5 ms·

This is more of a go out with a whimper rather than a bang type thing. Being the world reserve currency (as well as the largest consumer market in the world) pr

This is more of a go out with a whimper rather than a bang type thing. Being the world reserve currency (as well as the largest consumer market in the world) previously enabled the US to do things like relatively easily export inflation in spite of relatively reckless monetary policy. Now that inflation is sticking around far more persistently, even long term bonds have gone from 1-2% to 4%+, and so on. Stagflation is a conceivable longer term outcome. The replacement will probably be a multinational currency with strictly controlled quantity tied to some sort of physical asset(s). Basically Bretton Woods 2.0, except with the learned experience of not just granting a single country immense power and having them pinky swear not to default on their obligations and then abuse that granted power. China's probably betting that that asset will be gold.

HPsquared 10mo ago
With highly liquid capital markets, why wouldn't the dynamics be more like a bank run?
- selectodude 10mo ago
  Because dumping all of your US treasuries is a political statement. You can only sell to a willing buyer and announcing that you’re going to do that is tantamount to lighting wealth on fire. Treasuries are assets so there’s no counterparty that will “run out”.
GenerocUsername 10mo ago
Imagine how red 100 years of economists faces will be when the world ends up back on a gold backed currency. Probably only takes 2 years before they start inventing abstractions on top of it and this kicking off the eventually next economic disaster.
- vkou 10mo ago
  There were, of course, no economic disasters back when the world operated on gold-backed currencies. The goldbugs won't be red in the face, though, because they are never wrong and are constitutionally incapable of feeling any shame.
  - cjbgkagh 10mo ago
    I’m pretty sure no-one has argued that a gold standard would prevent economic disasters. That sounds like a straw man. My understanding is that there would be more of them but the individual and cumulative impact would be far less. You can still have fractional reserve banking with the gold standard so the gold standard alone is not sufficient to prevent that.
    - throw0101c 10mo ago
      > I’m pretty sure no-one has argued that a gold standard would prevent economic disasters. That sounds like a straw man. My understanding is that there would be more of them but the individual and cumulative impact would be far less. Contrary to popular opinion, the historical record shows that gold does not actually bring price stability; see "Why the Gold Standard Is the World's Worst Economic Idea, in 2 Charts": * http://archive.is/https://www.theatlantic.com/business/archive/2012/08/why-the-gold-standard-is-the-worlds-worst-economic-idea-in-2-charts/261552/ http://archive.is/https://www.theatlantic.com/business/archi... Most of the claimed benefits of gold-backed currencies are myths: * https://archive.is/https://www.vox.com/2014/7/16/5900297/case-against-gold-standard https://archive.is/https://www.vox.com/2014/7/16/5900297/cas... Before what we call "The Great Depression" (of the 1930s), that label was applied to another years-long economic malaise, which was in part caused by using gold-backed currency (as was the 1930s Great Depression): * https://en.wikipedia.org/wiki/Long_Depression https://en.wikipedia.org/wiki/Long_Depression You'll find that US economic downturns became less frequent as the US went off the gold standard, and the Fed gained more and more independence: * https://en.wikipedia.org/wiki/File:GDP_growth_1923-2009.jpg https://en.wikipedia.org/wiki/File:GDP_growth_1923-2009.jpg * https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
      - cjbgkagh 10mo ago
        Many things work just fine right until they stop working, our current strategy of blowing ever bigger economic bubbles has worked for a long time and I expect it will continue for long time. It has the very stable property of enriching the already wealthy. But it will not last forever and I do expect to see the end of it within my lifetime. It is this calamity that I'm interested in diminishing and it is on this basis that I think a weaker federal reserve would be less damaging. Since the federal reserve obscures the true state of the economy uncovering the true state will coincide with a weakling of the federal reserve and will appear causal. I'm not a gold bug, I don't own any of it, I do own some bitcoin but my main asset is my software company.
- delfinom 10mo ago
  Works until we have someone mining asteroids for gold. Then the gold backed currency collapses overnight.
  - symbogra 10mo ago
    No that's a good thing actually, because then we get asteroid mining spaceships
    - throw0101c 10mo ago
      Beltalowda unite!
- RealityVoid 10mo ago
  I'd rather go back to crypto than be chained to a piece of stupid metal.
  - carlosjobim 10mo ago
    You take that back now. Gold is the best thing which has ever existed. Name one thing in the world which can even compete.
    - freeone3000 10mo ago
      The literal idea of value.
      - carlosjobim 10mo ago
        Gold have existed and thrived long before there were any ideas, and will continue to do so long after the last idea is dead.
        RealityVoid 10mo ago
        Hah. This is merely your lack of imagination speaking. It could be that reality plays out that you are right, but what a sad, constrained world of ideas that would be.
rcarr 10mo ago
We almost got that with Bretton Woods 1.0: https://en.wikipedia.org/wiki/Bancor https://en.wikipedia.org/wiki/Bancor
daedrdev 10mo ago
No, physically backed currencies will not return because physical goods do not correlate with the size of an economy, especially the amount of gold
- carlosjobim 10mo ago
  They correlate with the size of production, which is a much better measurement than the amount of trading back-and-forth.
- 827a 10mo ago
  Gold-backed currencies, and even Bitcoin, are really good if you want your economy to be only this big, and never grow bigger. Eventually, a crisis will happen, and you'll say "actually, its now 1.3 yuan to the gram, because we need to build tanks", or "actually, did we say we had 8,000 tons of gold in reserve? we meant 9,000. Yeah we just counted, no you can't look at it, we have 9,000, here take the yuan and go build vaccines", or "its now illegal for citizens to own gold, turn it in at your nearest party headquarters" (even the US participated in that one!)
  - chhxdjsj 10mo ago
    "actually, did we say we had 8,000 tons of gold in reserve? we meant 9,000. Yeah we just counted, no you can't look at it, we have 9,000, here take the yuan and go build vaccines" You cant do that with bitcoin
    - xorcist 10mo ago
      Sure you can. "No you can't look" is the key. All those blocks which hasn't moved in many years? They're all ours. Pinky promise.
  - somenameforme 10mo ago
    If the government not sticking to a backed currency is one of the biggest concerns, then that's quite high praise of the concept in and of itself! In any case the amount of currency does not determine the size of an economy. Rather the size of the economy determines the value of the currency. As economies grow in a system with relatively finite amounts of currency, the currency simply becomes worth more - people become overall wealthier and things become overall cheaper. This is how you get things like the elderly generation thinking people are just lazy - when they were young, you could fully fund university and have enough for a down-payment on your first home through a part time job. The dollar just went much further. They don't really understand that's not the way things are anymore, especially as most are largely detached from the broader economy. Also the 'crisis point' you mention is similarly an issue with fiat currencies. Look we're going to print a billion dollars just this once... then 10 billion... then 100 billion.. then they're printing money by the trillions and insisting that the inflation will just be 'transitory', because it always has been, until the one time it isn't. It's akin to somebody arguing that you can always put a bit more air in the balloon - after all it hasn't popped before, so why would it now?
ajross 10mo ago
> The replacement will probably be a multinational currency with strictly controlled quantity tied to [...] probably [...] gold. This is econolibertarian fan fiction. Literally no one wants that except people already involved in speculating[1] on gold. Are there bad externalities to relying on a unlitaterally controlled reserve currency? Yes. Are they made better by handing financial control over to a bunch of fucking mine and vault operators? Let's be real, here. Basically this idea appeals to people who've convinced themselves they can get rich betting on financial policy and stay rich by burying their loot in their metaphorical backyard. [1] The very fact that such speculation even exists should be a triple exclamation point red flag on any argument about hard currency, but alas no.
- RealityVoid 10mo ago
  Yes, thank you. My puny mind can't even understand how people come to be convinced that gold should be the end all be all of international trade.
- blibble 10mo ago
  > This is econolibertarian fan fiction. I guess you never heard of the XDR? it was tied to gold https://en.wikipedia.org/wiki/Special_drawing_rights#Alternative_to_U.S._dollar https://en.wikipedia.org/wiki/Special_drawing_rights#Alterna... ... and could be again, if the US regime continues its incontinence
  - ajross 10mo ago
    SDR valuations were tied to gold when the USD was still gold-based. Needless to say Bretton Woods didn't survive that transition at all. Again, it was a failed (!) experiment, not a recipe to try again. Believing otherwise is fan fiction.

HPsquared 10mo ago

With highly liquid capital markets, why wouldn't the dynamics be more like a bank run?

selectodude 10mo ago
Because dumping all of your US treasuries is a political statement. You can only sell to a willing buyer and announcing that you’re going to do that is tantamount to lighting wealth on fire. Treasuries are assets so there’s no counterparty that will “run out”.

GenerocUsername 10mo ago

Imagine how red 100 years of economists faces will be when the world ends up back on a gold backed currency. Probably only takes 2 years before they start inventing abstractions on top of it and this kicking off the eventually next economic disaster.

vkou 10mo ago
There were, of course, no economic disasters back when the world operated on gold-backed currencies. The goldbugs won't be red in the face, though, because they are never wrong and are constitutionally incapable of feeling any shame.
- cjbgkagh 10mo ago
  I’m pretty sure no-one has argued that a gold standard would prevent economic disasters. That sounds like a straw man. My understanding is that there would be more of them but the individual and cumulative impact would be far less. You can still have fractional reserve banking with the gold standard so the gold standard alone is not sufficient to prevent that.
  - throw0101c 10mo ago
    > I’m pretty sure no-one has argued that a gold standard would prevent economic disasters. That sounds like a straw man. My understanding is that there would be more of them but the individual and cumulative impact would be far less. Contrary to popular opinion, the historical record shows that gold does not actually bring price stability; see "Why the Gold Standard Is the World's Worst Economic Idea, in 2 Charts": * http://archive.is/https://www.theatlantic.com/business/archive/2012/08/why-the-gold-standard-is-the-worlds-worst-economic-idea-in-2-charts/261552/ http://archive.is/https://www.theatlantic.com/business/archi... Most of the claimed benefits of gold-backed currencies are myths: * https://archive.is/https://www.vox.com/2014/7/16/5900297/case-against-gold-standard https://archive.is/https://www.vox.com/2014/7/16/5900297/cas... Before what we call "The Great Depression" (of the 1930s), that label was applied to another years-long economic malaise, which was in part caused by using gold-backed currency (as was the 1930s Great Depression): * https://en.wikipedia.org/wiki/Long_Depression https://en.wikipedia.org/wiki/Long_Depression You'll find that US economic downturns became less frequent as the US went off the gold standard, and the Fed gained more and more independence: * https://en.wikipedia.org/wiki/File:GDP_growth_1923-2009.jpg https://en.wikipedia.org/wiki/File:GDP_growth_1923-2009.jpg * https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
    - cjbgkagh 10mo ago
      Many things work just fine right until they stop working, our current strategy of blowing ever bigger economic bubbles has worked for a long time and I expect it will continue for long time. It has the very stable property of enriching the already wealthy. But it will not last forever and I do expect to see the end of it within my lifetime. It is this calamity that I'm interested in diminishing and it is on this basis that I think a weaker federal reserve would be less damaging. Since the federal reserve obscures the true state of the economy uncovering the true state will coincide with a weakling of the federal reserve and will appear causal. I'm not a gold bug, I don't own any of it, I do own some bitcoin but my main asset is my software company.
delfinom 10mo ago
Works until we have someone mining asteroids for gold. Then the gold backed currency collapses overnight.
- symbogra 10mo ago
  No that's a good thing actually, because then we get asteroid mining spaceships
  - throw0101c 10mo ago
    Beltalowda unite!
RealityVoid 10mo ago
I'd rather go back to crypto than be chained to a piece of stupid metal.
- carlosjobim 10mo ago
  You take that back now. Gold is the best thing which has ever existed. Name one thing in the world which can even compete.
  - freeone3000 10mo ago
    The literal idea of value.
    - carlosjobim 10mo ago
      Gold have existed and thrived long before there were any ideas, and will continue to do so long after the last idea is dead.
      - RealityVoid 10mo ago
        Hah. This is merely your lack of imagination speaking. It could be that reality plays out that you are right, but what a sad, constrained world of ideas that would be.

rcarr 10mo ago

We almost got that with Bretton Woods 1.0: https://en.wikipedia.org/wiki/Bancor https://en.wikipedia.org/wiki/Bancor

daedrdev 10mo ago

No, physically backed currencies will not return because physical goods do not correlate with the size of an economy, especially the amount of gold

carlosjobim 10mo ago
They correlate with the size of production, which is a much better measurement than the amount of trading back-and-forth.
827a 10mo ago
Gold-backed currencies, and even Bitcoin, are really good if you want your economy to be only this big, and never grow bigger. Eventually, a crisis will happen, and you'll say "actually, its now 1.3 yuan to the gram, because we need to build tanks", or "actually, did we say we had 8,000 tons of gold in reserve? we meant 9,000. Yeah we just counted, no you can't look at it, we have 9,000, here take the yuan and go build vaccines", or "its now illegal for citizens to own gold, turn it in at your nearest party headquarters" (even the US participated in that one!)
- chhxdjsj 10mo ago
  "actually, did we say we had 8,000 tons of gold in reserve? we meant 9,000. Yeah we just counted, no you can't look at it, we have 9,000, here take the yuan and go build vaccines" You cant do that with bitcoin
  - xorcist 10mo ago
    Sure you can. "No you can't look" is the key. All those blocks which hasn't moved in many years? They're all ours. Pinky promise.
- somenameforme 10mo ago
  If the government not sticking to a backed currency is one of the biggest concerns, then that's quite high praise of the concept in and of itself! In any case the amount of currency does not determine the size of an economy. Rather the size of the economy determines the value of the currency. As economies grow in a system with relatively finite amounts of currency, the currency simply becomes worth more - people become overall wealthier and things become overall cheaper. This is how you get things like the elderly generation thinking people are just lazy - when they were young, you could fully fund university and have enough for a down-payment on your first home through a part time job. The dollar just went much further. They don't really understand that's not the way things are anymore, especially as most are largely detached from the broader economy. Also the 'crisis point' you mention is similarly an issue with fiat currencies. Look we're going to print a billion dollars just this once... then 10 billion... then 100 billion.. then they're printing money by the trillions and insisting that the inflation will just be 'transitory', because it always has been, until the one time it isn't. It's akin to somebody arguing that you can always put a bit more air in the balloon - after all it hasn't popped before, so why would it now?

ajross 10mo ago

> The replacement will probably be a multinational currency with strictly controlled quantity tied to [...] probably [...] gold. This is econolibertarian fan fiction. Literally no one wants that except people already involved in speculating[1] on gold. Are there bad externalities to relying on a unlitaterally controlled reserve currency? Yes. Are they made better by handing financial control over to a bunch of fucking mine and vault operators? Let's be real, here. Basically this idea appeals to people who've convinced themselves they can get rich betting on financial policy and stay rich by burying their loot in their metaphorical backyard. [1] The very fact that such speculation even exists should be a triple exclamation point red flag on any argument about hard currency, but alas no.

RealityVoid 10mo ago
Yes, thank you. My puny mind can't even understand how people come to be convinced that gold should be the end all be all of international trade.
blibble 10mo ago
> This is econolibertarian fan fiction. I guess you never heard of the XDR? it was tied to gold https://en.wikipedia.org/wiki/Special_drawing_rights#Alternative_to_U.S._dollar https://en.wikipedia.org/wiki/Special_drawing_rights#Alterna... ... and could be again, if the US regime continues its incontinence
- ajross 10mo ago
  SDR valuations were tied to gold when the USD was still gold-based. Needless to say Bretton Woods didn't survive that transition at all. Again, it was a failed (!) experiment, not a recipe to try again. Believing otherwise is fan fiction.