[HN Gopher] Era of U.S. dollar may be winding down
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Era of U.S. dollar may be winding down
Author : gnabgib
Score : 108 points
Date : 2025-05-09 21:05 UTC (1 hours ago)
(HTM) web link (news.harvard.edu)
(TXT) w3m dump (news.harvard.edu)
| the_real_cher wrote:
| what's going to replace it?
| arghwhat wrote:
| Hummus.
| triceratops wrote:
| Arguably more useful than gold. But unfortunately perishable.
| api wrote:
| I doubt it will be a single currency.
|
| Something I think a lot of people miss in this discussion is
| that with computers and electronic markets dealing with
| currency conversions is fairly easy. In the past doing
| everything in USD vastly simplified everything, but today I
| think countries just trading with whatever currency works for a
| given market or transaction probably makes the most sense.
|
| There is no other world currency that looks both large and
| stable enough to replace USD. Chinese Yuan/Renminbi is probably
| the closest but it's probably viewed by many as too easily
| manipulated. It's a pure fiat currency run by a single party
| state with little separation of powers.
| gtirloni wrote:
| A global currency has to have liquidity and availability and
| the Renminbi has none of those things. China doesn't seem
| willing to turn their country into a major importer (thus
| making the RMB more global) so I doubt it will replace the
| USD either. Probably all three USD/EUR/RMB will be around
| without a major takeover by a new entrant.
| MaxPock wrote:
| China is a major importer.Isnt 3 trillion dollars a year in
| imports "major" to you ?
| selectodude wrote:
| China pays for their imports using dollars.
| gtirloni wrote:
| It's a much much big exporter.
| pphysch wrote:
| My view is that the primary purpose of money is to enable
| balanced exchange of useful goods and services, and with that
| premise, "money" could be replaced by large information
| systems. In fact, that transition is long underway. Who uses
| cash anymore?
| triceratops wrote:
| Computers and electronic markets don't solve currency
| conversion so easily because it's not just about doing math.
|
| If say a Thai company wants to buy cocoa beans from Nigeria,
| the Nigerian exporter doesn't have any immediate use for Thai
| baht if they aren't planning to buy something from Thailand.
| If exports and imports between two countries aren't
| relatively balanced there won't be a liquid market between
| their currencies.
| api wrote:
| What if countries form networks? If Nigeria has no use for
| Thai Baht they swap it with another country for US dollars,
| Euros, Rinminbi, whatever. It could all be done
| automatically in near real time.
| mig1 wrote:
| It literally says in the article that nothing is going to fully
| replace it. And the same way that it didn't happen overnight
| for it to become the force that it's today in the global
| economy, it won't disappear overnight either.
| slt2021 wrote:
| America decided to politicize and weaponize the USD and so
| the rest of the world decided to reduce usage of USD in
| international trade. They can use currencies of their trade
| partners to trade, so that: 1. Currency flows
| are invisible to the Fed 2. US sanctions cannot ban
| mutual trade in other FX
|
| these two are the major ones, so if Brazil wants to trade
| with China, they don't need to use USD, they can hold each
| other's FX as some reserve and use it for trade
| throwaway920102 wrote:
| pretty much all economists and commentators state that the
| replacement will be a basket of currencies not a single
| currency, where each countries' basket will be weighted by the
| typical trade volume they have with other countries (more trade
| with Country X, then hold more of Country X's currency) plus
| some factor for stability/volatility/currency risk etc.
| decimalenough wrote:
| This, incidentally, is exactly how the value of the Singapore
| dollar is managed.
| slt2021 wrote:
| national currencies of other countries, which are backed by
| gold and their national reserves.
| paulpauper wrote:
| Nothing. Even the price of bitcoin is measured in dollars.
| pedalpete wrote:
| There is a whole subset of the crypto community that says 1
| bitcoin = 1 bitcoin.
|
| What does it take to go from bitcoin being measured in US
| dollars to US dollars being measured in bitcoin.
| averageRoyalty wrote:
| By whom? If I wish to look up bitcoin exchange pricing, I
| look it up based on AUD. I wouldn't measure bitcoin in USD,
| that would hold no value to me or billions of others
| globally.
| zmmmmm wrote:
| My guess is that initially it will get eaten away by parties
| that currently trade in US dollar for convenience shifting to
| trading directly in their native currencies. It's a pure cost /
| risk equation for them that they have to manage this third
| variable in their dealings and if that outweighs the benefits
| of using a common currency they will make an agreement to trade
| directly. This will happen slowly over a long time and
| eventually a new default currency will emerge as a result of
| these decisions.
| starik36 wrote:
| I've been reading this news headline since I was a teenager. I am
| over 50 now. Why is this time different?
| api wrote:
| We have an administration actively attempting to tank the US
| dollar as global reserve currency?
|
| If you think this is a crazy thing to suggest, consider that
| there is a faction in the US that _wants_ this to happen. They
| see a strong US dollar as harmful to manufacturing and the
| working class.
| drstewart wrote:
| Great, Europe can use the yuan instead
| prpl wrote:
| The bond market, and blase attitude towards national debt and
| default.
| LPisGood wrote:
| I think this is the most incompetent administration USA has had
| in modern times, and it's perhaps the second most authoritarian
| (next to WW2 era FDR). The current administration seems to be
| taking concrete steps to weaken USA's financial dominance in a
| way that has not happened in the years since you were a
| teenager.
|
| I suspect these forces will combine to significantly weaken the
| dollar.
| ldjkfkdsjnv wrote:
| All previous administrations sold us down a river, I dont
| agree with Trump in how he has approached solving the
| problem, but atleast they are out there trying.
| gtirloni wrote:
| Are they? None of the recent events point to any plan. It's
| pure and simple corruption. If by trying you mean trying
| anything without a clue, I can agree with that.
|
| What do you think about the fact you can directly bribe the
| president through his memecoin or by buying dinners with
| him? That's "at least trying"?
|
| Sometimes change for the sake of change gets you a circus
| on fire.
| Henchman21 wrote:
| Trying to _do what_ exactly?
| pstuart wrote:
| Enrich themselves and punish their perceived enemies?
| After all, isn't that what government is supposed to be
| about?
| suzzer99 wrote:
| What exactly is the evidence of this? Debt/deficit? Seems
| like that's been going up and down forever. Because by
| every other metric the US economy was humming along until
| we decided to take a wrecking ball to it, to prevent future
| wreckage I guess?
| LPisGood wrote:
| I don't think that "Sold us down a river" is not an
| appropriate summary of 100 yers of American executive
| governance.
|
| Further, I don't think there is any evidence that they are
| sincerely "trying."
| justanotheratom wrote:
| Enjoy your instant HN downvote for any hint of pro-Trump
| sentiment.
|
| To support your statement, there was insanely unnecessary
| spending in last 4 years, raising the debt to unsustainable
| levels. And yes, Scott Bessent has clearly articulated what
| they are tying to do to improve the situation - agree with
| them or not.
|
| 2016: $19.57 trillion 2017: $20.24 trillion 2018: $21.52
| trillion 2019: $22.72 trillion 2020: $27.75 trillion
| (COVID-19 pandemic, CARES Act, and other stimulus) 2021:
| $28.43 trillion 2022: $30.93 trillion 2023: $33.17 trillion
| 2024: $35.46 trillion (as of October 2024)
| alabastervlog wrote:
| We were probably doomed to see a major public debt crisis
| eventually when we cut taxes going into two extremely-
| expensive long wars under W Bush, the "probably" was
| upgraded to an "almost certainly" when we cut taxes again
| under Trump, then Covid happening removed the "almost"
| from that.
|
| Now we appear to be trying to move the timing of the
| crisis from 20+ years out, to less than a decade out.
| pooty wrote:
| Pity hn has become a redditesque echo chamber of late. More
| than 50% voted for him and support him, though anyone on hn
| saying so gets banned.
| alabastervlog wrote:
| Fewer than 50% of people who voted, voted for him. He won
| a plurality, not a majority. (Of course fewer than 50% of
| eligible voters voted for him, but I'm assuming that's
| not what you intended)
| LPisGood wrote:
| Less than 50% of the vote went to Trump, and you'll find
| that he did very poorly among the well educated.
|
| This is the first I've heard of any banning, but the
| facts are clear and frankly it makes sense that an echo
| chamber opposed to the president's policies forms
| wherever well reasoned discussion happens among educated
| people.
| watwut wrote:
| Not true, I was saying conservatives in general wanted
| this and support this and no one banned me.
|
| Some tho tried to argue with me, trying to make them
| sound innocent
| starik36 wrote:
| This too I've heard forever. Usually it's voiced by
| alternating view points depending on if their guy is the
| occupant of the White House or not.
| LPisGood wrote:
| I sincerely question what you might mean by "heard forever"
| - much of what is being done here is so far beyond the pale
| of what has been done before that I can't seriously
| understand how someone could look at it and say "ah this is
| the same as it's always been, just standard partisan
| bickering"
| latency-guy2 wrote:
| If you sincerely question, then it should be easy for you
| to provide samples of what is "beyond the pale". There is
| no need for narrative building either, it serves no
| purpose other than aggravating the other person and
| making them smaller.
| watwut wrote:
| Except this is not true, unless you was reading some really
| weird far right stuff.
| CountSessine wrote:
| I don't know about incompetent - there's plenty of smart
| people around Trump. The big problem seems to be that they
| all kind of disagree with each other and Trump ends up doing
| what the guy who talks to him most recently advises him to
| do.
|
| The current "plan" seems to be to leave behind the largely-
| defunct WTO once and for all and build a selective free-trade
| alliance specifically excluding China, much like GATT was. I
| don't think this would really make the US "richer" (or any
| participant in the alliance) - in fact it would probably make
| us all a bit poorer. But it would make China _much_ poorer
| which at this point is kind of the goal.
|
| https://www.hudsonbaycapital.com/documents/FG/hudsonbay/rese.
| ..
|
| But that's just today. Next week someone else might get
| Trump's ear before he speaks to the press.
| CountSessine wrote:
| For the record, I'm not really sure how I feel about this
| plan. Free trade with China uplifted 700 million people (in
| China) from poverty.
|
| OTOH, if you believe that China is basically Germany circa
| 1938 (and indeed, China in 2025 is the largest and most
| successful fascist state in all of history), then
| kneecapping China's economy makes plenty of strategic
| sense.
|
| But we could always just keep buying Hitler's Volkswagens -
| that's the direction our incentive gradient points in. The
| US doesn't _need_ to be the global police - we could always
| just let China have Taiwan, the Senkakus, the Ryukyus,
| etc...
| LPisGood wrote:
| I think what a lot of people miss when they talk about
| America being the "global police" is that almost always
| the law (so to speak) that the "global police" are
| enforcing is enforcing is the advancement of American
| interests.
| zmmmmm wrote:
| Which "smart" person advised him to calculate tariffs based
| on trade imbalance for each country, including uninhabited
| islands? It's an utterly stupid idea that makes no sense at
| all.
| CountSessine wrote:
| If you read Miran's paper, the point of the tariffs is to
| bring US trade partners to the table to negotiate the
| alliance, so really they could be anything at all. It
| could have been 420% or 31.4159% or whatever, right
| across the board.
|
| But the amounts are actually kind of clever and it
| reflects the fact that there's a more mature understand
| of trade barriers now vs when the WTO was negotiated.
|
| How much do you know about trade barriers? Beyond
| tariffs, they're extraordinarily complicated and rely on
| regulations, trip-wires, and unequal application of
| rules.
|
| Canada has "free trade" with dairy, but only on dairy
| imports up to a point, and after that heavy tariffs
| apply. But no one ever imports enough to incur those
| tariffs, so, that's free-trade, right? But actually, no
| one considers the Canadian dairy market worth the trouble
| without being able to import large amounts of dairy. So
| Canada can legitimately say that the trip-wire isn't
| applied, but it's a long ways from "free trade" because
| large importers are kept out.
|
| China requires that foreign companies must partner with
| local companies to sell into the Chinese market. This
| effectively leads to a lot of technology transfers. It's
| not a tariff, but it's pretty clearly a "trade barrier"
| because companies that want to protect their IP are
| denied access.
|
| In the 80's when US trade reps were negotiating with
| Japanese trade reps, the Americans would try to convince
| the Japanese that free trade was best for Japanese
| consumers. The Japanese reps would just respond, "how
| much do you want us to buy?"
|
| The Japanese really didn't believe in free trade, and
| they were actively manipulating the value of the Yen at
| that point (it would be a few years still before the
| Plaza Accord), so they knew that just lowering tariffs
| wasn't going to make US goods sufficiently more
| competitive in Japan.
|
| What's changed in 35 years is that the US doesn't really
| believe in "free trade" anymore either - not after all of
| the grief the WTO brought. The simple formulas are a no-
| bullshit approach to trade - the same ones that motivated
| those Japanese trade reps.
|
| "I don't care how your trade barriers work - currency
| manipulation, tariffs, excess regulation, unequal rules -
| just fix your sh*t to reduce the trade imbalance."
| LPisGood wrote:
| The thought that there should be bilateral trade balance
| is ridiculous on the face of it. Vietnam and the USA
| _should_ have a trade imbalance.
|
| That's why all this talk of "forcing them to the
| negotiating table" is absurd.
| CountSessine wrote:
| Give up your whole notion of "should". There is no
| "should". The formula is for aligning incentives. It's no
| longer enough for other govts to claim compliance with
| abstract requirements while clandestinely working against
| them - they need to be committed to helping importers
| succeed.
| triceratops wrote:
| > just fix your sh*t to reduce the trade imbalance
|
| But why does each individual country's trade need to be
| perfectly balanced with the US? What are the odds of that
| happening for every single country? What are the odds of
| it working for every possible pair of countries?
| alfiedotwtf wrote:
| There is a surplus trade between the US and Australia
| and, yet our beef industry was called out as being
| imbalanced towards US beef.
|
| ... it was never about imbalances but protectionism and
| racketeering
| CountSessine wrote:
| I agree with you, but I also think you have this idea
| that trade is currently governed by largely linear and
| symmetric rules in Ricardian harmony, and that just isn't
| the case.
|
| Every industrialized exporting country in the world has
| optimized for exporting to the US, and there's plenty of
| govt policy involved. Trade barriers are the norm, not
| the exception. If other countries optimize their trade
| rules, regulations, and money supply to optimize for a
| sizeable trade surplus with the US, they can change their
| policy to reduce the surplus.
| Jimmc414 wrote:
| In the last 35 years, the US dollar has lost 60% of its
| purchasing power.
|
| https://www.bls.gov/cpi/factsheets/purchasing-power-constant...
| paulpauper wrote:
| This would be true if you left your $ in a vault or mattress
| ,which no one does. It also fails to take into account
| utility. How does one put a dollar value on a $10-30 GPT-4
| pro subscription? Where does this fit in the 'dollar losing
| value' paradigm?
| pton_xd wrote:
| Right, a burger and fries is $15 but a ChatGPT pro
| subscription is only $10, life is good!
| alabastervlog wrote:
| 2030: "Well a loaf of bread is $50 but a loaf of mostly-
| sawdust is $10 so we'll sub that in the basket of goods
| as equivalent; the median house is $2m but girlfriend
| chatbots are too cheap to meter. Looks like yet another
| year of low consumer price inflation!"
| pavlov wrote:
| Exactly.
|
| Modest inflation is good because it encourages investment.
|
| Japan suffered fifteen years of deflation starting in the
| early 1990s. It wasn't an economy anyone should envy.
| chrisoverzero wrote:
| > How does one put a dollar value on a $10-30 GPT-4 pro
| subscription?
|
| I'd estimate it at somewhere in the region of $10-$30,
| personally.
| LPisGood wrote:
| How does that compare to other major currencies?
| paulpauper wrote:
| Because this time is always different. There needs to be some
| accountability when pundits are wrong, just like in any other
| profession. I have read this prediction forever too. The dollar
| always has a recurring tendency of surging, typically when
| there is unrest or recession or any other reason, or even no
| reason.
|
| Also, the dollar falling also does not make Americans poorer,
| as the implicit unit of wealth is the US dollar (e.g. the
| Forbes 400 list). Americans measure their net worth in dollar,
| not Euros. This would only matter if traveling oversea and
| purchasing power falls due to falling dollar. Otherwise, it
| does not matter.
| Henchman21 wrote:
| Perhaps you've also followed politics since, oh, about 2016 or
| so?
| zardo wrote:
| This time it isn't we will fail in our efforts to maintain a
| strong dollar. It's, US policy is no longer attempting to
| maintain a strong dollar.
| lossolo wrote:
| You're not alone, someone in ancient Rome probably read a clay
| tablet saying the denarius was doomed. Centuries later, a
| merchant in Spain might've heard whispers about the decline of
| the Spanish real, and a banker in London likely scoffed at
| predictions of the pound's fall from grace. Empires always feel
| eternal, until they're not. History doesn't repeat, but it does
| hum the same tune. Maybe this time isn't different, just...
| next.
| altcognito wrote:
| Everything has been in a headline at some point. Perhaps all
| that experience is hindering your ability to discern what
| really matters. Too much noise from your past.
| deadbabe wrote:
| The era of bitcoin should be coming right
| jsheard wrote:
| Hasn't BTCs value always been strongly correlated with the
| strength of the U.S. economy?
| etaioinshrdlu wrote:
| Why does this really matter so much?
|
| I think what matters more is national wealth, wealth per capita,
| and their growth rates. This is an interesting list:
| https://en.wikipedia.org/wiki/List_of_countries_by_total_wea...
| chomp wrote:
| As it turns out, when every country holds US dollars for use in
| global finance, it makes it very easy for them to park US
| dollars in American financial assets
| kjkjadksj wrote:
| Where else would they park it? The stock market is being
| automatically pumped by 401k auto purchases and similar
| investment strategies that amount to basically a tax with
| lipstick to subsidize the market. I don't think any other
| nation is pumping their own assets to this scale. Maybe china
| but they don't exactly let in outsiders to milk a good cash
| cow I wouldn't think.
| mattmaroon wrote:
| Also, the primacy of the American banking system allows the
| US to use it as a cudgel against foreign countries to make
| them do do all sorts of things. If some other currency is the
| global reserve, we lose a fair bit of soft power.
|
| There are a lot of reasons we like being in the position
| we're in, and I don't think we know how bad losing it will
| be, if we do, but I think it's unlikely to be positive.
| (Clearly our economists have largely agreed or we'd have
| gotten here sooner.)
| aforty wrote:
| It matters because it's the main reason why the US is able to
| borrow money so cheaply and why the US doesn't get a junk bond
| rating.
| etaioinshrdlu wrote:
| I thought the reason we are able to borrow cheaply, and
| ratings, is basically due to credit-worthiness, and not
| dollar as a reserve dominance. After all, during the debt
| ceiling crises, that's when our credit worthiness and ratings
| were downgraded, but it had nothing to do with the actual
| currency.
| dathery wrote:
| Knowing you will get paid back (i.e. credit worthiness) is
| part of it, but another part is that the currency holds its
| value, and the global demand for dollars is an important
| part of that. If the global demand for dollars decreases,
| then borrowing is more expensive because you need to offer
| a higher interest rate to entice people to purchase bonds,
| because they have other more attractive options to
| store/grow their money than US bonds.
|
| One way to think of it is that the US benefits from the
| current world order by essentially taxing the rest of the
| world to pay for its spending by devaluing their currencies
| relative to the dollar.
| selectodude wrote:
| At the end of the day, somebody out there has to have a US
| Dollar and feel comfortable lending it to the US
| Government. The reserve currency status of the dollar means
| more people need it, which means there's more supply of
| dollars to borrow without causing currency collapse.
| bgnn wrote:
| Yes and no. US can just print more dollars and pay its
| debt, which it is doing since Nixon. It doesn't need to
| default on its debt ever, as long as USD is the reserve
| currency. Of course the rate rhis happens is a delicate
| thing. Too quick devaluation would upset the debtors.
| Though they own so much of US debt (like China owns 2
| trillion dollars or sth) that they are incentivizes to play
| along.
| mlinhares wrote:
| It has everything to do with the actual currency, if people
| weren't buying dollars at the rate they do to do commerce
| the US could never run the debt it does, it would have
| crushed any other country.
|
| It also means Americans get to buy stuff from all over the
| world cheaper than anyone else, the moment this goes away
| inflation for imported goods will eat into people's
| salaries, there will be less investment as it will be risky
| to invest in a country in a debt crisis and folks will find
| out what it is like to live in Argentina for the past few
| decades.
|
| The quality of life loss in the country if this happens
| will likely get people to stop talking about the great
| depression.
| dgfitz wrote:
| It doesn't matter, it's just a clickbait headline.
| londons_explore wrote:
| The controller of dollars gets to mint new dollars, making
| existing dollars less valuable.
|
| Other countries who use dollars do not have that privilege.
|
| That is effectively a 2% annual tax on the entire world, paid
| to the controller of the dollar.
| suzzer99 wrote:
| And we're going to blow it all up for no reason.
| mattmaroon wrote:
| The people who are blowing it up are doing it for a reason.
| You can disagree with them (I largely do) but there will
| likely be some upsides. I don't know if they'll be worth
| it, but all the economists said the trade war with China
| was a bad idea in Trump's first term but has come around to
| it by the time Biden got into office.
|
| I wouldn't say I'm optimistic but it's possible it may
| work.
| justin66 wrote:
| > wealth per capita
|
| It matters a lot to those of us among the capita who hold our
| wealth in US dollars.
| Osyris wrote:
| Ezra Klein had an interesting interview[1] with Kenneth Rogoff
| (the author) about this topic recently. It's worth a listen.
|
| 1. https://www.nytimes.com/2025/05/02/opinion/ezra-klein-
| podcas...
| mgaunard wrote:
| Crypto is the new dollar, and it is very dollar-centric.
| ldjkfkdsjnv wrote:
| I'm actually converting to believing in bitcoin, and that usa
| politicians/financiers have used the dollar as a way to side step
| wide ranging problems in the USA, at the expense of currency
| devaluation. Bitcoin is a backstop, a way to step outside
| manipulated currency.
| snozolli wrote:
| _Bitcoin is a backstop, a way to step outside manipulated
| currency._
|
| This seems like a phenomenally ironic claim to me. You're
| giving up government manipulation in favor of rampant
| individual manipulation and theft.
| idiotsecant wrote:
| How are we supporting or encouraging theft? When the state
| increases inflation and the supply of money on a whim, they
| directly steal value from the little people and funnel it to
| the big people.
|
| That's not possible with crypto.
| tcbawo wrote:
| People frequently lose a significant amount of money due to
| hacking, fraud, or extortion with no legal recourse. This
| is not where you want your grandparents parking their
| life's savings.
| idiotsecant wrote:
| If someone said literally the same thing op said, but
| about cash, would you have the same response?
| twothreeone wrote:
| That's just ignorance. In crypto "little people" is
| literally everybody, the "currency" is run by a handful of
| whales (largely quasi-criminal exchanges and casino
| mobsters), who have a track record of colluding to
| manipulate the market and hike up fees. And no, you cannot
| vote those people out of office. How is that _any_ better?
| fzeroracer wrote:
| Crypto just has pump and dump schemes on a practically
| regular basis, but I guess that's completely different
| because the way it funnels value is slightly different.
| idiotsecant wrote:
| It drives me nuts how many people support crypto for the right
| reason, and then miss the last step and support Bitcoin instead
| of Ethereum. Bitcoin is an enormous resource sink, on the scale
| of fiat system inflation. It doesn't have to be! The system
| works without it!
| silisili wrote:
| Bitcoin is not treated like a currency anymore, given recent
| trends. It's acted upon more like an equity. In short, it's
| seemed to tend to follow the stock market. Whatever that means
| to you, YMMV.
| jedberg wrote:
| Just remember, the same things that make Bitcoin attractive are
| what make it really easy to steal. Namely that it has no "men
| with guns" to back it up and no government bank to make you
| whole.
| SoftTalker wrote:
| It's also easy to declare it illegal, which will stop it
| being used for anything most people want to use currency for.
| knuckleheads wrote:
| He's been on a bit of a book tour recently and his name kept
| ringing a bell for me dimly every time I saw him pop up, and then
| one day it hit me, Rogoff is the economist who was found to have
| made a serious mistake in their paper about the effect of debts
| levels on GDP growth a decade and a half ago. The paper argued
| that the higher the levels of debt, the more gdp growth slowed
| down and reversed. This paper as used to support a lot of
| austerity policies in response to the GFC in the years following
| 2008. Some, at the time, grad students looked into though and
| found that there were lots of serious mistakes with the paper.
|
| https://en.wikipedia.org/wiki/Growth_in_a_Time_of_Debt
|
| Leaving a comment for others just in case others are experiencing
| that same mis-connect. As far as the article goes, we'll see! I'm
| inclined to think that is true, that the US is retreating from
| the world stage and the dollar will follow, but whether that
| happens now, later or never, I couldn't say. Interesting times!
| derivagral wrote:
| Thanks for the link. My memory from that time had it as
| "merely" excel issues, but as described it is a fair bit worse
| than that.
| doctorpangloss wrote:
| I stopped reading at:
|
| > But then President Richard Nixon decided, in 1971, that we
| weren't going to [give you gold for dollars on demand] anymore.
|
| It wasn't a political decision to end Bretton Woods. Nixon had
| no choice, there was no agency, nobody decided. Gold standard
| will never come back. Bretton Woods was a flawed system, and
| one of its fatal flaws occurred. If we ever came back to
| Bretton Woods, it would blow up again. It doesn't work.
|
| But governments do have the greatest power to create and
| destroy wealth! It is political. So it's so unfortunate that he
| chooses to make this point about Bretton Woods, where he's
| wrong, as opposed to say tariffs, where he'd be right.
| orwin wrote:
| And a forceful theter to gold for all major currencies/US
| partners would have just ended up in a state like the long
| depression of the 19th century, which would have probably
| killed the western block, so really the only choice was to
| let all money float.
| everybodyknows wrote:
| Thanks -- thus quote seems on the mark:
|
| > Economics professor L. Randall Wray criticized Reinhart and
| Rogoff for combining data "across centuries, exchange rate
| regimes, public and private debt, and debt denominated in
| foreign currency as well as domestic currency," in addition to
| "statistical errors," and for lacking a "theory of sovereign
| currency".
| nickff wrote:
| To be clear, the error caused a 'kink' in the graph which made
| it look like there was a 'tipping point' at a 90% debt-GDP
| ratio. Correcting this error did not change the overall result,
| which is that a 'high' debt/GDP ratio caused reduced growth.
| janalsncm wrote:
| Given that it doesn't change the overall result, is it really
| a "serious" error?
| mathfailure wrote:
| Yes.
| donmcronald wrote:
| > I'm inclined to think that is true, that the US is retreating
| from the world stage and the dollar will follow, but whether
| that happens now, later or never, I couldn't say.
|
| I don't understand why or how that would be a goal. Doesn't the
| US get / consume something like 25% of the world's production
| while having about 5% of the population? If they're consuming
| 5x their share, the bottom is way, way further down than anyone
| can fathom, isn't it?
| alfiedotwtf wrote:
| America is literally following Trump into isolation. Why
| trade using a reclusive countries currency? Would you expect
| Finland to do international trade using North Korean WON?
| mystified5016 wrote:
| Most of us don't really understand why, but that is
| apparently the goal of this administration.
|
| I'm honestly not sure there's any grand design or even
| inkling of a plan. It's happening and we have to deal with
| the consequences
| pylua wrote:
| Isn't the dollar dominance a bit of a blessing and a curse? Labor
| rate in U.S. is very high compared to other countries.
|
| It inevitably brings us many benefits, but it does feel like the
| U.S. and other western countries are being hollowed out.
|
| Maybe this is more of cost disease than dollar dominance. Maybe
| they are related in some ways?
| six_four_eight wrote:
| my understanding is that yes it is, you cant make shoes in the
| US, but the power that comes from pretty much all finance
| flowing through the American pipes is a good trade off.
| Xenoamorphous wrote:
| > my understanding is that yes it is, you cant make shoes in
| the US
|
| I love my US made RedWings and Aldens, just not cheap. :)
|
| (and I'm not American)
| alabastervlog wrote:
| Red wings and Rancourt & Company, here, plus Mexican and
| Spanish manufacturers (most search engines are terrible at
| surfacing these, you need to specify the country to find
| them) when I can't find what I want in my price bracket in
| the US. Alden's a bit rich for my blood.
|
| Frankly, sneaker prices are getting so damn high that for
| the last couple years "expensive" leather shoes and boots
| from manufacturers that have resisted big price hikes have
| been looking more and more like a bargain...
| tartoran wrote:
| Good quality comes with a price tag.
| fatbird wrote:
| The USD as the world's reserve currency means, effectively,
| that other nations are lending the US money at the very low
| interest rates that Treasuries yield. Effectively, the US
| gets the best and biggest line of credit in the world, with
| which it had (until now) financed the most incredible
| expansion of industrial, financial and academic prowess the
| world has ever seen.
| maest wrote:
| > are being hollowed out.
|
| What does this mean?
| pylua wrote:
| Rust belt. Many places where opportunity had dried up. Not
| just the north east, but even Tennessee. It's low wage jobs
| or selling drugs, or both.
| viraptor wrote:
| That's mixing up dominance with high value. In theory there
| could be a world with a lower value dollar that's still stable
| and used for international trade.
| CountSessine wrote:
| Yes, this is the Triffin Trap or the Triffin Dilemma
|
| https://en.wikipedia.org/wiki/Triffin_dilemma
| chatmasta wrote:
| It seems both backwards and perfectly sensible that the
| country with the biggest debts is also the country with the
| biggest stick. It's backwards because it seems
| counterintuitive to any mafia-style arrangement where the guy
| with the big stick is collecting the money. But it's sensible
| because the safest debtor is one that won't default, and why
| would the country with the biggest stick ever want to
| default?
|
| It's almost like some twisted version of Mutually Assured
| Destruction mixed with economics and realpolitik. As long as
| you don't try to collect your money, it's safe and profitable
| to lend me more of it. Because of the implication...
| jackconsidine wrote:
| > Treasury Secretary John Connally to meet with these leaders in
| Rome. They asked, "What do we do? Now that you're not on gold,
| you can just inflate this stuff, and we're stuck with it." And
| Connally replied, "Well, it's our dollar, but it's your problem."
|
| Unrelated but this is John Connaly who was governor of Texas
| during the JFK assassination. One of the bullets -- possibly the
| one that killed Kennedy -- went through Connaly's wrist & ribs
| greenavocado wrote:
| Shortly after JFK: https://wtfhappenedin1971.com
| gscott wrote:
| If I am China I lend you money I would like get paid back in
| dollars because I can already print as many Yuan as a I want.
| Why should I lend to you in a currency I can turn the printing
| press on for. So it feels like the Dollar will be around for
| awhile as long as it is accepted, convertible, and the
| Government tries to slow down the printing press themselves.
| alfiedotwtf wrote:
| You know... there are other alternatives to the Yuan, but
| your response makes it sound like USD is the only choice
| walterbell wrote:
| Interview did not cover eurodollars and potential successor,
| stablecoins.
|
| https://www.brookings.edu/articles/stablecoins-and-national-...
|
| _> Stablecoins are in some respects similar to Eurodollars, a
| financial innovation that helped to create the financial plumbing
| used to implement sanctions. Both stablecoins and Eurodollars are
| U.S. dollar-based liabilities that had their origins outside the
| regulated banking system. U.S. policymakers initially paid little
| attention to Eurodollars because the market was small. But it
| quickly grew, and--luckily for policymakers--Eurodollars
| ultimately helped cement the international role of the dollar. It
| is the global dominance of the dollar, coupled with the role of
| U.S. banks in facilitating dollar payments, that gives the U.S.
| its tremendous financial leverage._
| imgabe wrote:
| Anything might be happening. Does anyone ever collect statements
| like this and see if they turn out to be true or not? Predictions
| like this show up in the news all the time and they're pretty
| meaningless. They just slide out of public consciousness in a few
| days and nobody ever knows if they were right or wrong.
| dukeofdoom wrote:
| Can capitalism buy it's own goods it produces without inflation?
| I heard someone claim that the only way the system balances is by
| printing money. Workers are paid less than the value they
| produce, and they're most of the consumers. So governments
| encourages workers to borrow money from banks (home loans, car
| loans, credit cards, and so on) to buy the goods they produce.
| But in the end the government still needs to purchase the excess
| through deficit spending. Like we saw for example during covid.
| In Canada government doubled its debt. To keep things from
| falling apart. And inflation is the only way they made it go on.
| But it's not sustainable, because now good chunk of taxes go to
| paying previous government's debt, and citizens get less services
| in return for more taxes. Clearly this loop is not sustainable
| too many times.
| alphazard wrote:
| > It will still be first in global finance, because nothing is
| poised to fully replace it.
|
| There are many countries with their own currencies, and all it
| takes is one of them to back it with gold, or a basket of
| commodities, and create infrastructure around it, and now there
| is something more attractive than the dollar to denominate debts
| in. That's all it takes. Everyone just wants to conduct business,
| get paid, buy food, etc. If the dollar is inflating away 10%
| every year, and there's something that fluctuates less than that,
| it's not exactly a hard choice. Especially if the choice is just
| a drop down in an app.
|
| What may be more concerning, is it's not going to be a western
| democracy that sets up a stable-coin backed by commodities. They
| move too slowly, it's going to be an authoritarian regime that
| can move fast and wants to advance it's significance in the
| global economy.
| fatbird wrote:
| The backing the US dollar has is the strength of the world's
| only superpower. It doesn't matter if it's backed by gold or
| commodities, what matters is whether people believe there's an
| entity backstopping the currency that can guarantee its
| stability. That means an entity strong enough to be fully
| independent, and governed by the rule of law, so that if you're
| holding a bunch of that currency you can be confident it'll be
| worth as much tomorrow as it is today.
|
| It doesn't matter if Russia or China peg their currencies to
| gold reserves, no one trusts them keep the currency market-
| stable, because they're autocracies. And if Canada pegged its
| currency to gold or commodities, it wouldn't matter because
| it's not strong enough to maintain its independence by force,
| if it came to war.
|
| The EU and the Euro _might_ be a replacement for USD in terms
| of a currency backed by a big enough, stable enough entity to
| make it that trustworthy, but that 's a long way in the future.
| Though, as US Treasuries lose their preferred status, European
| instruments will likely gain from that.
| dgfitz wrote:
| This is the logical conclusion, the rest of the whole debate
| about US monetary policy today is window dressing.
| watwut wrote:
| > no one trusts them keep the currency market-stable, because
| they're autocracies.
|
| Oh boy, I have some news about US and its trust. China seems
| more trustworthy right now, which is kind of achievement in
| the US side.
|
| USA cant be trusted to ve stable nor to keep its contracts.
| Whether Euro collapses into the same state remains to be
| seen.
| skissane wrote:
| Let's say some random country follows your advice and decides
| to go back to the gold standard - is that going to convince
| people globally to use their currency? Probably not.
|
| Because even if the currency is on the gold standard today,
| what stops the country's government from switching back to fiat
| tomorrow and pocketing all the gold? Or, gradually doing so by
| introducing restrictions on gold redemption and slowly
| tightening them over time?
|
| Whether a currency is fiat or backed, it is ultimately a
| statement that you trust the government which controls the
| currency to take good care of it - and in general, it is easier
| to have that trust with democracies than authoritarian regimes.
| And this is part of the argument for fiat currencies - if trust
| in the institutions ultimately counts for more than what the
| currency is backed by, why do we really need the backing?
|
| Which is why replacing the USD is so hard. I think even if the
| US starts to go really downhill, people will be looking at
| currencies like the EUR, JPY, GBP as an alternative. If the IMF
| allowed private parties to use SDR as a currency - a move the
| US has always blocked as a threat to the USD, but in a global
| crisis the US might feel it has no choice but to change its
| mind - that might become a viable alternative global currency.
| CNY may become important in trade with China and its close
| allies, but who outside of China trusts the Chinese government
| enough to use CNY as a long-term store of value? Only as a
| riskier bet in a diversified portfolio including safer options.
| justanotheratom wrote:
| USD Stablecoins could be driving real demand for USD, no?
|
| "The total transaction volume for USD-pegged stablecoins in 2024
| was approximately $27.6 trillion, based on industry reports from
| CEX.IO and other sources."
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