The country is getting forced by markets into realizing pain for overspending, and only congress can manage this pain. Manage the pain, not remove it is key here. Manage it.
Conrgess is totally inept and ridiculously politicized, so it's unlikely they will do anything except make the problem worse.
That leaves only the natural fall out of refusing to acknowledge a financial injury before going out on the field to play hard for your voters.
Inflation. The US will be forced, it will not decide, but be forced, to inflate away its debt. Which means that people who cannot bury their wealth in (non-treasury!) assets will pay off the debt.
TheOtherHobbes · 1h ago
There is no "overspending." There is only undertaxing. The debt is literally just the accumulated difference between spending and taxation.
If extreme wealth was taxed, the debt would be zero. The point isn't even to "pay for spending" but to enforce a functional social contract, and to limit the political and democratic distortions created by extreme inequality.
"Markets" should not have a veto on policy in a democracy.
Making it non-zero is a policy choice. Inflating away this debt is also a policy choice. There is nothing accidental about this.
What will not be inflated away is personal debt. That will remain linked to inflation even after the currency is revalued, and will be captured from personal assets wherever possible.
nostromo · 1h ago
Europe has repeatedly tried to soak the rich, and the results are always the same: the rich move their wealth somewhere else and you end up breaking even or even reducing your tax revenue.
It's interesting to note that even when these tax schemes were repealed, the damage had already been done and the wealth did not return.
Here's a real plan for America:
Step 1: have a tax rate that's a little less than our peers
Step 2: return spending to pre-Covid rates circa 2019
crooked-v · 1h ago
The US is a long way away from trying to "soak" anyone. We have a top rate on long-term capital gains of 20%.
nostromo · 1h ago
That's pretty average (which is a good thing).
Japan: 20%
China: 20%
India: 13%
UK: 24%
Italy: 26%
Germany: 26%
France: 30%
Then there's Canada of course... 50% with a proposal to make it 66% in 2026. Let's see how that works out!
pseudo0 · 1h ago
Isn't it a 50% inclusion rate for capital gains in Canada? That works out to a maximum tax rate of 27% in the top tax bracket. And they canceled the proposed increase to a 66% inclusion rate, which is probably smart considering how a ton of rich Canadians already move to Florida.
nostromo · 45m ago
Thank you for the correction.
cperciva · 1h ago
Yes that's correct.
stock_toaster · 23m ago
> Europe has repeatedly tried to soak the rich, and the results are always the same: the rich move their wealth somewhere else and you end up breaking even or even reducing your tax revenue.
Why can't they tax something that _cant_ be moved elsewhere, like property ownership?
xg15 · 1h ago
The corrolay of this would be that as soon as money enters a "rich-only" ecosystem, it's essentially gone forever for the wider population. I don't see how this would be a desirable outcome.
marcosdumay · 1h ago
Your links are 2 about speculation on how business will react, and one real paper that discovers that rich people lie more to avoid taxes when your tax rate increases.
Nothing at all supports that "the rich move their wealth somewhere else"
stego-tech · 17m ago
That's because, as a singular planetary species, that story is a myth. The rich only maintain wealth by exploiting people against each other, thus deterring actions against the rich who likely caused the issue in the first place.
Lack of housing because it's a profitable investment class that rises in value due to lack of supply? Obviously it's the fault of NIMBYs alone and not political policy pushed by lobbying groups.
Healthcare too expensive? Totally not the fault of private equity bleeding care networks dry and public health insurance companies denying coverage to fund share buybacks and CEO raises, so it must be nurses striking for pay or the government for paying too little on Medicare.
The point is that if enough rich countries said "fuck this shit, pay up and fuck off out of politics forever", the rich can't leave. They're stuck here, on Earth, with the poors. That's not going to change anytime soon, so the only thing stopping these countries from reigning the issue in is cowardice.
0xdde · 55m ago
Your "Swedish" source appears to conclude that the wealth tax is effective, but suffered from loopholes and lack of enforcement. Why not fix those rather than follow your "real plan"?
Also your UK link does not support your argument:
> Weaker-than-expected tax liabilities from additional rate taxpayers are not necessarily an indicator of an unexpectedly low yield from the 50p rate. Incomes for those earning above £150,000 could be depressed for other reasons. For example, high income earners are more likely to derive a higher proportion of income from savings, dividends and other investments – and these have been much weaker in recent years than employment income.
ponector · 11m ago
>> If extreme wealth was taxed, the debt would be zero
With current level of debt it does not matter. Taxes should be rised for everyone if huge cuts in expenses are not done.
tobias3 · 1h ago
Yeah, but for taxation you need state capacity to enforce it which was chainsawed/DOGED away.
nostromo · 1h ago
This isn't true. US tax revenue in 2025 is on track to be the highest ever.
Basically unchanged for 70+ years, and far lower historically. Meanwhile significant growth in real GDP per capita and therefore real government receipts per capita.
The change isn't that the government is collecting less money. They get more than ever. But growth in government spending has outstripped it, and it has been getting worse rather than better.
alphazard · 1h ago
I'm not even sure if this is a serious post, but it indicates a significant misunderstanding.
There is an asymmetry between a government's revenue and its expenses. Revenue can increase arbitrarily if the government is allowed to take out unlimited debt. The amount a government can tax is limited first by the size of its country's economy. There is a maximum amount of revenue you can collect via taxation, and after a certain point increasing taxation decreases revenue. Countries also exist in the context of the rest of the world and there is a market for business. If the tax rate is not competitive businesses and people will leave, although this is over a longer time horizon.
In terms of the possibilities overspending is far more likely than undertaxing because you can spend an infinite amount, but you can only undershoot your optimal tax rate by a finite amount. Both are probably happening right now. The amount that the US government is undertaxing compared to its theoretical optimum might not even balance the current budget.
hilsdev · 1h ago
Why is the default to tax more and not spend less? Is there really no limit to the amount of spending the government should do? You see no possible use of resources that would be wasteful?
medvezhenok · 1h ago
It's because of the effects of technological progress on wealth accumulation.
Tech allows winner-takes-all effects in many different markets (and runaway situations where labor cannot catch up at all) - you either have to have very strong antitrust (which is still not possible in some places), or basically strong redistribution (i.e. taxation of wealth in order to redistribute) to maintain a reasonable (note: not equal, but a reasonable degree of inequality - closer to the model that existed from the 1940s-1970s) distribution of wealth in society.
cosmic_cheese · 1h ago
Problem is, there’s a lot of needs that private industry will not fill (or cannot be trusted to fill well). We’ve seen this play out repeatedly. If you want a functioning society, a certain degree of government spending is unavoidable.
Now there is something to be said for making sure that spending is effective, but this must be engaged with in good faith; that is, changes should be made with a scalpel after gathering plenty of data supporting the change in question. Proclaiming ineffectiveness without data to ground the claim and then using that as an excuse to make broad cuts is a great way to make any dysfunction even worse.
dehrmann · 41m ago
The default depends on your party and which party is in power.
wtcactus · 1h ago
Well, I argue with your point with mine then: there’s no under taxing, only over spending.
If extreme spending was cut, the debt would be zero.
NotGMan · 1h ago
You think that Bezos and Musk have billions in their own personal bank account?
So what do you mean be "extreme wealth"? Companies? Dividend payouts? House? Yachts?
I agree that luxury items that are out of reach of the middle class (eg sport cars etc...) should be taxed highly, but a toy that a rich person can buy vs a rich person investing money into his own or other companies is a problem if you want to tax that since no-one will then create new companies and invest in R&D.
nostromo · 1h ago
The issue is that all governments are in roughly the same situation, so there is no alternative other than maybe gold. The US doesn't need to be great or even good, it just needs to be better than the alternatives.
The issues facing China and the EU make America's spending problem look mild. (And I agree by the way: America has a massive spending problem.)
nostrademons · 1h ago
That's not necessarily true - it's possible for all governments to fail. The winner might be something that doesn't even register as a government today, maybe something like privatized micro-nations out of Snow Crash, city-states, or a crypto-economy.
There are times in history when a government fails, and then there are times when all governments fail, and the world re-organizes (usually after a long and bloody period of multiple wars) into a new system of social organization. The idea of a modern nation-state is only about 150 years old, dating from a series of wars (the U.S. Civil War, the German and Italian wars of unification, the Franco-Prussian War, the Meiji Restoration) in the 1860s-1880s. Before then, the early nation states and concept of nationalism arose out of European Wars of Religion in the early 1600s. Someone who lived under high-Medieval feudalism c. 1300, when the divine right of Kings was a given, would've found the world of the late 1600s quite alien.
pavlov · 1h ago
EU government debt to GDP ratio is 81.8% with a deficit of 2.9%.
US current debt to GDP is 124%, and Trump’s big beautiful bill is projected to increase the deficit to 7% next year.
America has long benefited from a more dynamic and attractive labor market than Europe, but the current administration is actively trying destroy that advantage by driving out the immigrants that were fueling it.
nostromo · 1h ago
Now look at economic growth rates.
To be clear, I think US spending is too high. But I would take a bit more debt and thriving economic growth vs a bit less debt and zero economic growth every time.
lossolo · 1h ago
Real GDP growth in 2024 was approximately 2.8%.
The federal budget deficit for fiscal year 2024 totaled around 6.4% of GDP.
It's unsustainable long term.
phkahler · 1h ago
Agree. But debt to GDP will continue to rise, and that eventually leads to something very bad.
lotsofpulp · 2h ago
>Which means that people who cannot bury their wealth in (non-treasury!) assets will pay off the debt.
I.e. people who need to work, which means it disproportionately affects the young.
This is what has to happen in a democratic society with a flattened and eventual top heavy population pyramid that will not vote to reduce old people benefits.
AnthonyMouse · 1h ago
> I.e. people who need to work, which means it disproportionately affects the young.
In general currency devaluation causes nominal wages to increase along with the price of everything else.
The people who get screwed are creditors, especially creditors who issued debt at a fixed interest rate. Which is kind of not that bad, except that creditors tend to have a lot of political power and then use it to either get bailed out by the taxpayer or get policies put in place to prevent inflation from eroding existing debts even if those policies have harsh consequences for other people.
hdgvhicv · 1h ago
Workers will see higher wages as there is more work and fewer people to do the work
Everyone will see higher prices as the costs of work increase
Interest rates will be low as there’s no other option
> Workers will see higher wages as there is more work and fewer people to do the work
Canada effectively has removed immigration cap. So no, not going to happen.
lotsofpulp · 1h ago
The relative rate of change is important, not the absolute change.
Politically, asset prices will be inflated quicker than labor prices. You can use SP500 as an easy guage.
This is not sustainable forever, of course, but I would bet there are a few more decades it will work.
sciencesama · 2h ago
But how ??
Luker88 · 1h ago
I am reading the book from Ray Dalio, "Principles for Dealing with the Changing World Order".
This article seems a little reductive in its analysis, but this is actually a huge topic.
I have not finished the book yet, I don't claim to understand all its implications, but I really like it because it analyzes many empires over the centuries, and tries to track multiple determinants for all of them (also a lot of pretty graphs).
Very, very recommended book if you are interested in this topic.
Dalio analysis agrees that today China power is rising and the USA is weakening (duh). It is a slow progress, and the financial aspect is merely the last determinant to show this. Dalio however does not talk much about the future, aside from the obvious initial decline of the USA.
Many point to China as the next big empire, however it might not become it as China does not seem to be too interested in becoming the world money reserve (Dalio uses this as a necessary definition for an "empire").
Also while China has imported many ideas and culture from our world, the language and culture gap remains huge even today, and that inevitably limits influence and power.
These couple of things might allow for a longer time before the big change of power, and even let the west come up again.
What I love about the book is how clear the situation is even without pointing to specific, detailed situations, political or financial decisions.
The decline did not start yesterday, or just 4 or 5 years ago either. Education, competitiveness, inequality, even military paint a clear trajectory. It takes time. Dalio tentatively gives an average of 250 years between rise and fall of an empire, and we seem to have passed the peak decade or two ago.
I'm European, and it's also very clear how Europe will definitely not be the next power, either. Too fragmented, no cohesion, etc.
You can find a few graphs of the book on the web, it should give you a clear idea of the kind of analysis.
So this guy just takes the time and money (I guess that part doesn’t hurt if you’ve got 15 billion) to write a book and produce an excellent video version for a broader audience, just for … what exactly?
According to his Wikipedia his employees are forced to agree to continuous recordings, the NYT claims he does some sort of (i assume perfectly legal) insider trading and just acts like he’s got the perfect system in place, he defended the CCPs actions on multiple accessions and just in general does not seem like the type of guy to provide anything of value for free.
So can someone educate me on the angle? What’s the goal here?
And why would anyone read this and not get the feeling of being scammed. There is no way this guy is in it for the book sales.
dustingetz · 2h ago
i would like to see deeper analysis of similar forces playing out in other countries. A weakening dollar implies a strengthening world, but European policy is even more messed up than American, there is still widespread talent export e.g. european programmers working for american companies, indian asian and russian programmers immigrating to Europe or working remote abroad, and China seems to face financial crises just the same as ours in the US. The US tech sector for all its faults and incompetencies still seems impregnable. So how does all this factor into the weak dollar narrative?
regnull · 1h ago
I think this argument suffers from the same problem as many arguments of similar kind. It goes like this: if A then B. If B then C. If C then D. It all makes sense. Every single one of these steps makes sense. Except, if you have a chain with five steps and every one of them has a 90% likelihood, the whole chain has only 60% likelihood. And it’s probably less the 90% for each step, in reality. So, you can come up with an entirely plausible reasoning chain, where each step is highly likely to come true, and yet be completely wrong with your overall conclusion.
daft_pink · 2h ago
I think that people and countries not wanting to purchase 30 year long term debt in a zero interest rate environment is perfectly natural. There is far more potential downside than upside and not evidence of demise.
Reality is that there is little motivation to invest in long term debt under 3%, normal motivation to invest in debt between 5-10% and huge appetite for debt above 10%.
Debt with a sub 2% interest rate can only be achieved with significant government intervention. We were living in an unrealistic economoic reality and now we’re going back towards something realistic with interest rates between 5-10%.
crooked-v · 1h ago
I think the US is particularly crazy about it because ultra-low interest rates allowed the country to temporarily paper over the realities of the nationwide housing shortage and resulting housing prices, and now everybody's getting slapped in the face with more realistic mortgage terms again.
ofalkaed · 2h ago
Is there any other country with both the court system and wealth required to back up being the global reserve currency? I don't think there is and I don't see a viable contender showing up in the near future.
treetalker · 2h ago
As a counterpoint, confidence in US courts (particularly the federal courts) is rapidly declining — both among the public and among those who operate within the court systems.
A_D_E_P_T · 2h ago
As somebody who has been involved in civil actions in Federal Court, I can assure you that it deserves zero confidence and is basically pay-to-win. (Unless two billion-dollar-plus corporations are involved.) This is largely, but not only, on account of discovery taking years and costing unbounded sums of money, plus monetary penalties for not complying with expensive discovery.
qingcharles · 1h ago
I would second this. I would add that the federal court system is far ahead of the state courts, in that the federal trial courts at least put out reasonably well-written decisions on hearings, whereas the county courts generally just hand-wave everything in emotional verbal rulings.
ofalkaed · 2h ago
This is about how the courts operate with regards to international business disputes, US has proven record about being impartial in these matters.
ioasuncvinvaer · 1h ago
Even if that is true, the US's proven record does not include the current administration.
ofalkaed · 1h ago
It excludes the current administration, the separation of powers goes a long ways here to help insure things are not overly influenced by internal politics. Worst case is you stall until things change, which is not much of an issue when dealing with the amounts of money that matter in these cases.
schrodinger · 2h ago
That’s true, but doesn’t necessarily contradict the question posed. Is any other country _better_ in both of those dimensions?
827a · 1h ago
That depends on what kind of media you consume. Feeling isn't really a good indication of reality.
treetalker · 1h ago
I'd be interested to look at any studies (or even opinion pieces) that indicate either that confidence in the courts is remaining unchanged (compared either to recent or historical levels) or that it's increasing.
827a · 1h ago
Agreed, that would be interesting to see if the methodology were sound. The problem is naturally that measuring "confidence in the courts" is almost inherently a methodologically difficult thing to do.
Additionally: shortage of confidence in the US Courts isn't a new thing. The reality of the US Courts system is: Money wins, and its been like this for the entire life of essentially all Americans alive today. This is, actually, rather convenient and good if you take the view that faith in the US courts system is a critical component of the US Dollar's global reserve status. If money controls the courts, and courts support the money, that's a pretty nice virtuous cycle. But, for the People; its been hit-or-miss for a long, long time.
Tadpole9181 · 1h ago
The economy and markets of made of people with feelings. Perception is an important part.
kccqzy · 2h ago
I agree with you. I don't even think in the near future there will be a single global reserve currency. There will be multiple ones, all of which weaker in terms of power and influence than the dollar.
ofalkaed · 1h ago
I suspect there will be at least two big ones on about the same level but I don't think this will be particularly near future, at least not near future in context of the global economy which is fairly young. It is the logical path for China with their role in the global economy and how much western business relies on them, but this will take decades, they have a lot of work ahead of them.
Ekaros · 2h ago
Do you even need singular global currency in modern world? Where every transaction can be in essence instant if there was desire. And everything is digital. Overall it is rather different world and things can be done different than before.
bootsmann · 2h ago
The world doesn’t necessarily need it, but the US does need it to be the dollar due to the massive deficits it runs.
ofalkaed · 1h ago
The US dollar provides a massive stabilizing effect on the global economy, which we don't need but it is nice.
water9 · 2h ago
The United States won’t let their reserve currency go without a fight
vkou · 1h ago
> Do you even need singular global currency in modern world?
The world doesn't need it, but unless Americans want to see their purchasing power destroyed, they do.
vasco · 1h ago
Currency is backed by military, not courts. Courts are also backed by military.
earnestinger · 2h ago
Why court system is relevant for the currency?
I assume British courts can enforce contracts that deal in dollars.
simonh · 1h ago
The court system is relevant for confidence in investing in an economy, and currencies are largely supported by and dependent on investment into the economy of the country. Even government debt instruments are a form of investment in the economy of the country.
ivell · 1h ago
It need not be a single country. Organizations like BRICS could float it's own currency, and with significant size of the economy of the members, it could pull it off. This is why Trump has been explicitly warning against that.
AnimalMuppet · 1h ago
"... with both the court system and..."
BRICS might have the wealth. Would you trust that it's going to be legally stable? I wouldn't.
But, in fairness, for the first time in my life I don't trust the US in that way either. I'm beginning to see it as possible that someday the president could make some arbitrary decision that takes everything I have. (Either this president or another - but it's this president who's making the precedents that make it possible.)
saubeidl · 2h ago
The European Union.
lawlessone · 2h ago
People blamed covid to much for the global economic turmoil.
But we don't have covid this time.
We do have the same guy in the White House again though...
No comments yet
dh2022 · 21m ago
A post claiming that the dollar is dead without mentioning Trifflin’s dilemma [0] is not a serious post.
A post claiming the dollar is dead without explaining why a large freely traded currency backed by a large economy (I.e the Euro) did not take the dollar’s place is even less serious.
The idea that a basket of foreign currencies or "BRIC+" will replace the dollar is absolutely not going to happen. If the dollar goes down it takes the entire world with it. Nobody is insulated from the risk of a dedollarization.
sparrish · 1h ago
Those holding gold and silver may be insulated. Historically, it's a great hedge against hyperinflation (dedollarization).
toomuchtodo · 1h ago
I’m somewhat confident in the Euro until India or Africa grows to be a potential competitor. Whether they can achieve a similar risk profile remains to be seen of course.
Russia is a non starter, and China is unlikely to make the political change necessary to be a reserve currency.
nostromo · 1h ago
If you think the US has a debt problem, the Eurozone is much worse. At least America has economic growth along with debt growth. The EU has slightly less debt but zero economic growth and almost zero population growth (and negative organic population growth).
Africa's GDP is tiny and will not a serious contender for any sort of reserve currency status for many decades. I can't imagine a wave of automation will do anything positive for most of Africa.
toomuchtodo · 1h ago
Growth is over globally except India and Africa due to demographics [1]. Developed countries and unions will compete for the last of the world’s young, prime age workers over the next century. Financial stability will be a function of who manages this situation to the best of their circumstances. Can you attract and retain these workers and leverage that for economic success? If so, that’s where investment will flow and capital will remain invested. My thesis is Europe is best positioned to succeed in the near term, based on the above.
Sibling comment mentions Europe needs the US for energy; Canada has known fossil gas reserves of ~200 years and LNG export capabilities, and Europe is scheduled to end Russian fossil gas consumption in 2027 [2]. The world is deploying 1GW of solar every 15 hours; like the rest of the world, everyone will arrive at energy independence/sovereignty eventually through cheap renewables (solar primarily, but also wind) and battery storage (LFP and sodium most likely, as of this comment) exported by China to the world. China is also selling inexpensive EVs to as many global consumers as they can find (while internal sales of battery electric and hybrids is already at ~50% this year). This leads me to believe the future of US oil and gas is an internal petrostate similar to Russia, not an energy exporter of relevance far into the future.
Having billions of low-skill "prime age workers" is not a good thing in the AI era. Africa's population surge is a liability as much as it is a benefit, especially considering they already have to import a large portion of their food supplies. Africa is 20% of world population but just 2% of world GDP... Maybe they will turn into China at some point, but I wouldn't bet on it yet.
toomuchtodo · 1h ago
AI era remains to be proven to not be bullshit. If it turns on to be something of value and not pets.com and webvan 2.0, prime age workers should be provided training and hiring pipelines for jobs AI cannot do: healthcare, construction, infrastructure, housing, agriculture scaling, etc. Knowledge/white collar jobs are most at risk with LLMs, not work building society up and operating it in the physical world.
nostromo · 1h ago
People are turning melted rocks into thinking machines and general purpose robots and you're like "it's all basically pets.com."
It's hard to take your point of view seriously after that honestly.
toomuchtodo · 1h ago
If you think an LLM is a thinking machine, I don’t know what to tell you. They are great at predicting tokens, but there is no evidence they are thinking in the human sense. They rely on patterns and probabilities, not understanding. Powerful search engines, certainly, but there is much work ahead to see how hard the limits being bumped up against are.
> As someone that has sold a bunch of LLM enabled software over the past 6 months, I don’t really buy the AI capex turning into huge productivity gains. Everything to date are just chatbots with RAG and API calls. None of them are going to do my laundry or file my taxes.
fragmede · 1h ago
Without getting hung up on the definition of the word "think", the fact that anyone can feed an LLM a couple of bullet points and generate a pile of convincing sounding marketing copy, is worth something if you're to someone. We can disagree on exactly how much and to whom, but if you're not willing to see that as fact then there's no common ground to base a conversation on.
lossolo · 59m ago
> Africa's population surge is a liability as much as it is a benefit, especially considering they already have to import a large portion of their food supplies.
They also need to import phones, dishwashers, and cars. But how many cars do you really use? How many phones?
Africa's population growth is projected to drive steady demand for consumer products, while the West and parts of Asia are expected to see a decline.
They have abundant natural resources, and they’re likely to become the cheapest labor force after countries like Vietnam and Thailand see rising wages and living standards.
We’re already seeing this in China, where wage growth is pushing some manufacturing to neighboring, lower cost countries.
Demand is ultimately limited by the number of people. You can produce as many goods as you want using AI powered factories but without demand, they’ll just end up in the garbage.
declan_roberts · 1h ago
Even Europe has huge parts of their economy backed by the USA.
NATO funding, drug R&D and subsidized pricing, even sovereign wealth funds are invested in the USA. Their only energy option outside of the USA is Russia.
Postwar Europe as we know it does not exist without the USA.
throwawaymaths · 1h ago
> I’m somewhat confident in the Euro
out of curiosity, why do you believe that?
toomuchtodo · 1h ago
Stable governance and a business friendly enough environment (SAP is the most valuable company in Europe currently, for example; business can be done there). Even with populism and right wing extremes popping up there, I’m more confident in Europe staying on the rails vs the US (as it relates to currency stability).
declan_roberts · 1h ago
Huge portions of the European economy are backed by a strong USA, and that doesn't include NATO/defense subsidies.
Unless they're paying Russia for energy, they're buying oil and LNG in dollars.
TacticalCoder · 1h ago
I don't understand why anyone would believe that. The euro does exist since only a quarter of a century and is already in very serious dire straits. It's the worse ever conceived currency (conceived by clueless bureaucrats): it makes no sense at all to have a common currency for countries with different fiscal policies. Nearly all the countries that have the euro are more indebted than the US (GDP wise). One country with the euro already partially defaulted on its public debt (Greece).
dyauspitr · 1h ago
India is not going to happen for atleast a few decades and Africa isn’t even on the remotest horizon.
stego-tech · 1h ago
Pretty much this. There is no “spare part” currency to swap in for the dollar and preserve the modern economy, here. The end of dollarization means the end of post-WW2 economic policy wholesale.
So what we’ll end up with is a post-WW2 supply chain but in a world where every currency dynamically floats, even the dollar. It’ll be a decade of price shocks, trade wars, and likely conflict as everyone vies to define the next era of economic power, until a smattering of core currencies (likely the Yuan, Euro, and Dollar) emerge on top for each respective region.
That’s my armchair theorycrafting, anyway.
KaiserPro · 1h ago
> idea that a basket of foreign currencies or "BRIC+" will replace the dollar is absolutely not going to happen
No it'll be renminbi, with the euro, if they are lucky as a distant second place.
tobias3 · 1h ago
China is more in a debt trap than even the US. Their only clean balance sheet is the central government balance sheet.
declan_roberts · 1h ago
China simply cannot exist without the USA and unlike Russia they have no real natural resources to back up their currency.
moogly · 1h ago
The Swiss Franc perhaps?
lossolo · 1h ago
Things like this don’t happen overnight, just like the decline of empires doesn’t happen overnight.
Have you heard of the Portuguese real? Or the Spanish real? Maybe the Dutch guilder? They were all global reserve currencies in the past.
If you haven’t heard of them, don’t worry, someday, people will ask “Do you know the United States dollar?”
starmole · 1h ago
This article is initially very well written and convincing. And it started to stress me out a little bit! Am I at great risk for having most of my wealth tied to the dollar?
But taking a step back: It is making very strong predictions for a future state of what I would consider a chaotic system.
As the author identifies as a Physicist and not a Psychic, why is there no mention of uncertainty?
No mention of how you would test or refute the prediction?
Looking at very selectively picked graphs is like reading tea leaves.
If even just a few people read the article and change their investment strategy as a result you already affected the outcome.
saubeidl · 52m ago
> Am I at great risk for having most of my wealth tied to the dollar?
Well, you lost 15% compared to Euros this year so far...
starmole · 35m ago
Lol, yes! I should take my dad's advice and buy forest land in Germany instead of US index funds. And this is not sarcastic - it might actually be the better strategy! But the article does not help me at all making that decision.
dlcarrier · 2h ago
I used to think that the dominance of the US dollar in world trade would fade as technologies like crytocurrencies rise, but the dominance of stablecoins pegged to the US dollar has shown that without, or even despite, policies and practices of the US government, society is adamant that USD be the reserve currency.
alphazard · 1h ago
The timing of a migration away from dollars will depend mostly on US fiscal and monetary policy. Better financial infrastructure on-chain isn't going to do it alone.
The stablecoins will absolutely accelerate the transition, so that when it does happen, it happens more quickly. Anyone with a stablecoin can transact on-chain for something else. And anyone holding stablecoins will be using an app that has familiarized them with the idea of alternate currencies and currency exchanges.
This is probably a good thing. A realistic not terrible scenario is a few year period where you have to pay attention to exchange rates, but your net-worth is mostly unaffected and at the end of it you're paying for groceries with something that's not USD.
A_D_E_P_T · 2h ago
It's still early days. If the dollar suffers from any serious shocks, or inflation accelerates, stablecoins will peg themselves to something else, or to a basket of currencies or commodities. I don't see anything that stops them from jumping ship the minute the going gets tough, and it would presumably be irrational not to.
etempleton · 1h ago
The only thing saving the dollar is a lack of suitable replacement. Trust in the PRC is lower than even the current highly politicized United States, so the Yuan is out. The replacement could be an index of currents tied to G7 or BRICS countries, but that likely gets complicated.
throwawaymaths · 1h ago
specifically the yuan is out because of the capital controls on the currency. because of the massive population in china even a minor shift in currency control could cause huge swings in the reserve value.
d00mB0t · 2h ago
The Dollar: reports of my death are greatly exaggerated.
phillipcarter · 1h ago
I feel like there was a lot of analysis of signals in this blog, but at the end is the only thing that matters: The dollar has power if and only if belief in the vast US institutions holds. I would extend that to go beyond our government, as the US private sector and cultural outputs are also incredibly powerful in this world.
chasd00 · 2h ago
I’ve been reading this article for decades.
nhp_fermi · 1h ago
If the world continues to become more protectionist, does the USD need to be replaced by a single global reserve? It could just be a multi-polar period with a bunch of regional reserve currencies. Global liquidity backed by a single reserve isn't required if WTO dies, and trade is negotiated bilaterally
jleyank · 1h ago
Don't forget, the US is the lowest-taxed Western country, so they have lots of room (and lots of inherent wealth) to tax. Whether they have the political will to do this, or the political will to reduce Defence Spending is an open question. But it's not inevitable. Hell, they can always do what other countries have done and abrogate debt or pay it down pennies or quarters to the dollar. Would work once.
Or, the country can break up with each portion rearranging its financing and resources accordingly. There's a number of options, if people choose to think beyond the next social message post.
nostromo · 1h ago
Defense spending, moderate taxation, and a respect for private property is what makes the dollar a reserve currency to begin with.
Taxing wealth agressively and cutting defense would immediately kill the goose that lays the golden eggs.
foogazi · 1h ago
Absolutely
bix6 · 2h ago
“The Dollar is Dead. Long live whatever comes next.”
So what will come next? It can’t be gold because we already tried that. I don’t see the West letting BRICS have it. Crypto seems too polarizing.
herval · 1h ago
Why does it have to be a single currency? The single-currency reserve is an artifact from the era where settlements required actual wads of cash shipped around. It’s also from an era where most other countries’ currencies were in flux and the dollar was the only non-risky option. This hasn’t been an issue for a few decades now, with euro, yen, pound, franc, etc proving they’re quite stable
With systems like Brazil’s Pix in place (which is supposedly gonna operate across latam countries soon), you can easily settle cross-bank instantly. Countries will then be able to build spot reserves on whatever currencies they need for trade directly, instead of an intermediate “stable” currency
sparrish · 1h ago
Why can't it be gold again?
It was working pretty well for thousands of years.
cjs_ac · 1h ago
The part where countries engage in warlike activities against each other to get their hands on more gold sounds like it would cause economic uncertainty.
mensetmanusman · 1h ago
Hopefully a basket of currencies, no need for one thing.
declan_roberts · 1h ago
What comes next is USA 2.0.
kesor · 2h ago
Fiat currencies are like Unicorns and Santa Claus, they stop existing when people grow up and stop believing in them. And there is no need for a "replacement" (i.e. the nothing is better argument) or a need for "enforcement" (i.e. the military argument) or a need for a "system" (i.e. the rule-based-order & courts argument). Fiat currencies simply die off due to lack of trust and belief, and it often happens by way of Gresham's Law.
crooked-v · 1h ago
Fiat currencies are the "grown up" result of realizing that everything else in modern society depends on people believing in the social contract, and that doing the same with currency is both more stable and more predictable than having an economy that depends on the amounts currently available of arbitrarily chosen rare metals.
robocat · 1h ago
I would be interested to see if we could create an hours-worked currency.
Every person is given a similar amount of lifetime (only a few countries are exceptions).
Time can't inflate or deflate, is understood by all and easily measured, and it can't be stored. Taking it from others or trading it between people is difficult (we use money as a proxy instead).
Some obvious problems: quality of time, the value of different people's time is variable, retirement.
AnimalMuppet · 1h ago
For Gresham's Law, there has to be an alternative, which becomes a replacement.
shiandow · 2h ago
Substack has got to be the worst medium for articles with graphs. There seems to be no way to zoom in or view a larger version of tge image.
echoangle · 2h ago
The graphs are just images, and tapping them opens a lightbox for me. On desktop you could also just right click and open the image in a new tab and zoom there, and on mobile you can just zoom on the page itself.
vinnymac · 2h ago
I don’t disagree.
I usually pipe Substack to markdown and then just open it in my favorite markdown reader.
Three projections that signal the dollar's demise: 1. The Fed has lost control of the Yield Curve, 2. One term presidents will become the norm, and fail to cut deficit spending 3. Powell will be the last multi-term Fed chair, and monetary policy will begin to oscillate in lock step with fiscal policy.
AnimalMuppet · 1h ago
I don't see #1, at least not yet. The Fed hasn't lost control of the yield curve compared to the amount of control that the Fed normally has over it (which is less than total control).
For me, the second half of #3 is the real death knell. If Congress or the president is setting monetary policy, the dollar is in for a world of hurt.
lvl155 · 2h ago
USD strength comes from military. Just as it was the case with all other currencies in the past. Do you see anyone challenging the US in a conflict? China won’t even invade Taiwan because they are afraid. ‘Nuff said.
bootsmann · 2h ago
The dollar has lost 15% vis-a-vis the euro this year, how does your theory explain this?
TrackerFF · 1h ago
There's a sitting POTUS that wants to devalue the dollar, in order to stimulate domestic production, and exports.
"But what about the stuff that the factories import, to produce anything?" one might ask. Well, Trump wants no such imports - he wants the people selling stuff to the US, to relocate to the US.
Note: I'm not in favor for what Trump tries to do, but it explains why there's so little concern for the dropping dollar.
bootsmann · 1h ago
Its not about concern (the dollar dropping while Trump is putting on tariffs is very concerning, it should be appreciating) its more about the fact that the dollar value seems to be influenced by things other than military strength.
lvl155 · 58m ago
It lost 15% because Trump is undermining the US? What’s there to explain? Does US still have its military? Yes. Do you think currencies stay completely stagnant over even one week? It’s driven by a myriad of market forces.
bootsmann · 50m ago
Yes thats the point I was trying to make. The strength of the USD derives itself in large parts from the fundamental trust markets have in US institutions not from the strength of its military.
lvl155 · 8m ago
I know what you’re saying but it’s not some fiat blind trust. There’s a big reason why the US can print with impunity. EUR cannot, even though people may trust EU more over the near-term. It’s all tied to military.
bix6 · 2h ago
My friends in Taiwan think they will be invaded before 2030 so we’ll see
lvl155 · 1h ago
They won’t do it until they actually know how to make SOTA AI chips which won’t be for a very long time.
etempleton · 1h ago
If the PRC were to do it, I would imagine you would try to do it under the Trump administration as he is anti-interventionist and sees the world as a series of regional fiefdoms led by the strongest regional player--Asia, to him, is China's region. This is in sharp contrast to every prior US administration and with the Biden administration in particular coming out with the strongest rhetoric regarding any potential invasion.
mensetmanusman · 1h ago
The action on Iran proves otherwise, especially since his entire anti-interventionist wing was squealing that World War III would start if he did bomb the nuclear sites.
Those around the president have been pretty clear that the US will defend Taiwan until the US is capable of its own supply of leading edge semi conductors. Taiwan is very easy to defend with the harsh ocean separating them, especially since North Korea gives the US an excuse to plant massive amounts of long range missiles in SK.
There are no surprises when attacks start in the era of real time world video satellites.
etempleton · 34m ago
I think the limited actions in Iran are not at all comparable to the commitment and risks involved in directly defending Taiwan from invasion or naval / aerial blockade. With that said, I do think that the US is likely to intervene in some capacity regardless of admin, but slightly less so with the current admin.
PartiallyTyped · 2h ago
There's been a spike in news articles on the invasion the last couple of weeks. Given that the US appears to not hold on to any alliances or assurances, and ~~incontinent~~ incompetent in chief is on the helm, it seems that they've the perfect opportunity. Europe's busy with Russia, US is busy with itself, so honestly, why not?
phillipcarter · 1h ago
> so honestly, why not?
Because it might not work out so well for them? Let's not kid ourselves, this would be an invasion by sea against an opponent who's prepared for many years, has a modern defense force, and has explicitly designed a defense protocol to inflict as much damage as possible. This is not Russia stepping over fields they already encircle that are governed by a dysfunctional government. And it's not Isreal being allowed to bomb impoverished children with impunity either. And neither of those scenarios have worked out splendidly for them either.
almost_usual · 1h ago
Economy is wrecked due to real estate and internal power struggles.
senko · 2h ago
What, if I (a European) decide not to buy American treasuries, a squad of Marines is going to bust my front door?
cuuupid · 1h ago
What will you buy instead? The point is that the dollar is strong not purely because the American economy has been (and continues to be) the largest on the planet, but also because it is not currently possible to topple the US since its global activities are tied strongly to its military.
The only realistic options that exist at the moment are going back to the gold standard (not viable for most countries) or shifting to the yen (which is tied to the dollar as Japan is the largest holder of treasuries).
tobias3 · 1h ago
When Trump was elected, I clicked the sell button on the US treasuries and the buy button on the European ones. Was pretty easy.
It will be more costly for the people doing this later, of course.
hdgvhicv · 1h ago
If you decided to trade oil in euros then a squad of aircraft carriers parks off your coast
lvl155 · 1h ago
No, we just won’t rescue you next time you guys do stupid things.
tobias3 · 1h ago
Your president said we had "not a great day" the last time you rescued us.
lvl155 · 55m ago
I am referring to two world wars you guys started killing millions in the process. Do you think Americans will be stupid enough to spill blood for ungrateful Europoors next time?
actionfromafar · 23m ago
"Say thank you!" You just need a golden 747.
almost_usual · 1h ago
Arguably USD strength comes from geography.
stego-tech · 1h ago
One thing I desperately wish the markets would finally recognize is that the call is coming from inside the house: by letting private enterprise capture government, they are destroying the very currency that gives them power through unnecessary subsidies, preferential tax policies, socialization of losses and privatization of profits. Through corporate mass media manipulating voters and outright corruption in donations or associations with politicians, they did this to themselves.
Until markets begin penalizing companies receiving government funding (or whose workers disproportionately rely on welfare due to low wages) with shitty share prices and recognize which sectors should be private while which others should be public, this nonsense will continue unabated.
This is why I loathe believers in the mythos of “the invisible hand of the free market”: if said hand existed, it’s been firing shots into its mouth for decades and everyone in finance has seemed okay with that continuing.
herval · 1h ago
Does anyone NOT know that? Devaluing the dollar is literally the key item on the current president’s financial agenda, as they’ve explained repeatedly
stego-tech · 1h ago
Listening to my fellow Americans? Lots of them either don’t know that’s the policy, don’t know the consequences of such a policy, or want it because they believe it’ll harm their enemies.
herval · 27m ago
How can someone not know, at this point? You can literally just google “mar a lago accord”, this stuff has been widely discussed across mainstream media and social media (including the likes of r/conservative and even the whitehouse site! eg https://www.whitehouse.gov/briefings-statements/2025/04/cea-...)
stego-tech · 23m ago
We assume people think similarly to us, but the reality is that we're the outliers in a lot of ways. It's why I occasionally insert myself into the Lion's Den on HN when I see someone smart espousing known bullshit, lest their SME be confused as authority on whatever they're screeding about.
Having watched colleagues spend every waking moment on their breaks digest literal propaganda as truth? Watching relatives so dosed up on misinformation by cable outlets that they only exist within that specific fantasy and never reality?
It's depressingly, distressingly common.
theturtle · 2h ago
As my late grandfather would say, "who is this kid?"
dia80 · 2h ago
Even if the dollar was "dead" the time and effort required by the world economy to switch away from the dollar system would be enormous so not much is likely to happen quicker than a few decades.
saubeidl · 2h ago
I think a lot depends on whether the US keeps being an unreliable actor and thus a pain to deal with.
If there's enough pain, it'll outweigh the pain of switching.
dia80 · 2h ago
If you are using the dollar right now, what pain are you taking? None. What's actually happened? US added some tariffs and became a bit more isolationist and the Fed has lost some independence. Might not bode well for the future but has very little impact on today.
saubeidl · 1h ago
Idk man, it's lost 15% against the euro this year alone...
827a · 1h ago
People read FUD articles like this then start ignoring any common sense, including even their own senses, because apparently the world must be ending and we're all going to die. There's no pain. What pain is anyone (except a couple dictators under sanctions) feeling?
Almost every major currency has lost value relative to the US Dollar over the past 10 years. Not just, like, a little bit. Like, a lot a bit. The Indian Rupee has lost 53% since 2007. Yen, down. Pound, down. Canada, down. That's reality. There is no "switching to avoid devaluation of the USD" when the USD has devalued so much less than almost any other currency on the planet.
One major country that has managed to maintain the value of their currency relative to the USD is China. Who has by some estimates a ~300%+ debt to GDP load (if you think that number is too high, its because whatever estimates you've read before didn't take into account municipal debt, because that's where China hides it). And a 72 year old leader with zero politically-feasible line of succession. And a critically shrinking population. And literally zero global military force projection. Any faith that any country puts into China is going to be destroyed just a few short years after Xi's death; the main thing China has going for it isn't their manufacturing base, AI strategy, or whatever; its that Xi hopefully won't die in the next decade.
rssoconnor · 31m ago
Huh? The CAD/USD exchange rate is exactly where I remember it being 30 years ago.
saubeidl · 1h ago
You didn't mention Euros or Swiss Francs - the Euro being the obvious candidate for next reserve currency.
abeppu · 1h ago
Nit: Is anyone else annoyed by the trend of people using block quote formatting to emphasize their own topic sentences rather than to quote from another source? In addition to being visually annoying, to me it highlights that the author habitually doesn't interact with whatever literature exists (i.e. if they sometimes needed to quote a paragraph from another author, they wouldn't use block quote formatting in this way), which signals that they're more likely to be missing something that's well known to people in the field.
p_ing · 1h ago
You see it on reddit quite a bit. I wonder where the author learned that style of writing from; certainly no institution that could teach one to properly write to an established literary style.
It's super annoying. There's no reason to bold the chosen text, or any text in this post. I mean, it's on substack ffs.
Worse is when authors use emojis in titles or text. Maybe we can blame tiktok brain rot or just gen-z in general. There's gotta be someone we can toss under the bus and I bet they don't know what cursive handwriting is!
(And technically this violates the HN rules)
mcphage · 1h ago
Magazines do it a lot.
meindnoch · 1h ago
Nuclear weapons will be used within our lifetime.
seydor · 2h ago
Reserve currency may maintain its status even after the empire behind it has collapsed. America may decline but the dollar will go on for a number of decades
disambiguation · 58m ago
> Others have looked more towards what a post-dollar world would look like: a gold-backed currency. A basket of commodities. A BRICS+ crypto-alternative. Bretton Woods 3.0.
> All of it’s noise — and none of it matters.
I've been reading libertarian de dollarization doom posts since 2008.
The question is, if the system is so messed up, why does everyone continue to put up with it? It's exactly due to the lack of viable alternatives. So long as the American monetary system is the only game in town, it will remain the reserve currency regardless of the debt or strength of the dollar.
Esophagus4 · 1h ago
Meh… it’s easy for someone to string together a few charts and make a dramatic prediction. It’s telling that he hasn’t disclosed his positions or portfolio.
If “Skin in the Game” has taught us anything, it’s that if you want to know what a person really believes, don’t read their blog, look at their investment portfolio.
Ok… you think the dollar is going to “melt away in a fire”? How much do you believe that? Enough to put your own money on the line and place your bets? Is your money in real estate, then? Gold? BTC?
Because if you don’t believe a financial projection enough to put your own money into it, do you really believe it?
compiler-guy · 2h ago
NPR’s Planet Money had a podcast about this a few months ago. I see several assertions and claims that it deals with made here without any evidence or discussion as to why.
TLDR: Yes the dollar is weakening as a reserve currency. But the decline has been long and slow and it is not clear what, if anything, will replace it.
Conrgess is totally inept and ridiculously politicized, so it's unlikely they will do anything except make the problem worse.
That leaves only the natural fall out of refusing to acknowledge a financial injury before going out on the field to play hard for your voters.
Inflation. The US will be forced, it will not decide, but be forced, to inflate away its debt. Which means that people who cannot bury their wealth in (non-treasury!) assets will pay off the debt.
If extreme wealth was taxed, the debt would be zero. The point isn't even to "pay for spending" but to enforce a functional social contract, and to limit the political and democratic distortions created by extreme inequality.
"Markets" should not have a veto on policy in a democracy.
Making it non-zero is a policy choice. Inflating away this debt is also a policy choice. There is nothing accidental about this.
What will not be inflated away is personal debt. That will remain linked to inflation even after the currency is revalued, and will be captured from personal assets wherever possible.
France: https://www.theguardian.com/world/2014/dec/31/france-drops-7...
UK: https://obr.uk/box/effect-of-the-additional-rate-of-income-t...
Sweden: https://eml.berkeley.edu/~saez/course/seimAEJ17wealth.pdf
It's interesting to note that even when these tax schemes were repealed, the damage had already been done and the wealth did not return.
Here's a real plan for America:
Step 1: have a tax rate that's a little less than our peers
Step 2: return spending to pre-Covid rates circa 2019
Japan: 20%
China: 20%
India: 13%
UK: 24%
Italy: 26%
Germany: 26%
France: 30%
Then there's Canada of course... 50% with a proposal to make it 66% in 2026. Let's see how that works out!
Why can't they tax something that _cant_ be moved elsewhere, like property ownership?
Nothing at all supports that "the rich move their wealth somewhere else"
Lack of housing because it's a profitable investment class that rises in value due to lack of supply? Obviously it's the fault of NIMBYs alone and not political policy pushed by lobbying groups.
Healthcare too expensive? Totally not the fault of private equity bleeding care networks dry and public health insurance companies denying coverage to fund share buybacks and CEO raises, so it must be nurses striking for pay or the government for paying too little on Medicare.
The point is that if enough rich countries said "fuck this shit, pay up and fuck off out of politics forever", the rich can't leave. They're stuck here, on Earth, with the poors. That's not going to change anytime soon, so the only thing stopping these countries from reigning the issue in is cowardice.
Also your UK link does not support your argument:
> Weaker-than-expected tax liabilities from additional rate taxpayers are not necessarily an indicator of an unexpectedly low yield from the 50p rate. Incomes for those earning above £150,000 could be depressed for other reasons. For example, high income earners are more likely to derive a higher proportion of income from savings, dividends and other investments – and these have been much weaker in recent years than employment income.
With current level of debt it does not matter. Taxes should be rised for everyone if huge cuts in expenses are not done.
https://fred.stlouisfed.org/series/FYFRGDA188S
Basically unchanged for 70+ years, and far lower historically. Meanwhile significant growth in real GDP per capita and therefore real government receipts per capita.
The change isn't that the government is collecting less money. They get more than ever. But growth in government spending has outstripped it, and it has been getting worse rather than better.
There is an asymmetry between a government's revenue and its expenses. Revenue can increase arbitrarily if the government is allowed to take out unlimited debt. The amount a government can tax is limited first by the size of its country's economy. There is a maximum amount of revenue you can collect via taxation, and after a certain point increasing taxation decreases revenue. Countries also exist in the context of the rest of the world and there is a market for business. If the tax rate is not competitive businesses and people will leave, although this is over a longer time horizon.
In terms of the possibilities overspending is far more likely than undertaxing because you can spend an infinite amount, but you can only undershoot your optimal tax rate by a finite amount. Both are probably happening right now. The amount that the US government is undertaxing compared to its theoretical optimum might not even balance the current budget.
Tech allows winner-takes-all effects in many different markets (and runaway situations where labor cannot catch up at all) - you either have to have very strong antitrust (which is still not possible in some places), or basically strong redistribution (i.e. taxation of wealth in order to redistribute) to maintain a reasonable (note: not equal, but a reasonable degree of inequality - closer to the model that existed from the 1940s-1970s) distribution of wealth in society.
Now there is something to be said for making sure that spending is effective, but this must be engaged with in good faith; that is, changes should be made with a scalpel after gathering plenty of data supporting the change in question. Proclaiming ineffectiveness without data to ground the claim and then using that as an excuse to make broad cuts is a great way to make any dysfunction even worse.
If extreme spending was cut, the debt would be zero.
So what do you mean be "extreme wealth"? Companies? Dividend payouts? House? Yachts?
I agree that luxury items that are out of reach of the middle class (eg sport cars etc...) should be taxed highly, but a toy that a rich person can buy vs a rich person investing money into his own or other companies is a problem if you want to tax that since no-one will then create new companies and invest in R&D.
The issues facing China and the EU make America's spending problem look mild. (And I agree by the way: America has a massive spending problem.)
There are times in history when a government fails, and then there are times when all governments fail, and the world re-organizes (usually after a long and bloody period of multiple wars) into a new system of social organization. The idea of a modern nation-state is only about 150 years old, dating from a series of wars (the U.S. Civil War, the German and Italian wars of unification, the Franco-Prussian War, the Meiji Restoration) in the 1860s-1880s. Before then, the early nation states and concept of nationalism arose out of European Wars of Religion in the early 1600s. Someone who lived under high-Medieval feudalism c. 1300, when the divine right of Kings was a given, would've found the world of the late 1600s quite alien.
US current debt to GDP is 124%, and Trump’s big beautiful bill is projected to increase the deficit to 7% next year.
America has long benefited from a more dynamic and attractive labor market than Europe, but the current administration is actively trying destroy that advantage by driving out the immigrants that were fueling it.
To be clear, I think US spending is too high. But I would take a bit more debt and thriving economic growth vs a bit less debt and zero economic growth every time.
The federal budget deficit for fiscal year 2024 totaled around 6.4% of GDP.
It's unsustainable long term.
I.e. people who need to work, which means it disproportionately affects the young.
This is what has to happen in a democratic society with a flattened and eventual top heavy population pyramid that will not vote to reduce old people benefits.
In general currency devaluation causes nominal wages to increase along with the price of everything else.
The people who get screwed are creditors, especially creditors who issued debt at a fixed interest rate. Which is kind of not that bad, except that creditors tend to have a lot of political power and then use it to either get bailed out by the taxpayer or get policies put in place to prevent inflation from eroding existing debts even if those policies have harsh consequences for other people.
Everyone will see higher prices as the costs of work increase
Interest rates will be low as there’s no other option
https://www.suerf.org/wp-content/uploads/2023/12/f_fa99ccdbe...
https://link.springer.com/book/10.1007/978-3-030-42657-6
Canada effectively has removed immigration cap. So no, not going to happen.
Politically, asset prices will be inflated quicker than labor prices. You can use SP500 as an easy guage.
This is not sustainable forever, of course, but I would bet there are a few more decades it will work.
This article seems a little reductive in its analysis, but this is actually a huge topic.
I have not finished the book yet, I don't claim to understand all its implications, but I really like it because it analyzes many empires over the centuries, and tries to track multiple determinants for all of them (also a lot of pretty graphs).
Very, very recommended book if you are interested in this topic.
Dalio analysis agrees that today China power is rising and the USA is weakening (duh). It is a slow progress, and the financial aspect is merely the last determinant to show this. Dalio however does not talk much about the future, aside from the obvious initial decline of the USA.
Many point to China as the next big empire, however it might not become it as China does not seem to be too interested in becoming the world money reserve (Dalio uses this as a necessary definition for an "empire"). Also while China has imported many ideas and culture from our world, the language and culture gap remains huge even today, and that inevitably limits influence and power.
These couple of things might allow for a longer time before the big change of power, and even let the west come up again.
What I love about the book is how clear the situation is even without pointing to specific, detailed situations, political or financial decisions.
The decline did not start yesterday, or just 4 or 5 years ago either. Education, competitiveness, inequality, even military paint a clear trajectory. It takes time. Dalio tentatively gives an average of 250 years between rise and fall of an empire, and we seem to have passed the peak decade or two ago.
I'm European, and it's also very clear how Europe will definitely not be the next power, either. Too fragmented, no cohesion, etc.
You can find a few graphs of the book on the web, it should give you a clear idea of the kind of analysis.
45min https://youtu.be/xguam0TKMw8
5min https://youtu.be/BB2r_eOjsPw
According to his Wikipedia his employees are forced to agree to continuous recordings, the NYT claims he does some sort of (i assume perfectly legal) insider trading and just acts like he’s got the perfect system in place, he defended the CCPs actions on multiple accessions and just in general does not seem like the type of guy to provide anything of value for free.
So can someone educate me on the angle? What’s the goal here?
And why would anyone read this and not get the feeling of being scammed. There is no way this guy is in it for the book sales.
Reality is that there is little motivation to invest in long term debt under 3%, normal motivation to invest in debt between 5-10% and huge appetite for debt above 10%.
Debt with a sub 2% interest rate can only be achieved with significant government intervention. We were living in an unrealistic economoic reality and now we’re going back towards something realistic with interest rates between 5-10%.
Additionally: shortage of confidence in the US Courts isn't a new thing. The reality of the US Courts system is: Money wins, and its been like this for the entire life of essentially all Americans alive today. This is, actually, rather convenient and good if you take the view that faith in the US courts system is a critical component of the US Dollar's global reserve status. If money controls the courts, and courts support the money, that's a pretty nice virtuous cycle. But, for the People; its been hit-or-miss for a long, long time.
The world doesn't need it, but unless Americans want to see their purchasing power destroyed, they do.
I assume British courts can enforce contracts that deal in dollars.
BRICS might have the wealth. Would you trust that it's going to be legally stable? I wouldn't.
But, in fairness, for the first time in my life I don't trust the US in that way either. I'm beginning to see it as possible that someday the president could make some arbitrary decision that takes everything I have. (Either this president or another - but it's this president who's making the precedents that make it possible.)
But we don't have covid this time.
We do have the same guy in the White House again though...
No comments yet
A post claiming the dollar is dead without explaining why a large freely traded currency backed by a large economy (I.e the Euro) did not take the dollar’s place is even less serious.
[0] https://en.wikipedia.org/wiki/Triffin_dilemma
Russia is a non starter, and China is unlikely to make the political change necessary to be a reserve currency.
Africa's GDP is tiny and will not a serious contender for any sort of reserve currency status for many decades. I can't imagine a wave of automation will do anything positive for most of Africa.
Sibling comment mentions Europe needs the US for energy; Canada has known fossil gas reserves of ~200 years and LNG export capabilities, and Europe is scheduled to end Russian fossil gas consumption in 2027 [2]. The world is deploying 1GW of solar every 15 hours; like the rest of the world, everyone will arrive at energy independence/sovereignty eventually through cheap renewables (solar primarily, but also wind) and battery storage (LFP and sodium most likely, as of this comment) exported by China to the world. China is also selling inexpensive EVs to as many global consumers as they can find (while internal sales of battery electric and hybrids is already at ~50% this year). This leads me to believe the future of US oil and gas is an internal petrostate similar to Russia, not an energy exporter of relevance far into the future.
[1] https://www.sas.upenn.edu/~jesusfv/Slides_London.pdf
[2] https://news.ycombinator.com/item?id=43506589
(not investing advice)
It's hard to take your point of view seriously after that honestly.
https://direct.mit.edu/opmi/article/doi/10.1162/opmi_a_00160...
https://www.psychologytoday.com/us/blog/the-digital-self/202...
From the piece (which I agree with):
> As someone that has sold a bunch of LLM enabled software over the past 6 months, I don’t really buy the AI capex turning into huge productivity gains. Everything to date are just chatbots with RAG and API calls. None of them are going to do my laundry or file my taxes.
They also need to import phones, dishwashers, and cars. But how many cars do you really use? How many phones?
Africa's population growth is projected to drive steady demand for consumer products, while the West and parts of Asia are expected to see a decline. They have abundant natural resources, and they’re likely to become the cheapest labor force after countries like Vietnam and Thailand see rising wages and living standards.
We’re already seeing this in China, where wage growth is pushing some manufacturing to neighboring, lower cost countries.
Demand is ultimately limited by the number of people. You can produce as many goods as you want using AI powered factories but without demand, they’ll just end up in the garbage.
NATO funding, drug R&D and subsidized pricing, even sovereign wealth funds are invested in the USA. Their only energy option outside of the USA is Russia.
Postwar Europe as we know it does not exist without the USA.
out of curiosity, why do you believe that?
Unless they're paying Russia for energy, they're buying oil and LNG in dollars.
So what we’ll end up with is a post-WW2 supply chain but in a world where every currency dynamically floats, even the dollar. It’ll be a decade of price shocks, trade wars, and likely conflict as everyone vies to define the next era of economic power, until a smattering of core currencies (likely the Yuan, Euro, and Dollar) emerge on top for each respective region.
That’s my armchair theorycrafting, anyway.
No it'll be renminbi, with the euro, if they are lucky as a distant second place.
Have you heard of the Portuguese real? Or the Spanish real? Maybe the Dutch guilder? They were all global reserve currencies in the past.
If you haven’t heard of them, don’t worry, someday, people will ask “Do you know the United States dollar?”
But taking a step back: It is making very strong predictions for a future state of what I would consider a chaotic system. As the author identifies as a Physicist and not a Psychic, why is there no mention of uncertainty? No mention of how you would test or refute the prediction?
Looking at very selectively picked graphs is like reading tea leaves.
If even just a few people read the article and change their investment strategy as a result you already affected the outcome.
Well, you lost 15% compared to Euros this year so far...
The stablecoins will absolutely accelerate the transition, so that when it does happen, it happens more quickly. Anyone with a stablecoin can transact on-chain for something else. And anyone holding stablecoins will be using an app that has familiarized them with the idea of alternate currencies and currency exchanges.
This is probably a good thing. A realistic not terrible scenario is a few year period where you have to pay attention to exchange rates, but your net-worth is mostly unaffected and at the end of it you're paying for groceries with something that's not USD.
Or, the country can break up with each portion rearranging its financing and resources accordingly. There's a number of options, if people choose to think beyond the next social message post.
Taxing wealth agressively and cutting defense would immediately kill the goose that lays the golden eggs.
So what will come next? It can’t be gold because we already tried that. I don’t see the West letting BRICS have it. Crypto seems too polarizing.
With systems like Brazil’s Pix in place (which is supposedly gonna operate across latam countries soon), you can easily settle cross-bank instantly. Countries will then be able to build spot reserves on whatever currencies they need for trade directly, instead of an intermediate “stable” currency
It was working pretty well for thousands of years.
Every person is given a similar amount of lifetime (only a few countries are exceptions).
Time can't inflate or deflate, is understood by all and easily measured, and it can't be stored. Taking it from others or trading it between people is difficult (we use money as a proxy instead).
Some obvious problems: quality of time, the value of different people's time is variable, retirement.
I usually pipe Substack to markdown and then just open it in my favorite markdown reader.
https://www.substacktools.com/downloader
For me, the second half of #3 is the real death knell. If Congress or the president is setting monetary policy, the dollar is in for a world of hurt.
"But what about the stuff that the factories import, to produce anything?" one might ask. Well, Trump wants no such imports - he wants the people selling stuff to the US, to relocate to the US.
Note: I'm not in favor for what Trump tries to do, but it explains why there's so little concern for the dropping dollar.
Those around the president have been pretty clear that the US will defend Taiwan until the US is capable of its own supply of leading edge semi conductors. Taiwan is very easy to defend with the harsh ocean separating them, especially since North Korea gives the US an excuse to plant massive amounts of long range missiles in SK.
There are no surprises when attacks start in the era of real time world video satellites.
Because it might not work out so well for them? Let's not kid ourselves, this would be an invasion by sea against an opponent who's prepared for many years, has a modern defense force, and has explicitly designed a defense protocol to inflict as much damage as possible. This is not Russia stepping over fields they already encircle that are governed by a dysfunctional government. And it's not Isreal being allowed to bomb impoverished children with impunity either. And neither of those scenarios have worked out splendidly for them either.
The only realistic options that exist at the moment are going back to the gold standard (not viable for most countries) or shifting to the yen (which is tied to the dollar as Japan is the largest holder of treasuries).
It will be more costly for the people doing this later, of course.
Until markets begin penalizing companies receiving government funding (or whose workers disproportionately rely on welfare due to low wages) with shitty share prices and recognize which sectors should be private while which others should be public, this nonsense will continue unabated.
This is why I loathe believers in the mythos of “the invisible hand of the free market”: if said hand existed, it’s been firing shots into its mouth for decades and everyone in finance has seemed okay with that continuing.
Having watched colleagues spend every waking moment on their breaks digest literal propaganda as truth? Watching relatives so dosed up on misinformation by cable outlets that they only exist within that specific fantasy and never reality?
It's depressingly, distressingly common.
If there's enough pain, it'll outweigh the pain of switching.
Almost every major currency has lost value relative to the US Dollar over the past 10 years. Not just, like, a little bit. Like, a lot a bit. The Indian Rupee has lost 53% since 2007. Yen, down. Pound, down. Canada, down. That's reality. There is no "switching to avoid devaluation of the USD" when the USD has devalued so much less than almost any other currency on the planet.
One major country that has managed to maintain the value of their currency relative to the USD is China. Who has by some estimates a ~300%+ debt to GDP load (if you think that number is too high, its because whatever estimates you've read before didn't take into account municipal debt, because that's where China hides it). And a 72 year old leader with zero politically-feasible line of succession. And a critically shrinking population. And literally zero global military force projection. Any faith that any country puts into China is going to be destroyed just a few short years after Xi's death; the main thing China has going for it isn't their manufacturing base, AI strategy, or whatever; its that Xi hopefully won't die in the next decade.
It's super annoying. There's no reason to bold the chosen text, or any text in this post. I mean, it's on substack ffs.
Worse is when authors use emojis in titles or text. Maybe we can blame tiktok brain rot or just gen-z in general. There's gotta be someone we can toss under the bus and I bet they don't know what cursive handwriting is!
(And technically this violates the HN rules)
> All of it’s noise — and none of it matters.
I've been reading libertarian de dollarization doom posts since 2008.
The question is, if the system is so messed up, why does everyone continue to put up with it? It's exactly due to the lack of viable alternatives. So long as the American monetary system is the only game in town, it will remain the reserve currency regardless of the debt or strength of the dollar.
If “Skin in the Game” has taught us anything, it’s that if you want to know what a person really believes, don’t read their blog, look at their investment portfolio.
Ok… you think the dollar is going to “melt away in a fire”? How much do you believe that? Enough to put your own money on the line and place your bets? Is your money in real estate, then? Gold? BTC?
Because if you don’t believe a financial projection enough to put your own money into it, do you really believe it?
TLDR: Yes the dollar is weakening as a reserve currency. But the decline has been long and slow and it is not clear what, if anything, will replace it.
https://www.npr.org/2025/05/09/1250191994/reserve-currency-d...