but how is it to be paid for?” Let me begin by telling you how I tried to answer an eminent architect who pushed on one side all the grandiose plans to rebuild London with the phrase: “Where’s the money to come from?” “The money?” I said. “But surely, Sir John, you don’t build houses with money? Do you mean that there won’t be enough bricks and mortar and steel and cement?” “Oh no”, he replied, “of course there will be plenty of all that”. “Do you mean”, I went on, “that there won’t be enough labour? For what will the builders be doing if they are not building houses?” “Oh no, that’s all right”, he agreed. “Then there is only one conclusion. You must be meaning, Sir John, that there won’t be enough architects”. But there I was trespassing on the boundaries of politeness. So I hurried to add: “Well, if there are bricks and mortar and steel and concrete and labour and architects, why not assemble all this good material into houses?” But he was, I fear, quite unconvinced. “What I want to know”, he repeated, “is where the money is coming from”. To answer that would have got him and me into deeper water than I cared for, so I replied rather shabbily: “The same place it is coming from now”. He might have countered (but he didn’t): “Of course I know that money is not the slightest use whatever. But, all the same, my dear sir, you will find it a devil of a business not to have any …” Had I given him a good and convincing answer by saying that we build houses with bricks and mortar, not with money? Or was I only teasing him? … For one thing, he was making the very usual confusion between the problem of finance for an individual and the problem for the community as a whole … The first task is to make sure that there is enough demand to provide employment for everyone. The second task is to prevent a demand in excess of the physical possibilities of supply, which is the proper meaning of inflation. For the physical possibilities of supply are very far from unlimited. Our building programme must be properly proportioned to the resources which are left after we have met our daily needs and have produced enough exports to pay for what we require to import from overseas … Where we are using up resources, do not let us submit to the vile doctrine of the nineteenth century that every enterprise must justify itself in pounds, shillings and pence of cash income, with no other denominator of values but this. I should like to see that war memorials of this tragic struggle take the shape of an enrichment of the civic life of every great centre of population … Assuredly we can afford this and much more. Anything we can actually do we can afford. Once done, it is there. Nothing can take it from us.

hgomersall 2y ago

Whether the US can or cannot run a deficit has nothing to do with the dollar being a reserve currency. It being a reserve currency means it probably will run a deficit but that's just a reflection of foreigners wanting to save US dollars, which is true for many country's currency. The deficit is just a reflection of the sectoral balances[1], which governments don't realistically influence through normal policy. They obviously can change them, but it generally results in significant undesirable outcomes. [1] https://en.m.wikipedia.org/wiki/Sectoral_balances https://en.m.wikipedia.org/wiki/Sectoral_balances

tokioyoyo 2y ago
US will have to prove that these big changes are a sogn towards more stability, for others to keep saving in USD. Gold markets are pretty insane nowadays, which makes me think of my own savings.
mindslight 2y ago
Sure, "deficit" is crappy political term that mostly serves as a martingale and rallying cry for kayfabe austerity politics. Forgive me for stooping. I'm really talking about monetary creation/inflation - the part of the budget deficit that is new "loans" from another branch of government (Federal Reserve), plus "loans" from the Federal Reserve into the financial industry to do things like grow the housing bubble. The belief that USD will continue to be redeemable for best in class future goods (technological widgets, military hardware, trade and military alliances, etc) combined with the stickiness of transaction costs (especially at nation-state scale) is what allows that ongoing monetary inflation without commensurate price inflation.
- hgomersall 2y ago
  There's certainly a reasonable concern about what happens when China stops accepting IOUs in return for piles of actual stuff. That doesn't influence though the ability of the US to create what it needs, which is just a function of what resources it can draw on. As Keynes pointed out, anything we can actually do, we can afford. I'm not actually American, but you get the gist. I've taken the liberty of posting the full passage here since it's so good: For some weeks at this hour you have enjoyed the day-dreams of planning. But what about the nightmare of finance? I am sure there have been many listeners who have been muttering: “That’s all very well, but how is it to be paid for?” Let me begin by telling you how I tried to answer an eminent architect who pushed on one side all the grandiose plans to rebuild London with the phrase: “Where’s the money to come from?” “The money?” I said. “But surely, Sir John, you don’t build houses with money? Do you mean that there won’t be enough bricks and mortar and steel and cement?” “Oh no”, he replied, “of course there will be plenty of all that”. “Do you mean”, I went on, “that there won’t be enough labour? For what will the builders be doing if they are not building houses?” “Oh no, that’s all right”, he agreed. “Then there is only one conclusion. You must be meaning, Sir John, that there won’t be enough architects”. But there I was trespassing on the boundaries of politeness. So I hurried to add: “Well, if there are bricks and mortar and steel and concrete and labour and architects, why not assemble all this good material into houses?” But he was, I fear, quite unconvinced. “What I want to know”, he repeated, “is where the money is coming from”. To answer that would have got him and me into deeper water than I cared for, so I replied rather shabbily: “The same place it is coming from now”. He might have countered (but he didn’t): “Of course I know that money is not the slightest use whatever. But, all the same, my dear sir, you will find it a devil of a business not to have any …” Had I given him a good and convincing answer by saying that we build houses with bricks and mortar, not with money? Or was I only teasing him? … For one thing, he was making the very usual confusion between the problem of finance for an individual and the problem for the community as a whole … The first task is to make sure that there is enough demand to provide employment for everyone. The second task is to prevent a demand in excess of the physical possibilities of supply, which is the proper meaning of inflation. For the physical possibilities of supply are very far from unlimited. Our building programme must be properly proportioned to the resources which are left after we have met our daily needs and have produced enough exports to pay for what we require to import from overseas … Where we are using up resources, do not let us submit to the vile doctrine of the nineteenth century that every enterprise must justify itself in pounds, shillings and pence of cash income, with no other denominator of values but this. I should like to see that war memorials of this tragic struggle take the shape of an enrichment of the civic life of every great centre of population … Assuredly we can afford this and much more. Anything we can actually do we can afford. Once done, it is there. Nothing can take it from us.