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.
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!
nickff · 4h ago
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.
ajross · 3h ago
I don't think that's correct. The "overall result" was originally a marked effect, and the one after correction was pretty much noise. Yes, it pointed in the same direction, but without a notable impact.
It's like trying to convince your parents to let you stay home by faking a temperature on the thermometer, then when caught repeating the measurement and shouting about how it actually shows 98.9°F and you really do have a fever!
Consensus was and remains that public debt and GDP growth correlate very poorly if at all, and the book that claimed the opposite was simply wrong.
janalsncm · 4h ago
Given that it doesn’t change the overall result, is it really a “serious” error?
alephnerd · 3h ago
Yep. It lead to a decade of austerity measures across the EU, which caused most European nations to fall behind the US, despite being head-on-head economically in 2007.
roughly · 48m ago
Also some fairly direct ties to the rise of right-wing movements and governments in Europe.
pessimizer · 3h ago
It did change the overall result. The claim was that there was a tipping point when government debt went higher than annual GDP that would cause growth to suddenly plunge. Turned out here was no discontinuity, it was almost entirely an artifact of motivated reasoning and their failure to use Excel.
The pretend claim the debt police went with later is that the paper somehow proves debt is inversely related to growth in some way. This is not an interesting claim, and certainly not proved by showing that low-growth countries are often also high-debt countries.
edit: there is absolutely no reason to think that government debt is related to GDP. That's why they resort to making statistical, associative arguments. The balance of payments is the important number, and it's an accounting identity that if holding the balance of trade steady, when government debt goes down, private debt must go up. The only thing you can be sure of when government spending goes down is that systemic investments by governments are being neglected, in favor of individuals borrowing money for personal consumption. Hello Temu.
econ · 1h ago
Spending is important, GDP is a nothing burger and national debt means the country was captured by bankers.
I like how Richard Wolff put it: There is a reason business school and economics aren't in the same building.
But people are deeply invested in these ideas and would rather die than correct the mistakes.
The only thing I admire in Trump is his ability to change his mind. Maybe he can beach the ship before it sinks. I hope there is something to eat on the island. That would at least make the infighting worth it.
mathfailure · 3h ago
Yes.
donmcronald · 4h ago
> 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?
coldtea · 2h ago
Speaking for the global community, so they can consume a fairer share, instead the 5% consuming 25% of the world's production? It's not just the US itself that sets goals about dollar's use as global reserve.
datavirtue · 58m ago
My bottom would be Americans consuming 4x their share. You don't have to get to zero or even close to reach a "really shitty for me" outcome.
pessimizer · 3h ago
> Doesn't the US get / consume something like 25% of the world's production while having about 5% of the population?
It did this by running up an impossibly massive trade debt since Reagan. This is not something that can be done endlessly, unless you're going to "start" invading other countries for resources.
PaulDavisThe1st · 3h ago
It is far, far from impossibly massive. It is, for example, entirely comparable to a typical mortgage:income debt ratio. It is lower than the debt:GDP ratio of several other countries (including Japan in the recent past) that did not fail as a result.
It also can't be done (in the sense of grown) endlessly if the only tools brought to bear upon it are the ones of heterodox economics and the historical policies of the two major US parties. You don't, however, need to invade other countries. You can take the sort of approach MMT advocates, for example.
mystified5016 · 3h ago
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
alwillis · 2h ago
It's called The Mar-a-Lago Accord. When you google it, this is the summary:
The "Mar-a-Lago Accord" is a proposed economic strategy, often discussed in financial circles, suggesting a coordinated effort to devalue the US dollar and reduce the country's trade deficit. Essentially, it envisions a deal where the US would pressure its trading partners to weaken the dollar and lower US borrowing costs, potentially in exchange for continued US security guarantees. The idea is rooted in the 1985 Plaza Accord, where major economies agreed to jointly weaken the dollar, but with some key differences.
wahern · 2h ago
> weaken the dollar and lower US borrowing costs
I found this confusing as weakening the dollar and lowering borrowing costs would seem to be at odds. Apparently the "deal" involves central banks which hold US Treasuries swapping some large share of them for near-zero interest ultra-long Treasury bonds (50-100 years), to prevent yields on typical Treasury bonds spiking when rolling over debt. See https://www.cfr.org/article/mar-lago-accord-not-recipe-succe...
I'm still not sure how that's supposed to work to actually lower borrowing costs rather than blunt the increase. Maybe it's like the Laffer Curve where they rely on some very specific hypothetical conditions to make the numbers work?
slt2021 · 21m ago
China calls 100 year zero coupon bonds basically Technical Default on foreign debt, and rejected it.
If you think about, it really is a default, because US borrowers are being forced to exchange their cash into trust-me-bro letters.
Technically USD has been a trust me bro paper ever since Bretton Woods, but today the trust in the system is really at very low level, unlike before
alfiedotwtf · 3h ago
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?
No comments yet
nimish · 1h ago
Yep. Trusting a guy who made a rookie excel error is not something I think we should continue to do.
Especially when the consequences downstream of that error were so stark in terms of policy.
everybodyknows · 4h ago
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".
derivagral · 5h ago
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.
JCattheATM · 3h ago
Of course it is. The current administration is eradication all the soft power the US built up since WW2 under the mistaken belief they can go back to how things were in the 1950s, instead they're going to make things so much worse for themselves and the very smart big beautiful high IQ people who voted them in.
slt2021 · 1h ago
Americans must pay the consequences for electing the people they did and for having the duopoly political system with gatekeeping that filters out the worst kind of people, and for having politicians being for sale to the special interests group like the street walkers they are
EnPissant · 2h ago
Assuming this system is stable forever is just as unrealistic as trying to rewind history.
Osyris · 5h ago
Ezra Klein had an interesting interview[1] with Kenneth Rogoff
(the author) about this topic recently. It's worth a listen.
I watched it and I found him less convincing than Dalio's Principles of a changing world order, which I found to be extremely intuitive although not at all rigorous.
Ezra gave Rogoff a lot of push back and Rogoff came off as a guy who intuitively understands things but doesn't rigorously understand them so he looked kind of foolish multiple times. Rhetorically he was poor and if I hadn't already gone in agreeing with his general consensus, I would probably have been left fairly unconvinced. Of course, the curse of knowing a lot is that your knowledge of what you don't know is much larger than other people's knowledge so it's harder to confidently present things because you can think of exceptions or why they might not be true or how things could be much worse or much better than what seems most likely.
adamwk · 3h ago
Agreed, I left the episode thinking I didn’t take the right college courses to understand it. There were a lot of “proof is trivial” or “draw the rest of the owl” types of explanations
> 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
gscott · 4h ago
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.
mitthrowaway2 · 2h ago
Why would that be any better or worse than being paid back in paper that your counterpart can print with their own printing press?
alfiedotwtf · 3h ago
You know… there are other alternatives to the Yuan, but your response makes it sound like USD is the only choice
It was the end of the bretton woods system/the gold backed US dollar.
The major consequences are inflation, which devalues savings and transfers the buying power lost from devalued savings to those who own assets, and removing the consequences of poor policy, letting the market remain more irrational and letting corruption fester longer before reality asserts itself.
Because the relationship between money and value are severed, it allows for wage stagnation and real economic production to stagnate while paper power and paper growth are allowed to metastasize because the supply of money can always be expanded rather than having to deal with the reality of potentially not being able to import things that fuel the engine of your economy.
Instead of only listing the disadvantages, could you list the advantages of decoupling the money supply from how quickly we can dig yellow rocks out of the ground?
There are quite a few of them, and you've conspicuously omitted them.
It's a bit like issuing a scathing review of the automobile by listing all the disadvantages of diesel engines compared to horses.
hayst4ck · 3h ago
Yeah I could see why you would say that. I linked the article to exorbitant privilege which states some of those advantages.
If you are responsible with your levels of corruption, then fiat currency is generally very beneficial. So it ends up being like a drug. Appropriate amounts can improve your life, but abuse, which the drug will promote, can destroy it.
It's a form of power, and if you can use it responsibly it's good, and if you abuse it it's bad.
Rampant shortermism promoted by shareholder supremacy especially when compounded by government funded bailouts really amplifies our ability to damage our future with our monetary system.
If you can think in the long term then it's very net beneficial, but if you allow short term interests to dominate... the hangover will be devastating.
Thinking about it more, lack of inflation makes savings valuable and potentially implies deflation where saving/not spending money gives you more buying power than investing it. This takes money out of the market and reduces "dollar velocity"/the sum total of market activity which can devastate your economy.
hayst4ck · 1h ago
The elephant in the room is that rich people need to be taxed and their wealth redistributed.
If that happens, then there is a mechanism that prevents systems of compounding power, and the wages "stolen" by inflation are put back into the economy rather than becoming part of someone's hoard. If wealth is redistributed then that allows for monetary inflation without changing power relationships.
If that does not happen, then power compounds and those with power will enact systems that benefit themselves since they will never have to experience the long term consequences of their looting of tomorrow for today. The poor will continue to get poorer and the rich will get richer, until the rich have so much power and poor have so little power, that law, the prevention of arbitrary exercises of power by the powerful, becomes meaningless and the rich will take what they wish unopposed. Some people will get so powerful that when a government says "you can't fish all the fish in the sea because we need to have fish next year" they pay enough money to replace that government's politicians with politicians that say you can, then next year there are no more fish left to fish.
Money is a note that denotes buying power, but that note is meaningful because there is a law that says it is meaningful and people with guns enforce that it is meaningful. So if people get powerful enough to subordinate people with guns it means that power is more effective at acquiring resources than money since someone with power can just take what they want without consequence.
So inflationary monetary policy is good because it means more money is active in the economy, but inflationary policy is bad because it also concentrates money/power and you must have a system to prevent the power concentration that inflation causes by default if you want the system to remain coherent.
greenavocado · 1h ago
That sounds nice in theory but the practical reality is that this so-called redistributed wealth is funneled back to "the people" through corrupt departments and NGOs because a corrupt system will stop at nothing to perpetuate the production through whatever mechanisms available. The only way this can be stopped is with a moralistic social movement.
hayst4ck · 1h ago
I don't follow what you're saying.
If you're saying that people must empower themselves (by unionizing or the like) first because redistribution must follow power rather than power following redistribution, then I agree. If you're saying something else then I don't understand.
pylua · 5h ago
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?
CountSessine · 4h ago
Yes, this is the Triffin Trap or the Triffin Dilemma
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…
six_four_eight · 5h ago
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 · 4h ago
> 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 · 4h ago
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 · 4h ago
Good quality comes with a price tag.
fatbird · 3h ago
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 · 4h ago
> are being hollowed out.
What does this mean?
pylua · 4h ago
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 · 4h ago
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.
hayst4ck · 3h ago
The liberation day tariffs were definitely something. The tariff numbers themselves were chosen explicitly in reference to trade deficits. Trade deficits are an exact measurement of the strength of the US dollar as a reserve currency.
Reducing trade deficits to zero is exactly ending the dollar as a reserve currency since it implies that no country has dollars in reserve. There is a stated a goal of this ruling regime to return to the gold standard.
So who was being liberated? From what I could tell it was authoritarian countries from the consequences of the sanctions framework provided by SWIFT and trade predominately occurring via the dollar. Rogoff explicitly states that the dollar as reserve currency has incredible intelligence value and allowed for us to impose sanctions on other countries.
The number of ways to interpret liberation day in a dystopian way are large, and I can't really think of any American entity that directly benefits from liberation day "liberation" except potentially unskilled American labor who might be free to work sweatshop jobs that get re-homed, if they aren't automated or don't just disappear entirely.
No comments yet
alphazard · 4h ago
> 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.
skissane · 3h ago
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.
fatbird · 3h ago
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.
SturgeonsLaw · 3h ago
So if the USA was to lose its status as the world's only superpower, or if the world loses faith in its ability to back the dollar, or if the world is unconvinced that the US is governed by the rule of law, then that wouldn't bode well for the US dollar's position as the world's reserve currency, right?
Kon-Peki · 2h ago
Presumably, for the dollar to be the world’s reserve currency the world needs to have sufficient excess reserves to be able to buy lots of US Treasuries.
If there were some event or events that causes a dramatic contraction in world trade and set off financial crises around the world, many countries may be unable to buy treasuries in the same quantity.
A potentially scary thought exercise may be to figure out what the collective reduction in treasury purchases needs to be before it all blows up. I have no clue what that number may be.
But I have a feeling that if the dollar ceases to be the reserve currency, it will not be because the world has decided on something else.
fatbird · 1h ago
Your second and third options, absolutely. For the first, it's a matter of whether the sovereignty of US could be credibly threatened militarily, which would is hard to imagine without a long, long fall in its military power. It's not the superpower status, it's the absence of credible military threat against it. Canada or Mexico (or Finland, or Vietnam or North Korea) can't guarantee the absence of instability by their military heft alone.
dgfitz · 2h ago
I posit that if the US loses their status as the dominant superpower, WWIII will swiftly follow.
alphazard · 3h ago
> 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.
Commodity backing is a mechanism by which a country can ensure the stability of its currency across different political administrations. It's a kind of social technology like a constitution or super-majority requirement that creates stability. It's a plus that the US is stable power, but you can bet that the dollar will inflate year over year. That is its own form of instability.
throw0101d · 1h ago
> Commodity backing is a mechanism by which a country can ensure the stability of its currency across different political administrations.
Historical data contradicts the idea that you get stability on the gold standard:
> 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.
dgfitz · 3h ago
This is the logical conclusion, the rest of the whole debate about US monetary policy today is window dressing.
treebeard901 · 2h ago
At the end of the day, youre just moving an amount from one ledger to another. Its all digital now too. A reserve currency was always a technological issue. SWIFT is largely just FTP servers.
The fall back for a long time was that half of the problem was exchanging money between two countries, and then shipping the goods relied on a strong blue water navy.
The U.S. doesnt have the lead it used to in either area.
Sanctions didnt help either.
Another issue is the ongoing attacks on the rule of law and the courts. There was a reason why Russians kept so much money in British banks, it was the trust in the institutions that caused the inflow.
Its like a perfect storm to destroy your currency credibility.
siavosh · 3h ago
I only learned this recently but Stephen Miran, President Trump’s chairman of the Council of Economic Advisors, in 2024 basically laid out the plan to de-value the USD and to encourage foreign nations to move to more diverse basket of currencies all while trying to balance the transition and mostly maintain the geopolitical power of remaining the reserve currency. Who know how it will play.
One can certainly debate if it's a good strategy, but I'd highly recommend that everyone read this paper. A particular part that's surprising is that the headlines are constantly ~"US unable to stop decline of dollar" when according to this paper a weaker dollar is an explicit goal.
Though BRICS may seem insignificant atm, it is off to an impressive start.
Could the world have two competing currencies? Possibly.
But the one way to guarantee that adversaries (I don't care who your adversaries are, I'm using that as a non-denominational term) don't get the upper hand, is to use a currency they can't control or manipulate.
ATM the US dollar, can be manipulated by the Fed, but also by the collaboration of other countries, and holders of debt, as recently shown by the US bond activity.
I know many on HN are going to hate to hear this, but a single, global, trust-less currency cannot be manipulated against any single group. So bitcoin may just be the answer here.
throw0101d · 1h ago
> Though BRICS may seem insignificant atm, it is off to an impressive start.
A semi-joke-y take on BRICS:
> Pretty straightforward really. You combine Brazil's history of monetary stability, with Russia's respect for property rights, India's domestic tranquility, China's financial transparency, and South Africa's investment opportunities - and hey presto, you've got a new global money
Of course more countries may enrol in the system, but that dilutes the influence of the five namesake nations of BRICS. But then you have to choose an actual currency(s), so you will they trust to be stable? Or perhaps go with a 'theoretical' currency likes Keynes' bancor?
jdmoreira · 3h ago
Bitcoin is so concentrated in the hands of so few that its probably the simplest thing in the world to be manipulated
the_real_cher · 5h ago
what's going to replace it?
throwaway920102 · 5h ago
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 · 4h ago
This, incidentally, is exactly how the value of the Singapore dollar is managed.
mig1 · 5h ago
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 · 5h ago
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
zmmmmm · 4h ago
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.
slt2021 · 5h ago
national currencies of other countries, which are backed by gold and their national reserves.
api · 5h ago
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 · 5h ago
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 · 5h ago
China is a major importer.Isnt 3 trillion dollars a year in imports "major" to you ?
selectodude · 4h ago
China pays for their imports using dollars.
gtirloni · 4h ago
It's a much much big exporter.
triceratops · 4h ago
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 · 4h ago
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.
triceratops · 1h ago
So there's still an intermediate currency needed. Which is how it works right now. And the preferred intermediate currency when trading currencies with non-liquid markets is USD.[1]
It might be how it’s done now but I don’t see why that’s how it has to be done. It’s just math and database transactions. Not having a fixed intermediate does make things more complicated since it requires many-party transactions between floating currencies. But lots of math nerds with backgrounds in physics go into finance. I’m sure they can figure it out.
You could also create derivative instruments based on baskets of currencies and use those as intermediates.
pphysch · 5h ago
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?
paulpauper · 5h ago
Nothing. Even the price of bitcoin is measured in dollars.
averageRoyalty · 3h ago
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.
pram · 2h ago
This is pretty rich considering the volume of Tether, USDC, etc. For whom? I'd say: the exchanges themselves, casinos, a litany of other things
pedalpete · 3h ago
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.
lxgr · 46m ago
> What does it take to go from bitcoin being measured in US dollars to US dollars being measured in bitcoin.
Just for Bitcoin to no longer be deflationary. Right now it's much too good a store of value to become an effective medium of exchange.
arghwhat · 5h ago
Hummus.
the_real_cher · 1h ago
Mmmm delicious currency
has my vote
triceratops · 4h ago
Arguably more useful than gold. But unfortunately perishable.
No comments yet
dukeofdoom · 4h ago
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.
pessimizer · 3h ago
The government is not borrowing foreign currencies to buy an oversupply of domestically produced goods.
I think your model depends on "workers" being the only people who are taxed, so if workers are being paid less than the cost of the goods they have to consume, the government + workers must be running at a constant deficit.
But you also tax employers and owners.
Inflation is a tool intentionally used by governments to quickly lower wage costs across the board. People at the bottom end can be subsidized, and productive people whose nominal worth just went up with inflation will negotiate for higher pay. Everybody else gets a pay cut.
imgabe · 5h ago
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.
No comments yet
starik36 · 5h ago
I've been reading this news headline since I was a teenager. I am over 50 now. Why is this time different?
LPisGood · 5h ago
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.
Hilift · 3h ago
The FDR administration two of the Treasury architects of Bretton Woods were Russian agents. One of them, FDR's chief economist, had his US passport and US citizenship revoked. He lived the remainder of his life in Columbia, presumably helping with their "monetary policy success".
Don't forget Nixon shock though. That was basically undoing Bretton Woods, but in an incompetent fashion that was amplified by low interest rate induced inflation, and produced "stagflation". https://en.wikipedia.org/wiki/Nixon_shock
The smartest guy we had was probably Lawrence Summers.
starik36 · 4h ago
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 · 4h ago
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 · 3h ago
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.
LPisGood · 3h ago
I think the “narrative building” is important here, since I am responding to an in-construction narrative.
Frankly I really struggle to see how someone who has been reasonably paying attention would need examples; they’re too many to mention.
Off the top of my head and in no particular order:
1.) Unilaterally and without the consent of congress invoking emergency powers to place broad tariffs on almost the entire world has never been done
2.) Frequently attacking and undermining the judicial branch, including by transparently punishing entire law firms that represent causes unpopular with the administration has never been done
3.) Brazenly abusing the office of the presidency to further personal financial gain by launching a meme cryptocurrency days before taking office has never been done
These are just some of the many examples, and that’s without going into the many things before Jan 20, 2025 that are clearly and undoubtedly unprecedented.
watwut · 3h ago
Except this is not true, unless you was reading some really weird far right stuff.
CountSessine · 4h ago
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.
But that's just today. Next week someone else might get Trump's ear before he speaks to the press.
zmmmmm · 4h ago
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 · 4h ago
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."
triceratops · 3h ago
> 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?
CountSessine · 3h ago
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.
triceratops · 1h ago
> I also think you have this idea that trade is currently governed by largely linear and symmetric rules
I didn't think that. Every country has tariffs and trade barriers to protect the industries they want to grow or protect. Even the US. Even before this administration or the last one, or the one before that. Sugar, for example.
> Every industrialized exporting country in the world has optimized for exporting to the US
Or maybe, more accurately, to earn US dollars. Possibly because of petroleum, which every country needs? I don't really know, I'm not an expert.
LPisGood · 3h ago
The word “optimize” is being used a lot here, and I think it’s covering up the clear lack of a plan.
The USA exports plenty of goods, and in cases where there are these nebulous “trade barriers” being imposed, they should be investigated, discovered, publicized, and negotiated. That work was clearly not done here.
alfiedotwtf · 3h ago
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 · 3h ago
Read the Miran paper. It’s not about imbalances. It’s about negotiating leverage. Australia in particular is going to be the most interesting case in the world.
Strategically, Australia is more sympathetic to the US, but your trade with China is many multiples of your trade with the US. If you join the US you’ll have to raise tariffs against China and if you don’t you’ll naturally fall into China's orbit. Interesting times!
this_user · 3h ago
Negotiate about what? There isn't even a clear ask from the US side when they base everything on trade imbalances. Attempting to bring those to zero makes no sense and would do more harm than good. A country like Vietnam is not able to able enough expensive US goods to offset their exports to the US. Trying to squeeze these countries serves no purpose, and the absolute trade volumes with a lot of the smaller countries are so small that it's not even worth putting in the effort to attempt to negotiate anything.
So, what do they want? It is pretty clear by now that they don't even know. They started a massive trade war without a clear plan or way out, and now they are progressively walking it back and attempting to negotiate some quick, face saving deals like the UK one that barely does anything.
And if they really are worried about China, then they need allies to be able to isolate the Chinese and put enough pressure on them. Except, they have just alienated everyone who could have helped with that.
These are not the actions of some master strategist, but of someone who is in way over his head.
LPisGood · 3h ago
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 · 3h ago
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.
LPisGood · 3h ago
There is absolutely a “should.”
The only world where USA has a trade balance with Vietnam is one where USA isn’t importing as much as they “should” from Vietnam.
alfiedotwtf · 3h ago
Why did he tare up his own trade agreements that he signed himself during his first term?
CountSessine · 3h ago
Because Trump himself isn’t really that smart?
Like I said, he takes the advice of the last person who talks to him. He’s very suggestible. The best parts of his presidency, so far, have been when he follows the plan in project 2025, which you may not agree with, but is at least sane and coherent. The worst bits are when he adlibs, like the stupid tariff escalation with China.
Ultimately the biggest problem with Miran’s plan is that now that Trump is tearing up these trade agreements, no one has any reason to believe that the new one is worth the paper it’s printed on. He has no integrity and no one signs agreements with people who have no integrity.
jiggawatts · 3h ago
You're being downvoted because you're repeating trivially disproven, clear nonsense... which is unfortunately the official position of the whitehouse.
> "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."
Except that that is NOT what is going on. Trump has been screaming something to this effect for weeks, but when it comes to actually negotiating something he tells world leaders that the tariffs are there to stay! He just did this with the Japanese PM, mere days ago.
Not to mention that many countries have actual, effective tariffs or "trade barriers" on the order of 1% with the US, which means that he can't possible negotiate anything that will improve things more than that.
Trump has no actual strategy. He can't possibly, because his stated list of goals are mutually incompatible. He also wants to eliminate income tax and pay for this with tariffs! He can't do that and return tariffs to 0% after countries capitulate.
He also keeps talking about bringing manufacturing back to the US (note that it never left, it just got more high-tech), but he's tariffing industrial machinery and robots imported from Germany!
This "policy" makes about as much sense as a first-year student's homework essay thrown together the night before it is due.
Anyone engaging in good faith debates is missing the point entirely. There is nothing of substance to engage with, as multiple world leaders are discovered.
PS: Trump apparently made 200 deals, more than the number of countries in the world, then 17, and now just 1 with the UK, where he reduced tariffs from 1% to 0.8%. Wooo! Winning!
CountSessine · 4h ago
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 · 3h ago
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.
CountSessine · 3h ago
And yet the near-term interest is to keep buying Volkswagens from Hitler.
LPisGood · 3h ago
If Trump’s anti-trade policies were targeted at China and China alone, this analogy would be applicable.
CountSessine · 3h ago
Read Miran’s paper.
LPisGood · 3h ago
I have read it, albeit not every single word.
prpl · 5h ago
The bond market, and blasé attitude towards national debt and default.
Jimmc414 · 5h ago
In the last 35 years, the US dollar has lost 60% of its purchasing power.
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?
chrisoverzero · 4h ago
> 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.
pavlov · 4h ago
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.
pton_xd · 4h ago
Right, a burger and fries is $15 but a ChatGPT pro subscription
is only $10, life is good!
alabastervlog · 4h ago
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!”
XorNot · 3h ago
I don't know why this example gets presented as absurd all the time. Food is a vital good. If you have a population with a certain calorie demand and don't have enough calories, in 3 months you no longer have the population.
Food: you literally die without it.
ChatGPT: nothing of value is lost.
Look at your iPhone and realize that in any desperate situations, the burger and fries gets more and more valuable.
Henchman21 · 5h ago
Perhaps you’ve also followed politics since, oh, about 2016 or so?
zardo · 4h ago
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.
JCattheATM · 3h ago
Because the USA is rapidly losing it's place on the world stage.
api · 5h ago
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 · 5h ago
Great, Europe can use the yuan instead
altcognito · 4h ago
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.
paulpauper · 5h ago
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.
lossolo · 4h ago
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.
deadbabe · 5h ago
The era of bitcoin should be coming right
jsheard · 5h ago
Hasn't BTCs value always been strongly correlated with the strength of the U.S. economy?
ldjkfkdsjnv · 5h ago
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.
jedberg · 4h ago
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 · 4h ago
It's also easy to declare it illegal, which will stop it being used for anything most people want to use currency for.
hn_acc1 · 2h ago
In the world right now, how many transaction per second in $USD are ongoing? 1000? 100,000? Visa can handle 20K/s, IIRC. Bitcoin can handle what, 3-7 per second?? Yeah, that'll scale up to "the world currency".
mmh0000 · 41m ago
There are many reasons to poo-poo on Bitcoin, but, please pick a valid one. The transactions-per-second problem has been solved for over a decade and is widely implmented:
Bitcoin becoming the world reserve currency does not necessarily imply it also becoming the primary payment currency, nor would it somehow imply fully reserved banking.
Satoshi would probably shudder at the thought of Bitcoin-backed fractional reserve currencies, but that's about the only thing he could do about it.
silisili · 5h ago
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.
idiotsecant · 5h ago
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!
No comments yet
snozolli · 5h ago
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 · 5h ago
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 · 4h ago
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 · 4h ago
If someone said literally the same thing op said, but about cash, would you have the same response?
XorNot · 2h ago
My credit card was skimmed and charged $2000 in the US a couple of months ago. I blocked the card from my phone, files a dispute and the charges were reversed.
The most annoying part was updating all my linked services, but I lost no money.
If someone literally robs the bank I have an account with, I also lose no money even if they actually steal some from the physical vault.
twothreeone · 4h ago
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?
hn_acc1 · 2h ago
What is the equivalent website to https://web3isgoinggreat.com for banks, and what is the relative %age lost/stolen on a daily/weekly/monthly basis? I'll bet it's WAY higher for crypto.
fzeroracer · 4h ago
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.
mgaunard · 5h ago
Crypto is the new dollar, and it is very dollar-centric.
No comments yet
justanotheratom · 4h ago
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."
lxgr · 34m ago
Only if the other major world currencies take active (and successful) steps against stablecoins being backed by them.
If they don't, stablecoins would presumably make it even easier to convert holdings into stablecoins backed by another currency (as there is no new account to be opened etc.) as soon as the sentiment on a given world currency shifts.
justanotheratom · 18m ago
According to your argument and the article of this post, there should already be prominent stablecoins backed by other currencies. Yet there is not such thing AFAIK. Reason is simple. USD is the common denominator for people the world over. Almost everyone know what a dollar is, and that is reflected in the dominance of USDT and USDC. And since this is a relatively recent phenomenon, it goes counter to the narrative of the decline of the US Dollar.
crote · 2h ago
No. Stablecoins only exist because fiat <-> crypto trading is a massive pain. Nobody wants to own stablecoins, they want easier transactions. And if the USD becomes less popular, people will switch to, for example, EUR stablecoins - there's nothing special about the dollar here.
On top of that, transaction volume is meaningless. Those $27.6T could be $27.6T held in escrow being traded once, or $1 held in escrow being traded 26.6 trillion times. You can't derive USD demand from transaction volume.
justanotheratom · 2h ago
You can certainly estimate the amound of USD held as StableCoin Collateral:
RE: Nobody wants to own stablecoins, they want easier transactions.
Agree but that does not mean anything. Stablecoins seem to be solving a problem, and there is not evidence of any traction by any currency other than USD.
So this phenomenon definitely runs counter to the conventional intellectual wisdom that USD is in decline.
EnPissant · 2h ago
I thought tax evasion was the use case for stablecoins.
justanotheratom · 2h ago
Tax evasion could certainly be a use case until govt's sort out the implications. But the lasting use case I think is - fast and cheap transfer of money, anywhere.
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 · 5h ago
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.
mlinhares · 4h ago
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.
dathery · 5h ago
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.
bgnn · 4h ago
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.
XorNot · 2h ago
Most US debt is still owned by the US though: 79% is owed to domestic holders[1]
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.
chomp · 5h ago
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
mattmaroon · 5h ago
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.)
kjkjadksj · 5h ago
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.
londons_explore · 5h ago
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 · 5h ago
And we're going to blow it all up for no reason.
mattmaroon · 4h ago
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 · 5h ago
> wealth per capita
It matters a lot to those of us among the capita who hold our wealth in US dollars.
dgfitz · 5h ago
It doesn’t matter, it’s just a clickbait headline.
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!
It's like trying to convince your parents to let you stay home by faking a temperature on the thermometer, then when caught repeating the measurement and shouting about how it actually shows 98.9°F and you really do have a fever!
Consensus was and remains that public debt and GDP growth correlate very poorly if at all, and the book that claimed the opposite was simply wrong.
The pretend claim the debt police went with later is that the paper somehow proves debt is inversely related to growth in some way. This is not an interesting claim, and certainly not proved by showing that low-growth countries are often also high-debt countries.
edit: there is absolutely no reason to think that government debt is related to GDP. That's why they resort to making statistical, associative arguments. The balance of payments is the important number, and it's an accounting identity that if holding the balance of trade steady, when government debt goes down, private debt must go up. The only thing you can be sure of when government spending goes down is that systemic investments by governments are being neglected, in favor of individuals borrowing money for personal consumption. Hello Temu.
I like how Richard Wolff put it: There is a reason business school and economics aren't in the same building.
But people are deeply invested in these ideas and would rather die than correct the mistakes.
The only thing I admire in Trump is his ability to change his mind. Maybe he can beach the ship before it sinks. I hope there is something to eat on the island. That would at least make the infighting worth it.
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?
It did this by running up an impossibly massive trade debt since Reagan. This is not something that can be done endlessly, unless you're going to "start" invading other countries for resources.
It also can't be done (in the sense of grown) endlessly if the only tools brought to bear upon it are the ones of heterodox economics and the historical policies of the two major US parties. You don't, however, need to invade other countries. You can take the sort of approach MMT advocates, for example.
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
The "Mar-a-Lago Accord" is a proposed economic strategy, often discussed in financial circles, suggesting a coordinated effort to devalue the US dollar and reduce the country's trade deficit. Essentially, it envisions a deal where the US would pressure its trading partners to weaken the dollar and lower US borrowing costs, potentially in exchange for continued US security guarantees. The idea is rooted in the 1985 Plaza Accord, where major economies agreed to jointly weaken the dollar, but with some key differences.
I found this confusing as weakening the dollar and lowering borrowing costs would seem to be at odds. Apparently the "deal" involves central banks which hold US Treasuries swapping some large share of them for near-zero interest ultra-long Treasury bonds (50-100 years), to prevent yields on typical Treasury bonds spiking when rolling over debt. See https://www.cfr.org/article/mar-lago-accord-not-recipe-succe...
I'm still not sure how that's supposed to work to actually lower borrowing costs rather than blunt the increase. Maybe it's like the Laffer Curve where they rely on some very specific hypothetical conditions to make the numbers work?
If you think about, it really is a default, because US borrowers are being forced to exchange their cash into trust-me-bro letters.
Technically USD has been a trust me bro paper ever since Bretton Woods, but today the trust in the system is really at very low level, unlike before
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Especially when the consequences downstream of that error were so stark in terms of policy.
> 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".
1. https://www.nytimes.com/2025/05/02/opinion/ezra-klein-podcas...
Ezra gave Rogoff a lot of push back and Rogoff came off as a guy who intuitively understands things but doesn't rigorously understand them so he looked kind of foolish multiple times. Rhetorically he was poor and if I hadn't already gone in agreeing with his general consensus, I would probably have been left fairly unconvinced. Of course, the curse of knowing a lot is that your knowledge of what you don't know is much larger than other people's knowledge so it's harder to confidently present things because you can think of exceptions or why they might not be true or how things could be much worse or much better than what seems most likely.
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
It was the end of the bretton woods system/the gold backed US dollar.
The major consequences are inflation, which devalues savings and transfers the buying power lost from devalued savings to those who own assets, and removing the consequences of poor policy, letting the market remain more irrational and letting corruption fester longer before reality asserts itself.
Because the relationship between money and value are severed, it allows for wage stagnation and real economic production to stagnate while paper power and paper growth are allowed to metastasize because the supply of money can always be expanded rather than having to deal with the reality of potentially not being able to import things that fuel the engine of your economy.
So 1971 is when we started to hang ourselves with our exorbitent privilege: https://en.wikipedia.org/wiki/Exorbitant_privilege
There are quite a few of them, and you've conspicuously omitted them.
It's a bit like issuing a scathing review of the automobile by listing all the disadvantages of diesel engines compared to horses.
If you are responsible with your levels of corruption, then fiat currency is generally very beneficial. So it ends up being like a drug. Appropriate amounts can improve your life, but abuse, which the drug will promote, can destroy it.
It's a form of power, and if you can use it responsibly it's good, and if you abuse it it's bad.
Rampant shortermism promoted by shareholder supremacy especially when compounded by government funded bailouts really amplifies our ability to damage our future with our monetary system.
If you can think in the long term then it's very net beneficial, but if you allow short term interests to dominate... the hangover will be devastating.
Thinking about it more, lack of inflation makes savings valuable and potentially implies deflation where saving/not spending money gives you more buying power than investing it. This takes money out of the market and reduces "dollar velocity"/the sum total of market activity which can devastate your economy.
If that happens, then there is a mechanism that prevents systems of compounding power, and the wages "stolen" by inflation are put back into the economy rather than becoming part of someone's hoard. If wealth is redistributed then that allows for monetary inflation without changing power relationships.
If that does not happen, then power compounds and those with power will enact systems that benefit themselves since they will never have to experience the long term consequences of their looting of tomorrow for today. The poor will continue to get poorer and the rich will get richer, until the rich have so much power and poor have so little power, that law, the prevention of arbitrary exercises of power by the powerful, becomes meaningless and the rich will take what they wish unopposed. Some people will get so powerful that when a government says "you can't fish all the fish in the sea because we need to have fish next year" they pay enough money to replace that government's politicians with politicians that say you can, then next year there are no more fish left to fish.
Money is a note that denotes buying power, but that note is meaningful because there is a law that says it is meaningful and people with guns enforce that it is meaningful. So if people get powerful enough to subordinate people with guns it means that power is more effective at acquiring resources than money since someone with power can just take what they want without consequence.
So inflationary monetary policy is good because it means more money is active in the economy, but inflationary policy is bad because it also concentrates money/power and you must have a system to prevent the power concentration that inflation causes by default if you want the system to remain coherent.
If you're saying that people must empower themselves (by unionizing or the like) first because redistribution must follow power rather than power following redistribution, then I agree. If you're saying something else then I don't understand.
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?
https://en.wikipedia.org/wiki/Triffin_dilemma
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…
I love my US made RedWings and Aldens, just not cheap. :)
(and I’m not American)
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…
What does this mean?
Reducing trade deficits to zero is exactly ending the dollar as a reserve currency since it implies that no country has dollars in reserve. There is a stated a goal of this ruling regime to return to the gold standard.
So who was being liberated? From what I could tell it was authoritarian countries from the consequences of the sanctions framework provided by SWIFT and trade predominately occurring via the dollar. Rogoff explicitly states that the dollar as reserve currency has incredible intelligence value and allowed for us to impose sanctions on other countries.
The number of ways to interpret liberation day in a dystopian way are large, and I can't really think of any American entity that directly benefits from liberation day "liberation" except potentially unskilled American labor who might be free to work sweatshop jobs that get re-homed, if they aren't automated or don't just disappear entirely.
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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.
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.
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.
If there were some event or events that causes a dramatic contraction in world trade and set off financial crises around the world, many countries may be unable to buy treasuries in the same quantity.
A potentially scary thought exercise may be to figure out what the collective reduction in treasury purchases needs to be before it all blows up. I have no clue what that number may be.
But I have a feeling that if the dollar ceases to be the reserve currency, it will not be because the world has decided on something else.
Commodity backing is a mechanism by which a country can ensure the stability of its currency across different political administrations. It's a kind of social technology like a constitution or super-majority requirement that creates stability. It's a plus that the US is stable power, but you can bet that the dollar will inflate year over year. That is its own form of instability.
Historical data contradicts the idea that you get stability on the gold standard:
* https://archive.is/https://www.theatlantic.com/business/arch...
* https://www.moneyandbanking.com/commentary/2016/12/14/why-a-...
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.
The fall back for a long time was that half of the problem was exchanging money between two countries, and then shipping the goods relied on a strong blue water navy.
The U.S. doesnt have the lead it used to in either area.
Sanctions didnt help either.
Another issue is the ongoing attacks on the rule of law and the courts. There was a reason why Russians kept so much money in British banks, it was the trust in the institutions that caused the inflow.
Its like a perfect storm to destroy your currency credibility.
One can certainly debate if it's a good strategy, but I'd highly recommend that everyone read this paper. A particular part that's surprising is that the headlines are constantly ~"US unable to stop decline of dollar" when according to this paper a weaker dollar is an explicit goal.
Edit: CountSessine has an excellent (and currently downvoted) set of posts about the paper elsewhere in this thread: https://news.ycombinator.com/item?id=43941376
Could the world have two competing currencies? Possibly.
But the one way to guarantee that adversaries (I don't care who your adversaries are, I'm using that as a non-denominational term) don't get the upper hand, is to use a currency they can't control or manipulate.
ATM the US dollar, can be manipulated by the Fed, but also by the collaboration of other countries, and holders of debt, as recently shown by the US bond activity.
I know many on HN are going to hate to hear this, but a single, global, trust-less currency cannot be manipulated against any single group. So bitcoin may just be the answer here.
A semi-joke-y take on BRICS:
> Pretty straightforward really. You combine Brazil's history of monetary stability, with Russia's respect for property rights, India's domestic tranquility, China's financial transparency, and South Africa's investment opportunities - and hey presto, you've got a new global money
* https://twitter.com/davidfrum/status/1665053372402081792
Of course more countries may enrol in the system, but that dilutes the influence of the five namesake nations of BRICS. But then you have to choose an actual currency(s), so you will they trust to be stable? Or perhaps go with a 'theoretical' currency likes Keynes' bancor?
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.
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.
1. https://www.lynalden.com/may-2025-newsletter/
You could also create derivative instruments based on baskets of currencies and use those as intermediates.
What does it take to go from bitcoin being measured in US dollars to US dollars being measured in bitcoin.
Just for Bitcoin to no longer be deflationary. Right now it's much too good a store of value to become an effective medium of exchange.
has my vote
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I think your model depends on "workers" being the only people who are taxed, so if workers are being paid less than the cost of the goods they have to consume, the government + workers must be running at a constant deficit.
But you also tax employers and owners.
Inflation is a tool intentionally used by governments to quickly lower wage costs across the board. People at the bottom end can be subsidized, and productive people whose nominal worth just went up with inflation will negotiate for higher pay. Everybody else gets a pay cut.
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I suspect these forces will combine to significantly weaken the dollar.
Don't forget Nixon shock though. That was basically undoing Bretton Woods, but in an incompetent fashion that was amplified by low interest rate induced inflation, and produced "stagflation". https://en.wikipedia.org/wiki/Nixon_shock
The smartest guy we had was probably Lawrence Summers.
Frankly I really struggle to see how someone who has been reasonably paying attention would need examples; they’re too many to mention.
Off the top of my head and in no particular order:
1.) Unilaterally and without the consent of congress invoking emergency powers to place broad tariffs on almost the entire world has never been done
2.) Frequently attacking and undermining the judicial branch, including by transparently punishing entire law firms that represent causes unpopular with the administration has never been done
3.) Brazenly abusing the office of the presidency to further personal financial gain by launching a meme cryptocurrency days before taking office has never been done
These are just some of the many examples, and that’s without going into the many things before Jan 20, 2025 that are clearly and undoubtedly unprecedented.
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.
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."
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?
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.
I didn't think that. Every country has tariffs and trade barriers to protect the industries they want to grow or protect. Even the US. Even before this administration or the last one, or the one before that. Sugar, for example.
> Every industrialized exporting country in the world has optimized for exporting to the US
Or maybe, more accurately, to earn US dollars. Possibly because of petroleum, which every country needs? I don't really know, I'm not an expert.
The USA exports plenty of goods, and in cases where there are these nebulous “trade barriers” being imposed, they should be investigated, discovered, publicized, and negotiated. That work was clearly not done here.
… it was never about imbalances but protectionism and racketeering
Strategically, Australia is more sympathetic to the US, but your trade with China is many multiples of your trade with the US. If you join the US you’ll have to raise tariffs against China and if you don’t you’ll naturally fall into China's orbit. Interesting times!
So, what do they want? It is pretty clear by now that they don't even know. They started a massive trade war without a clear plan or way out, and now they are progressively walking it back and attempting to negotiate some quick, face saving deals like the UK one that barely does anything.
And if they really are worried about China, then they need allies to be able to isolate the Chinese and put enough pressure on them. Except, they have just alienated everyone who could have helped with that.
These are not the actions of some master strategist, but of someone who is in way over his head.
That’s why all this talk of “forcing them to the negotiating table” is absurd.
The only world where USA has a trade balance with Vietnam is one where USA isn’t importing as much as they “should” from Vietnam.
Like I said, he takes the advice of the last person who talks to him. He’s very suggestible. The best parts of his presidency, so far, have been when he follows the plan in project 2025, which you may not agree with, but is at least sane and coherent. The worst bits are when he adlibs, like the stupid tariff escalation with China.
Ultimately the biggest problem with Miran’s plan is that now that Trump is tearing up these trade agreements, no one has any reason to believe that the new one is worth the paper it’s printed on. He has no integrity and no one signs agreements with people who have no integrity.
> "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."
Except that that is NOT what is going on. Trump has been screaming something to this effect for weeks, but when it comes to actually negotiating something he tells world leaders that the tariffs are there to stay! He just did this with the Japanese PM, mere days ago.
Not to mention that many countries have actual, effective tariffs or "trade barriers" on the order of 1% with the US, which means that he can't possible negotiate anything that will improve things more than that.
Trump has no actual strategy. He can't possibly, because his stated list of goals are mutually incompatible. He also wants to eliminate income tax and pay for this with tariffs! He can't do that and return tariffs to 0% after countries capitulate.
He also keeps talking about bringing manufacturing back to the US (note that it never left, it just got more high-tech), but he's tariffing industrial machinery and robots imported from Germany!
This "policy" makes about as much sense as a first-year student's homework essay thrown together the night before it is due.
Anyone engaging in good faith debates is missing the point entirely. There is nothing of substance to engage with, as multiple world leaders are discovered.
PS: Trump apparently made 200 deals, more than the number of countries in the world, then 17, and now just 1 with the UK, where he reduced tariffs from 1% to 0.8%. Wooo! Winning!
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...
https://www.bls.gov/cpi/factsheets/purchasing-power-constant...
I’d estimate it at somewhere in the region of $10–$30, personally.
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.
Food: you literally die without it.
ChatGPT: nothing of value is lost.
Look at your iPhone and realize that in any desperate situations, the burger and fries gets more and more valuable.
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.
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.
https://en.wikipedia.org/wiki/Lightning_Network
Satoshi would probably shudder at the thought of Bitcoin-backed fractional reserve currencies, but that's about the only thing he could do about it.
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This seems like a phenomenally ironic claim to me. You're giving up government manipulation in favor of rampant individual manipulation and theft.
That's not possible with crypto.
The most annoying part was updating all my linked services, but I lost no money.
If someone literally robs the bank I have an account with, I also lose no money even if they actually steal some from the physical vault.
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"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."
If they don't, stablecoins would presumably make it even easier to convert holdings into stablecoins backed by another currency (as there is no new account to be opened etc.) as soon as the sentiment on a given world currency shifts.
On top of that, transaction volume is meaningless. Those $27.6T could be $27.6T held in escrow being traded once, or $1 held in escrow being traded 26.6 trillion times. You can't derive USD demand from transaction volume.
"The total market capitalization of USD-pegged stablecoins exceeds $220 billion, with over 99% backed by fiat currencies, predominantly the U.S. dollar." https://chatgpt.com/share/681e95fe-4308-8008-ab25-61be94a418...
RE: Nobody wants to own stablecoins, they want easier transactions. Agree but that does not mean anything. Stablecoins seem to be solving a problem, and there is not evidence of any traction by any currency other than USD.
So this phenomenon definitely runs counter to the conventional intellectual wisdom that USD is in decline.
Disclaimer: I have never used stablecoins myself.
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...
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.
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.
[1] https://www.pgpf.org/article/the-federal-government-has-borr...
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.)
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.
I wouldn’t say I’m optimistic but it’s possible it may work.
It matters a lot to those of us among the capita who hold our wealth in US dollars.
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