4 ms·

For other countries USD is something they have to work for or sell something to acquire it. If they screw up they may end up in crisis being unable to obtain US

by mrtksn 1y ago

For other countries USD is something they have to work for or sell something to acquire it. If they screw up they may end up in crisis being unable to obtain USD. Borrowing in their own currency will be much more limited and borrowing in USD much more costly. USA on the other hand can just print it out of thin air and because the global USD liquidity is huge they can do it for much longer without facing the consequences of it. USA is also borrowing in currency they can just print to pay their debts. Very advantageous position for USA and they took advantage of it, imported crazy amount of products and services otherwise they wouldn't have.

starspangled 1y ago
Many countries control their currency and can print money to pay debts, and can control their fiscal and monetary policies to best gain advantage for themselves. And they do. US can do some things more, bigger, longer, etc., for various reasons. Just like Australia can do more, bigger, longer, etc., than Tonga. I don't really see anything profound being said here. USA might be in some advantageous position now, and it might not always be in such a position, which is a pretty bland observation, but it also does not support the idea that they are living beyond their means today.
- mrtksn 1y ago
  The reserve currency status makes all the difference on how much of all this you can do and under what conditions. That's the difference and that's why US had it so good for so long and now is due for such a large correction. Also, US is blessed with huge natural reserves, didn't actually waste it all on drugs and alcohol but did in fact created some of the best institutions in many areas so maybe it wouldn't be that bad if the politics don't make it bad.
  - starspangled 1y ago
    It's not a reserve currency because the US decided it is, it's a reserve currency because everybody else decided it is. They decided that because they decided it was in their own best interest to trade in and maintain reserves of USD. But whatever difference it makes is still just a matter of degrees. Countries keep reserves of and trade in currencies other than USD. Some get more benefit than others from this, and they all work to benefit from what advantage they can take from their own positions within their means to do so.
    - jampekka 1y ago
      USD became the reserve currency in the Bretton Woods, when it was pegged to gold and major currencies were pegged to USD. This was pretty much demanded by US in the Bretton Woods conference. In 1971 US unilaterally scrapped the Bretton Woods and essentially stole the gold reserves. Other countries protested heavily but could not really do much. US then transitioned to the petrodollar system where demand for and value of the dollar is/was ensured by dollar monopoly in oil trade. This was done with deals with oil producing countries with varying levels of coercion. Granted it is in a country's best interest not to piss off the world's largest military. Silver or lead is a decision too.
      - starspangled 1y ago
        In other words, what I said was correct.
      - chii 1y ago
        The gold reserves wasnt stolen - it is the US's gold that was acquired as a result of WW2. The revocation of the convertability of the US dollar to gold was suspended because it became impossible to honor it due to the increase in the amount of circulating dollars (what people generally call printing - it isn't "printed", it is debt created that produced more currency). And imho, while it seemed like other countries complained, i think this system allowed the world to move off the gold standard - a system which does not allow for flexibility. And the idea that the US somehow enforces their dollar as being the reserve is moot - it is simply not true. Countries use the US dollar for trade because both sides of the trade believes that the other side cannot "cheat" using this currency, and implicitly believes that the US gov't won't "cheat" on behalf of one side either. Unfortunately, this trust is being undermined from various sides, including the current US administration (and i have a hard time believing that the trump administration doesnt know this - it seems deliberate).
        jampekka 1y ago
        The situation was similar to there being a gold ETF that just decides to remove the gold peg and start diluting the shares. Whether that's essentially stealing or not is a matter of terminology IMHO. US for sure didn't do it out of goodness of their hearts even if it led to arguably better monetary system. And US did get lopsided benefits out of it. Consistently recieving more goods than you give out is a huge benefit.
  - OGWhales 1y ago
    Is the USD due for a correction? I would agree the current policies do not help, however I have a hard time seeing any other currency actually replacing the dollar as the world's reserve currency.
    - unionpivo 1y ago
      If USD stops being global currency, there probably will not be just one that replaces it, but there will be several competing ones (USD still probably being there), for foreseeable future, with countries hedging bets.
- mtrovo 1y ago
  It doesn't matter how much money you print if your debts are USD denominated. If for example Tonga has double their currency in circulation with a debt of Y USD tomorrow they will still owe Y USD and their currency will probably be worth half of what it was before. In the case of the dollar if you suddenly double the supply it's not just the US national debt that is affected, it's all the secondary financial products indexed on dollar that are affected: debt from countries and private companies across the world, commodities and all transactions between countries not involving US that are dollar denominated. So in a way the value of a single dollar is diluted but it's diluted over a much bigger pool of participants. That's the main reason printing money is cheaper to US as is reflected on the bond market, just look at supply vs inflation around the years following the global pandemic. Living beyond their means is very relative. When credit is virtually free for years it makes sense to run 10x leveraged, the problem is when interest rate rises and you have to deleverage without showing too much that you don't have that much money as failing to do so could result in a death trap spiral.
- pbhjpbhj 1y ago
  When Aus print money they devalue the currency, spreading the cost over all Aus dollar holders. When USA do the same, the non-USA dollar holders also take on the cost, same-same, excepting that is everyone around the World who trades in dollars. Which comes back to USA's military-industrial complex to some extent. It's like having the ability to steal a gram from every gold bar in the World.
  - starspangled 1y ago
    > When USA do the same, the non-USA dollar holders also take on the cost They don't. If they aren't holding USD or something pegged to it then it is not devalued.
    - pbhjpbhj 1y ago
      Sorry, I made that hard to parse - "the dollar holders outside USA".
avidphantasm 1y ago
Thank you for elucidating the fact that US “borrows” in its own currency and so as long as we have monetary sovereignty (which we do to a great degree due to USD being the global reserve currency) we have no deficit problems (as long as we keep inflation in check). I implore everyone reading this thread to read up on Modern Monetary Theory (MMT). Stephanie Kelton’s “The Deficit Myth” is a good place to start. Until more people have a better understanding for how the system works, they’ll continue to be confused and easily led astray by politicians who don’t have the best interests of most people in mind, but instead wish to rob us blind in a vain attempt to eliminate trade/budget deficits. (Note: I’m very much for restoring domestic manufacturing as much as possible, including the use of highly targeted tariffs, industrial policy, R&D, workforce development, etc. but this is not what the current administration is doing, not even close).
- Flemlo 1y ago
  I don't think domestic manufacturing works anymore. The pressure to automate will just skyrock. I'm more for a global currency which will be given to everyone who does certain jobs we can't automate away or don't want to like nursing, teaching. Everyone around the globe can get worldfiat when they do these jobs. We need to start thinking beyond known capitalism in a modern highly automated world.
  - mmillin 1y ago
    There are important reasons to have domestic manufacturing even if automated and not creating jobs.
    - Flemlo 1y ago
      Sure but that's not enough to give people enough jobs.
  - mensetmanusman 1y ago
    We want automation x1000, every useful automaton increases the quality of life by increasing productivity.
nisegami 1y ago
>For other countries USD is something they have to work for or sell something to acquire it. If they screw up they may end up in crisis being unable to obtain USD. Right on the mark. This is happening to my country and it's an existential threat to my country's continued existence tbqh.

by mrtksn 1y ago

starspangled 1y ago

Many countries control their currency and can print money to pay debts, and can control their fiscal and monetary policies to best gain advantage for themselves. And they do. US can do some things more, bigger, longer, etc., for various reasons. Just like Australia can do more, bigger, longer, etc., than Tonga. I don't really see anything profound being said here. USA might be in some advantageous position now, and it might not always be in such a position, which is a pretty bland observation, but it also does not support the idea that they are living beyond their means today.

mrtksn 1y ago
The reserve currency status makes all the difference on how much of all this you can do and under what conditions. That's the difference and that's why US had it so good for so long and now is due for such a large correction. Also, US is blessed with huge natural reserves, didn't actually waste it all on drugs and alcohol but did in fact created some of the best institutions in many areas so maybe it wouldn't be that bad if the politics don't make it bad.
- starspangled 1y ago
  It's not a reserve currency because the US decided it is, it's a reserve currency because everybody else decided it is. They decided that because they decided it was in their own best interest to trade in and maintain reserves of USD. But whatever difference it makes is still just a matter of degrees. Countries keep reserves of and trade in currencies other than USD. Some get more benefit than others from this, and they all work to benefit from what advantage they can take from their own positions within their means to do so.
  - jampekka 1y ago
    USD became the reserve currency in the Bretton Woods, when it was pegged to gold and major currencies were pegged to USD. This was pretty much demanded by US in the Bretton Woods conference. In 1971 US unilaterally scrapped the Bretton Woods and essentially stole the gold reserves. Other countries protested heavily but could not really do much. US then transitioned to the petrodollar system where demand for and value of the dollar is/was ensured by dollar monopoly in oil trade. This was done with deals with oil producing countries with varying levels of coercion. Granted it is in a country's best interest not to piss off the world's largest military. Silver or lead is a decision too.
    - starspangled 1y ago
      In other words, what I said was correct.
    - chii 1y ago
      The gold reserves wasnt stolen - it is the US's gold that was acquired as a result of WW2. The revocation of the convertability of the US dollar to gold was suspended because it became impossible to honor it due to the increase in the amount of circulating dollars (what people generally call printing - it isn't "printed", it is debt created that produced more currency). And imho, while it seemed like other countries complained, i think this system allowed the world to move off the gold standard - a system which does not allow for flexibility. And the idea that the US somehow enforces their dollar as being the reserve is moot - it is simply not true. Countries use the US dollar for trade because both sides of the trade believes that the other side cannot "cheat" using this currency, and implicitly believes that the US gov't won't "cheat" on behalf of one side either. Unfortunately, this trust is being undermined from various sides, including the current US administration (and i have a hard time believing that the trump administration doesnt know this - it seems deliberate).
      - jampekka 1y ago
        The situation was similar to there being a gold ETF that just decides to remove the gold peg and start diluting the shares. Whether that's essentially stealing or not is a matter of terminology IMHO. US for sure didn't do it out of goodness of their hearts even if it led to arguably better monetary system. And US did get lopsided benefits out of it. Consistently recieving more goods than you give out is a huge benefit.
- OGWhales 1y ago
  Is the USD due for a correction? I would agree the current policies do not help, however I have a hard time seeing any other currency actually replacing the dollar as the world's reserve currency.
  - unionpivo 1y ago
    If USD stops being global currency, there probably will not be just one that replaces it, but there will be several competing ones (USD still probably being there), for foreseeable future, with countries hedging bets.
mtrovo 1y ago
It doesn't matter how much money you print if your debts are USD denominated. If for example Tonga has double their currency in circulation with a debt of Y USD tomorrow they will still owe Y USD and their currency will probably be worth half of what it was before. In the case of the dollar if you suddenly double the supply it's not just the US national debt that is affected, it's all the secondary financial products indexed on dollar that are affected: debt from countries and private companies across the world, commodities and all transactions between countries not involving US that are dollar denominated. So in a way the value of a single dollar is diluted but it's diluted over a much bigger pool of participants. That's the main reason printing money is cheaper to US as is reflected on the bond market, just look at supply vs inflation around the years following the global pandemic. Living beyond their means is very relative. When credit is virtually free for years it makes sense to run 10x leveraged, the problem is when interest rate rises and you have to deleverage without showing too much that you don't have that much money as failing to do so could result in a death trap spiral.
pbhjpbhj 1y ago
When Aus print money they devalue the currency, spreading the cost over all Aus dollar holders. When USA do the same, the non-USA dollar holders also take on the cost, same-same, excepting that is everyone around the World who trades in dollars. Which comes back to USA's military-industrial complex to some extent. It's like having the ability to steal a gram from every gold bar in the World.
- starspangled 1y ago
  > When USA do the same, the non-USA dollar holders also take on the cost They don't. If they aren't holding USD or something pegged to it then it is not devalued.
  - pbhjpbhj 1y ago
    Sorry, I made that hard to parse - "the dollar holders outside USA".

avidphantasm 1y ago

Thank you for elucidating the fact that US “borrows” in its own currency and so as long as we have monetary sovereignty (which we do to a great degree due to USD being the global reserve currency) we have no deficit problems (as long as we keep inflation in check). I implore everyone reading this thread to read up on Modern Monetary Theory (MMT). Stephanie Kelton’s “The Deficit Myth” is a good place to start. Until more people have a better understanding for how the system works, they’ll continue to be confused and easily led astray by politicians who don’t have the best interests of most people in mind, but instead wish to rob us blind in a vain attempt to eliminate trade/budget deficits. (Note: I’m very much for restoring domestic manufacturing as much as possible, including the use of highly targeted tariffs, industrial policy, R&D, workforce development, etc. but this is not what the current administration is doing, not even close).

Flemlo 1y ago
I don't think domestic manufacturing works anymore. The pressure to automate will just skyrock. I'm more for a global currency which will be given to everyone who does certain jobs we can't automate away or don't want to like nursing, teaching. Everyone around the globe can get worldfiat when they do these jobs. We need to start thinking beyond known capitalism in a modern highly automated world.
- mmillin 1y ago
  There are important reasons to have domestic manufacturing even if automated and not creating jobs.
  - Flemlo 1y ago
    Sure but that's not enough to give people enough jobs.
- mensetmanusman 1y ago
  We want automation x1000, every useful automaton increases the quality of life by increasing productivity.

nisegami 1y ago

>For other countries USD is something they have to work for or sell something to acquire it. If they screw up they may end up in crisis being unable to obtain USD. Right on the mark. This is happening to my country and it's an existential threat to my country's continued existence tbqh.