Printing Money: The Absolute Privilege of U.S. Dollars(imgracehuang.medium.com) |
Printing Money: The Absolute Privilege of U.S. Dollars(imgracehuang.medium.com) |
There are some opposing opinions on this being far far away. Recently the USD has lost a significant amount in global percentage mainly due to all the sanction the US imposes. The US treasury itself warned that these sanctions are bad for thr US. [1]
[1] https://www.livemint.com/news/world/yellen-says-sanctions-ma...
I wouldn't want to use the Yuan considering the frequent government manipulation of the currency.
Good luck to those investors. China has no established tradition of respecting property rights. It can change the rules of the game as it sees fit politically.
The only way to make it workable is to have some critical trading relationship that makes the cost of seizing property/money unpalatable.
China's been telegraphing it will attack Taiwan pretty soon. When that happens, good luck not having your investments either destroyed or nationalized.
No they aren't.
Take away reserve currency status and you suddenly have one of the sharpest currency devaluations in human history without any immediate loss in productivity or value-add. Unleashing the US workforce at that price point is a good way to ensure that no country that isn't already highly-developed will become highly-developed in our lifetimes.
On the article itself, comparisons to the pound sterling are rather confusing. The UK faced financial problems not simply because of a shift in the monetary landscape but also the loss of its former empire which a significant portion of its domestic economy was tied up in.
The US, in comparison, is a resource-rich continental power which conducts most of its 'international' trade with Canada and Mexico (both of which the US is deeply interlinked with logistically).
The fact that people continue to draw comparisons between the UK and US economies is incredibly baffling. It smacks of some kind of 'great cycle' religion.
I find it hard to believe that I’m reading this sentence correctly. Are you suggesting that hurting the US working class while moving an increasingly greater percentage of profits into the hands of the globalist class is actually a good and virtuous thing?
De-dollarization would really be a massive blow to the finance and services class because the US would suddenly be a far less attractive place to park your money whereas it would be good for the class which produces products for export.
Michael Pettis' books have a pretty good coverage of this perspective.
If you need to raise money for a project, to buy a property, or to finance a business, you must sell a portion of your venture/asset to raise the necessary capital.
The idea is to outlaw debt and money creating more money via interest.
I don’t see why this system can’t be as efficient as a debt and interest based financial system.
It would require getting rid of agencies like the SEC and replacing these regulatory bodies with a very efficient stock system, like ICOs.
Lending money to a business is essentially the same as investing in it anyway. If the business defaults the result is the same.
This would eliminate the parasitic effect of excessive interest from the economy. It would need to be combined with a basic social safety net set low enough to encourage people to remain productive.
An interesting thought experiment, what if people ICO’d their future earnings, selling themselves into indentured servitude to repay the hard currency they borrowed?
That’s what people are doing when they borrow money today. It’s also what happens when nations go deeper into debt to central banks!
Scenario: Monday: China buys 100 billion Yuan of oil from Saudi Arabia.
Tuesday; China prints 100 billion more Yuan.
Oops!
The only countries that the World mistrusts more than the U.S. … is everybody else.
No, they have terminal credibility issues when it comes to how they handle things, and its real hard to support something like that when you have no laws protecting foreign investors.
Netflix's The China Hustle was a great documentary providing visibility on these issues. A world currency is a foreign investment in any country that accepts and denominates in that currency.
Trade will work on verifiable assets in the future. If Bircoin picks up even a small percentage of foreign exchange it will be worth orders of magnitude more than it is now. A block chain with international trust is a valuable invention.
Did the author not recognize that the BRICS and associated countries are getting very tired of this arrangement, especially because the US uses it for political leverage?
Specifically, it acts as if this is business as usual when it is not. The debt to GDP, and inflation rates, are not correct. It makes no mention of the requirements imposed by Basel III which is what banks are being held to now.
There is no deposit requirements anymore. In 2020, they set this to 0 and haven't returned it. Boys and girls we no longer have a fractional banking system. Let that sink in for a moment.
Everything we know historically about banking and economic trends is largely based upon the banking system being a fractional banking system. You can't have a non-fractional banking system and claim its the same, or will operate remotely similar. Its unprecedented and was barely announced if you didn't follow all the metrics available through their site.
As they've redone their site again to hide stuff, here is the link for those that want to check it out themselves.
https://www.federalreserve.gov/monetarypolicy/reservereq.htm
Basel III sets up capital requirements but allows stock market capitalization to be counted against those requirements. Making any bank very susceptible to market attacks, synthetic shares can be indirectly created using the market maker as a patsy; just like commodities can be suppressed with net0 options contracts between colluding parties.
Worse, the banks have centralized to the point where if any of the big primary banks now fails, none of the others have the assets to take it over. Which means the next step is nationalization, or inflate the currency even more than is happening currently (as a bail-in).
Banks and other financial organizations don't have to disclose changes in the underlying assets (bonds specifically) when they intend to hold them to maturity. You've got funds holding 90%+ of 1.8% bonds whose value is significantly lower than actual market value (because interest rates went up how many times?). Value is worth approximately 1/3 when I last calculated, but the going market rate is well above that. For those that don't know, its the sum of all interest payments and principal discounting inflation above 2% up to present date as calculated in 1984, and adjusting for the difference of the current interest rate bond compared to the 1.8).
Not only that, it mistakes what really happened with Gamestop (a short squeeze, and market weighted index rebalancing) or the M2 triggered liquidity issues (in 2019) that prompted payouts to the general public amid the pandemic because the banks weren't lending due to liquidity.
https://fred.stlouisfed.org/series/M2V
I seriously don't see much that is actually accurate in that post. Even the market growth part is misleading.
If you want a solid background on how these things work, read David Graeber ("Debt, The first 5,000 years") followed by the Economic calculation problem (essays). You run into the latter in non-market and market systems that deviate sufficiently from rational pricing.
Debt to GDP is well above 300% when you count all outstanding liabilities, the measure he references is what the government publishes but if you look at how they've changed that formula over time you'd see its just like inflation. Less about accuracy more about promoting a narrative.
1. Why are returns on equity inherently favored versus returns on debt?
2. How is new money created as productive capacity increases?
3. How are you going to have an efficient stock system when every transaction requires immediate settlement?
4. Why do the securities regulators need to go away in a hypercharged securitized society?
5. How are people borrowing hard currency in their road to serfdom? I thought there was no debt?
6. When you say debt is the same thing as equity, are you saying that in a stylized Modigliani-Miller sense or do you literally think debt and equity get similar treatment in the capital stack?
7. Do you realize that everyone debt is someone else’s asset?
They’re very clearly not the same, debt and equity are separate things that serve different purposes. And yes, I am aware of convertible bonds and other forms of combined debt/equity instruments.
Debt is senior to equity in bankruptcy filings. A troubled company will pay its lenders and bondholders before paying dividends to its equity investors.
There has always been debt, society can’t function without it. “Lend me seeds now so that I may grow a crop and pay you back at harvest time” is a form of debt that has been around as long or nearly as long as agriculture has.
It is far more common for a business when times are hard to stop (or never start) paying out to its equity investors (dividends) while still servicing its debt. It is not "essentially the same as investing".
If businesses couldn’t take on debt there would only be one class of stakeholders, the shareholders.
It would be an interesting thing to pilot in Muslim countries where charging interest is effectively forbidden. I think it could be a more efficient, transparent, and equitable financial system.
Digitizing ownership solves all of the “problems” with not having “credit”. Raising capital would be a simple as selling tokens on decentralized exchanges for the hard currency unit of account. Accounts payable are smart contracts due at a specific date/time.
You would have to completely reform the SEC for this to work. They would need to get out of the way for the most part (no more red tape and accredited investor nonsense) and only handle edge cases that can’t be automated.
Central banks would no longer exist to profit from issuing credit to nations. Taxation would have to be transparent and politicians accountable, because there is no more money printer.
For 100+ years, interest above a certain percentage was outlawed until congress created a exclusion loophole for federal financial institutions.
If you haven't already read the book "Debt, The First 5,000 yaers" by David Graeber, I think you'd get a lot out of it.
Also, Market system's aren't a silver bullet.
I see where this is going though. Its not a new idea, it runs very close to similar lines of thought put forth by the authoritarian socialists.
It all sounds like a magical utopia until you get into the details. Promises are put forth, but once power is ceded, abuses happen. Those in power will claim "but those only happen because there is not enough of power and we face oblivion, anyone not with us is against us, they threaten our future", and the fools that are scared will believe it, and they are the ones that allow everyone else to become slaves. Its part of a common authoritarian playbook, and has happened many times throughout history.
https://www.mit.edu/people/fuller/peace/war_goering.html
When you look at the requirements for clearing at a national scale, it requires a centralized system with coercive control, and absolute information (future sight). For the most part those systems only operate efficiently because of corruption, and there is no future sight thankfully.
It doesn't address a number of issues with any centrally planned economy and without incentives it must be centrally planned to produce goods. Having assets without being able to use them means no property rights. The borgeioux/monopolists take over and the common man only needs bare subsistence. That's fine in a pre-limits of growth world but we'll be at 9B people soon and predefined currency pool without expansion doesn't take into account population growth. So given contention, who decides who lives and has children, or dies and doesn't. In that kind of system, the people at the top.
You end up with no investment, no companies, and no future within a generation or two (20 years = 1 generation).
Inevitably shortages occur, and when they do it causes death when its a strategic good (i.e. food). That death also won't be coming to those at the top while there's such a larger pool below. The people at the top need the good more since they are responsible for decisions that impact the whole. Sometimes its necessary to cut off a leg so the body can survive. Its important that the designated people can continue to make these important decisions in times of crisis... so they would say.
You can tweak those systems any number of ways and end up with the exact same outcome when you don't address the core problem of economic calculation which doesn't have a solution in centrally planned economies. Its not new, its old, there's quite a large body of material from the 1920s-1940s on it.
A currency with a pre-defined supply is a non-starter, there are multiple academic papers you can find that will tell you exactly why.
https://en.wikipedia.org/wiki/Civil_forfeiture_in_the_United...
and that's against their own citizens.
https://en.m.wikipedia.org/wiki/Land_Reform_Movement_(China)
Landlords — had their land confiscated and they were subjected to mass killing by the CCP and former tenants, with the estimated death toll ranging from hundreds of thousands to millions.
It’s also politically very unpalatable to use it on businesses. Use it on a business and good luck getting re-elected as a prosecutor / police chief etc.
Is it used to suppress poor brown people? Sure. Is that a good thing? No. But it’s not really a barrier to investment.
Why would we do that?
I love to travel and visit other countries and meet people. My hope is that a tourist will continue to be able to easily visit any country, even when the world bifurcates into two trading blocks.
Why is this needed?
> Why is this needed?
At a guess...being the worlds reserve currency creates demand for your currency which drives it's price up. This is bad in general because it means your exports become more expensive. The way you deal with that is to create debt to export in the form of US treasuries, which foreigners can then buy. One way to create treasuries is to create a public deficit (not strictly necessarily, you could raise money even with a surplus and then invest it)