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> As global GDP grows, it becomes increasingly burdensome for the United States to finance the provision of reserve assets and the defense umbrella I don't und

> As global GDP grows, it becomes increasingly burdensome for the United States to finance the provision of reserve assets and the defense umbrella I don't understand. US share of global GDP is around where it was in 1980, and in 1995[1]. Is Miran arguing that America's "exorbitant privilege" of being the source of the world's reserve currency, literally being able to buy goods from any country in the world with money printed out of thin air, is actually a liability? [1] Page 8 of his paper EDIT after reading through Chapter 2 of the paper: Thank you for sharing this. I don't agree with many of the arguments Miran is throwing out so far, but at least it's self consistent. He is saying: 1. If the US's global share of GDP decreases, then a set of global economic factors will cause the US to keep having to take on deficits to fund the rest of the world's desire for USD (because that is the world's reserve currency). If the US becomes small enough relative to the world economy, then this pressure will cause the US to risk defaulting on its debt. 2. The US's status as the reserve currency issuer means US dollars are artificially expensive. This means that low margin, high-labor industries like manufacturing can't thrive in the US. This is a national security risk because China/Russia can make lots of tanks/drones/etc and we can't. 3. The US benefits from being the reserve currency issuer because it can use that power to project force worldwide and maintain national security. 4. (He doesn't say this, but implies it in that coy way that people who read The New Criterion like to do) #1 is an unacceptable risk for America, and the US should employ a range of unilateral or multilateral measures to reshape the global financial system in a way that devalues the US Dollar, strengthens US manufacturing, and forces US trading partners (esp. other liberal democracies) to subsidize the US's status as the reserve currency issuer, since the US provides a global hegemony that is beneficial to them. Also, having read portions of the Project 2025 "Mandate for America," it's really interesting to me how all of these right wing thinktank writers (Russ Vought, Max Primorac, and now Miran) seem to share the same writing style.

AyyEye 2y ago
You and I don't get to print money. Other classes do.
- elcritch 2y ago
  Even being “close” to where the money is printed gives you enormous benefits. Average Americans don’t get this. Companies like Black Rock gain enormous power over the US and other nations.
sebmellen 2y ago
Yes, it is a liability, because in exchange for your reserve currency status you are indebting your country. Gradually, as you outsource more and produce less, your country derives more and more of its returns from soft economic assets (financial markets, legal structures, software, pharma, IP, etc.), than hard economic assets (commodities, energy, manufacturing, transportation, logistics, etc.). In the long run, this hollows out your industrial base, drives income inequality (because labor is devalued when products/soft assets have zero marginal cost of replication), and defangs your country. Said differently — vertical integration is the key to “innovation” in the abstract. You can see this with BYD. With the above in mind, let’s say your goal as a country is to develop your industries so you can achieve vertical integration. Soft economic assets are easier to bootstrap once you have hard economic assets. If you lose your hard economic assets and only have soft ones, you are at a strategic disadvantage because your opponent (in this case China), can bootstrap their soft assets relatively quickly. By comparison, it will take you much longer to get your hard assets back (through the mythical process of “reshoring/reindustrialization”). All that being said, this is not a commentary on the effectiveness of the tariff policy of the Trump administration.
- Centigonal 2y ago
  Thanks for the explanation! Most of what you wrote makes sense to me. In particular, I think the concept that going hard -> soft economic assets is easier than the reverse is really interesting. I'll have to think on that more. Things that still give me pause: 1. I don't understand why hard economic assets like manufacturing are more heavily impacted by this phenomenon. Wouldn't exporting a $50,000 car and a $50,000 software license have the same impact on the country's current account? I think it might have something to do with the marginal cost of replication point you made, but, for example, the marginal cost of manufacturing semiconductors is very small, and we trail in that too. 2. I disagree with your assertion that 'vertical integration is the key to “innovation” in the abstract.' I think this is often true, because vertical integration enables more control/flexibility and faster iteration, which allows innovation to occur. However, there are many cases (e.g. fabless semiconductors, meat poultry farming, software companies build on the cloud) where the innovation was actually to split the value chain into separate concerns with separate concerns.
walterbell 2y ago
Is there any relationship between reserve currency, national security and power projection? https://apnews.com/article/shipbuilding-china-united-states-trump-c995b06f35041e4ca1928e40f53adec5 https://apnews.com/article/shipbuilding-china-united-states-... > In only two decades, China has grown to be the dominant player in shipbuilding, claiming more than half of the world’s commercial shipbuilding market, while the U.S. share has fallen to just 0.1%, posing serious economic and national security challenges for the U.S. and its allies, according to a report released Tuesday by the Center for Strategic and International Studies. In 2024 alone, one Chinese shipbuilder constructed more commercial vessels by tonnage than the entire U.S. shipbuilding industry has built since the end of World War II.
- 8note 2y ago
  its kinda funny though, since US lack of shipbuilding is directly the result of protectionist law in the jones act get rid of the jones act, and you get americans on boats again, rather than trucks
  - franktankbank 2y ago
    Do the waterways support ship freight anymore? We'd need to redevelop the Great Lakes and riverways I think.
hattmall 2y ago
Yes, that's exactly what a liability is! US currency is an IOU. The more of it out in the world the less value there is in America's domestic assets.
- Centigonal 2y ago
  I meant "liability" in the sense of "is the US's status as the global reserve currency, on balance, a bad thing for the US?" not in the sense of "Is a US dollar abroad an asset or a liability on America's balance sheet?" Probably could have used a better word.
  - sebmellen 2y ago
    Curious on your thoughts in response to my sibling comment :)
- 8note 2y ago
  i generally cannot go to the US government with a dollar to withdraw its worth in gold. US debt is an IOU, but USD is just an object that i can barter with
  - hattmall 2y ago
    Sure it's not exactly an IOU but it more or less entitles you to a certain bit of the American people's labor or assets. Billions / Trillions of dollars in USD overseas waiting to be traded in is not a good thing for people who aren't in a position of international rent seeking. The average American is harmed not helped by foreign trade.

AyyEye 2y ago

You and I don't get to print money. Other classes do.

elcritch 2y ago
Even being “close” to where the money is printed gives you enormous benefits. Average Americans don’t get this. Companies like Black Rock gain enormous power over the US and other nations.

sebmellen 2y ago

Yes, it is a liability, because in exchange for your reserve currency status you are indebting your country. Gradually, as you outsource more and produce less, your country derives more and more of its returns from soft economic assets (financial markets, legal structures, software, pharma, IP, etc.), than hard economic assets (commodities, energy, manufacturing, transportation, logistics, etc.). In the long run, this hollows out your industrial base, drives income inequality (because labor is devalued when products/soft assets have zero marginal cost of replication), and defangs your country. Said differently — vertical integration is the key to “innovation” in the abstract. You can see this with BYD. With the above in mind, let’s say your goal as a country is to develop your industries so you can achieve vertical integration. Soft economic assets are easier to bootstrap once you have hard economic assets. If you lose your hard economic assets and only have soft ones, you are at a strategic disadvantage because your opponent (in this case China), can bootstrap their soft assets relatively quickly. By comparison, it will take you much longer to get your hard assets back (through the mythical process of “reshoring/reindustrialization”). All that being said, this is not a commentary on the effectiveness of the tariff policy of the Trump administration.

Centigonal 2y ago
Thanks for the explanation! Most of what you wrote makes sense to me. In particular, I think the concept that going hard -> soft economic assets is easier than the reverse is really interesting. I'll have to think on that more. Things that still give me pause: 1. I don't understand why hard economic assets like manufacturing are more heavily impacted by this phenomenon. Wouldn't exporting a $50,000 car and a $50,000 software license have the same impact on the country's current account? I think it might have something to do with the marginal cost of replication point you made, but, for example, the marginal cost of manufacturing semiconductors is very small, and we trail in that too. 2. I disagree with your assertion that 'vertical integration is the key to “innovation” in the abstract.' I think this is often true, because vertical integration enables more control/flexibility and faster iteration, which allows innovation to occur. However, there are many cases (e.g. fabless semiconductors, meat poultry farming, software companies build on the cloud) where the innovation was actually to split the value chain into separate concerns with separate concerns.

walterbell 2y ago

Is there any relationship between reserve currency, national security and power projection? https://apnews.com/article/shipbuilding-china-united-states-trump-c995b06f35041e4ca1928e40f53adec5 https://apnews.com/article/shipbuilding-china-united-states-... > In only two decades, China has grown to be the dominant player in shipbuilding, claiming more than half of the world’s commercial shipbuilding market, while the U.S. share has fallen to just 0.1%, posing serious economic and national security challenges for the U.S. and its allies, according to a report released Tuesday by the Center for Strategic and International Studies. In 2024 alone, one Chinese shipbuilder constructed more commercial vessels by tonnage than the entire U.S. shipbuilding industry has built since the end of World War II.

8note 2y ago
its kinda funny though, since US lack of shipbuilding is directly the result of protectionist law in the jones act get rid of the jones act, and you get americans on boats again, rather than trucks
- franktankbank 2y ago
  Do the waterways support ship freight anymore? We'd need to redevelop the Great Lakes and riverways I think.

hattmall 2y ago

Yes, that's exactly what a liability is! US currency is an IOU. The more of it out in the world the less value there is in America's domestic assets.

Centigonal 2y ago
I meant "liability" in the sense of "is the US's status as the global reserve currency, on balance, a bad thing for the US?" not in the sense of "Is a US dollar abroad an asset or a liability on America's balance sheet?" Probably could have used a better word.
- sebmellen 2y ago
  Curious on your thoughts in response to my sibling comment :)
8note 2y ago
i generally cannot go to the US government with a dollar to withdraw its worth in gold. US debt is an IOU, but USD is just an object that i can barter with
- hattmall 2y ago
  Sure it's not exactly an IOU but it more or less entitles you to a certain bit of the American people's labor or assets. Billions / Trillions of dollars in USD overseas waiting to be traded in is not a good thing for people who aren't in a position of international rent seeking. The average American is harmed not helped by foreign trade.