Who is going to buy China, Germany, Japan, and SKs stuff? If they don’t recycle into US assets (and they often hide these purchases or buy alts like MBS), then US consumers can’t afford to consume. All of these countries are deeply structurally imbalanced to exports. There just isn’t anyone big enough to absorb their trade. Quite frankly the US in general would be better off long term if people stopped buying treasuries. There’d be dislocation and Wall St would suffer but it would reshore more manufacturing and spur US growth. So I’m all for it but I doubt the exporters are going to commit suicide if they don’t have to. I think they are stuck.
I think causality is the other way - US consumes way more than any other nation on a per capita basis, and hence needs to import. Its the US demand that drives the export led model, not the other way round. But politically that works in the US - growth is very popular, even if credit driven
Which is the chicken and which is the egg doesn’t seem that important. Regardless, we’ve constructed a deeply imbalanced system that suppresses the wages of workers in all the countries involved.
You can cover some of that credit fueled growth by spending in the public sector or allowing debt build ups in the private sector like the GFC but it always blows up. I see Trump as intimately tied to this issue. We shipped steady middle class manufacturing jobs off the Asia and so we have a lot of resentful working people. Same thing with Brexit.
Until we lessen the power of Wall St in favor of main st I think it’ll continue. I think in the end this is what you are saying. Anyway listen to me. I’m losing my capitalist edge.
It's true, it is difficult to see where non-US demand is coming from. Certainly the Chinese have failed in that role once they stopped building ghost cities.
I would take a look at Michael Pettis’s work in this area. I think the causality is more reflexive. For example if US behavior was causing the current account deficits one would expect the US to be forced to raise interest rates to attract funding. Most of the time this isn’t the case. This was the basis for Bernanke’s “savings glut” idea earlier in the century.
My take is that foreign nations want to reduce unemployment and over produce to accomplish this goal. The US is willing (and able) to accept this outcome for hegemonic reasons; helps keep inflation down too
The Chinese have loads of US dollars... they give loans to 3rd nations in US dollars and make the loaned to country pay them back in Yuan. This is so the 3rd nation can pay its IMF/WORLD bank loan back in US dollars since they have been cutoff from getting them directly from the fed reserve. Its an odd dynamic thats being used to hide the collusion of national governments from the national publics they are responsible to so they can pretend globalization is dead and they're not working in collusion with each other to take over the world as a multipolar Alliance..
Switching from gold money to paper money helped the US spend more freely, and countries like Japan and China prefer saving their money as IOUs from the US government because they're easy and usually make good money. But, there are some issues brewing, like tensions with China and other countries not liking what the US is doing, which could change how things work in the financial world.
Of course, the US is prepared for all of this. Let's see how the story unfolds and do what we can to help each other prepare.
In essence, this is the dollar milk shake theory which is a play on Triffin dilemma. Ultimately what it comes down to is that structurally the United States accounting books is always going to look horrible in order to keep the plumbing of the global finical system operating. See what happens to the rest of the world when King dollar is on which generally means higher interest rates. Global growth slows, banking crisis tend to occur, trade slow, & default-generally by developing nations-occur. Since the United States does not need to import dollars and as a result of global wars and gold does not affect the amount of dollars in the global economy, it makes sense why the U.S. has the majority of it's reverse in gold. A hand few of developed nations have gold as reverses because of culture, historical, and traded-most countries in EU trade & settle with each other in Euros-which is why Germany, Italy, etc have large gold reverses. In face dollar usage and penetration has increase since the recent wars because: 1) higher rates attract more capital 2) the U.S. is the most establish and safest country that can absorb all the Eurodollars that are out there.
Given the tendency of nations states to misinform (i.e., lie), I have a very hard time believing that the US (or any so-called 'advanced' economy) actually has the gold reserves they claim to have. Unless they happen to have had a recent public and transparent audit of said reserves, their claim must be taken on complete and total faith--a state of trust that no government/politician deserves.
It's important to remember the exponential value of network effects in businesses like Google or Microsoft. But that exponential value works both ways. 10% less users on Google means exponentially less value to the Google network. I suspect that, this is true for the dollar's status as well.
Secondly on the politics situations. China and Russia have sat down and made a deal. "The way to weaken the US is to weaken the dollar".
Hi... are you aware of the plan to flip from federal reserve notes to dept of the treasury USA dollar bills? with a 1:1 exchange rate initially? The links worth a read. You can sorta indirectly corroborate this by looking at the usdebtclock.org and note the money creation oddities on the bottom left and bottom right, and then compare to the time machines 2028 naming of the same fields.
you are probably not old enough to remember US Notes which circulated freely with Federal Reserve Notes and Silver Certificates. almost no one understood the difference or even noticed the difference. A US Note was a direct debt of the Treasury, while a Fed Reserve Note has to be backed up by a debt instrument issued by the Treasury. Not much difference, except maybe the Fed gets to decide how many of what denominations are issued.
I am old enough, there were still silver notes floating around in the 80s. I guess maybe the play is to put them into circulation so nobody notices but by 2028 they will have about 6 trillion treasury dollars in circulation and still have 17 trillion in fed reserve notes out there. I don't disagree with you unless they pull some legal shenanigan that turns the two currencies into a non 1:1 exchange rate.
It feels like they are going to use crypto, perhaps bitcoin, as the 3rd leg of the 3 card monte. ie get bitcoin valued at 100k reserve notes, then in a year or 5 years they break the 1:1 exchange between notes and dollars and set the exchange rate between bitcoin and treasury dollars to be 8.37:1 versus todays exchange of 73000 notes to 1 bitcoin. It ends up a reverse collapse. And then they make crypto coins illegal across the board so people have to take the payback from investing in logical tokens.
I think most people must see it as you do, if they're even aware of it. I guess we'll see how it plays out. Theres gotta be a collapse somewhere...
It occurred to me that holding notes will be better than holding crypto when that day comes since they already have 1:1 exchange between notes and treasury dollars. Maybe thats why the stock owners of corporations that bought bitcoin were selling their Shares so they don't feel the bite when bitcoin evaporates and the corporations who own it, and individuals, will be left hanging. There was also an article on zerohedge noting trump supported the dollar, not that that means much but its a hint. I dunno... its been stewing with me for a month or so now...
Who is going to buy China, Germany, Japan, and SKs stuff? If they don’t recycle into US assets (and they often hide these purchases or buy alts like MBS), then US consumers can’t afford to consume. All of these countries are deeply structurally imbalanced to exports. There just isn’t anyone big enough to absorb their trade. Quite frankly the US in general would be better off long term if people stopped buying treasuries. There’d be dislocation and Wall St would suffer but it would reshore more manufacturing and spur US growth. So I’m all for it but I doubt the exporters are going to commit suicide if they don’t have to. I think they are stuck.
I think causality is the other way - US consumes way more than any other nation on a per capita basis, and hence needs to import. Its the US demand that drives the export led model, not the other way round. But politically that works in the US - growth is very popular, even if credit driven
Which is the chicken and which is the egg doesn’t seem that important. Regardless, we’ve constructed a deeply imbalanced system that suppresses the wages of workers in all the countries involved.
You can cover some of that credit fueled growth by spending in the public sector or allowing debt build ups in the private sector like the GFC but it always blows up. I see Trump as intimately tied to this issue. We shipped steady middle class manufacturing jobs off the Asia and so we have a lot of resentful working people. Same thing with Brexit.
Until we lessen the power of Wall St in favor of main st I think it’ll continue. I think in the end this is what you are saying. Anyway listen to me. I’m losing my capitalist edge.
It's true, it is difficult to see where non-US demand is coming from. Certainly the Chinese have failed in that role once they stopped building ghost cities.
Demand is easy... stimulus or pay increases act very quickly - and largely politically popular. Its just that businesses hate it
Russell,
I would take a look at Michael Pettis’s work in this area. I think the causality is more reflexive. For example if US behavior was causing the current account deficits one would expect the US to be forced to raise interest rates to attract funding. Most of the time this isn’t the case. This was the basis for Bernanke’s “savings glut” idea earlier in the century.
My take is that foreign nations want to reduce unemployment and over produce to accomplish this goal. The US is willing (and able) to accept this outcome for hegemonic reasons; helps keep inflation down too
but is it? the Chinese have been unable to do it for more than a decade effectively
The Chinese have loads of US dollars... they give loans to 3rd nations in US dollars and make the loaned to country pay them back in Yuan. This is so the 3rd nation can pay its IMF/WORLD bank loan back in US dollars since they have been cutoff from getting them directly from the fed reserve. Its an odd dynamic thats being used to hide the collusion of national governments from the national publics they are responsible to so they can pretend globalization is dead and they're not working in collusion with each other to take over the world as a multipolar Alliance..
Switching from gold money to paper money helped the US spend more freely, and countries like Japan and China prefer saving their money as IOUs from the US government because they're easy and usually make good money. But, there are some issues brewing, like tensions with China and other countries not liking what the US is doing, which could change how things work in the financial world.
Of course, the US is prepared for all of this. Let's see how the story unfolds and do what we can to help each other prepare.
In essence, this is the dollar milk shake theory which is a play on Triffin dilemma. Ultimately what it comes down to is that structurally the United States accounting books is always going to look horrible in order to keep the plumbing of the global finical system operating. See what happens to the rest of the world when King dollar is on which generally means higher interest rates. Global growth slows, banking crisis tend to occur, trade slow, & default-generally by developing nations-occur. Since the United States does not need to import dollars and as a result of global wars and gold does not affect the amount of dollars in the global economy, it makes sense why the U.S. has the majority of it's reverse in gold. A hand few of developed nations have gold as reverses because of culture, historical, and traded-most countries in EU trade & settle with each other in Euros-which is why Germany, Italy, etc have large gold reverses. In face dollar usage and penetration has increase since the recent wars because: 1) higher rates attract more capital 2) the U.S. is the most establish and safest country that can absorb all the Eurodollars that are out there.
Given the tendency of nations states to misinform (i.e., lie), I have a very hard time believing that the US (or any so-called 'advanced' economy) actually has the gold reserves they claim to have. Unless they happen to have had a recent public and transparent audit of said reserves, their claim must be taken on complete and total faith--a state of trust that no government/politician deserves.
With the growth of repo markets and secured lending, I suspect collateral (Treasuries) will become more & more important - ergo more in demand.
This also ties in with recent Fed inventions such as the FIMA repo facility & BTFP.
It's important to remember the exponential value of network effects in businesses like Google or Microsoft. But that exponential value works both ways. 10% less users on Google means exponentially less value to the Google network. I suspect that, this is true for the dollar's status as well.
Secondly on the politics situations. China and Russia have sat down and made a deal. "The way to weaken the US is to weaken the dollar".
I would suggest that even more than Microsoft or Google, payments systems like Visa & Mastercard would be the first network businesses to go.
Yet to date, shorting V or MA has been a mug's game.
Eventually you'll be right, the risk is that you lose all your capital beforehand!
True. But it has been fascinating to watch how they have struggled to grow in Asia
Hi... are you aware of the plan to flip from federal reserve notes to dept of the treasury USA dollar bills? with a 1:1 exchange rate initially? The links worth a read. You can sorta indirectly corroborate this by looking at the usdebtclock.org and note the money creation oddities on the bottom left and bottom right, and then compare to the time machines 2028 naming of the same fields.
https://ssrn.com/abstract=3563007
you are probably not old enough to remember US Notes which circulated freely with Federal Reserve Notes and Silver Certificates. almost no one understood the difference or even noticed the difference. A US Note was a direct debt of the Treasury, while a Fed Reserve Note has to be backed up by a debt instrument issued by the Treasury. Not much difference, except maybe the Fed gets to decide how many of what denominations are issued.
I am old enough, there were still silver notes floating around in the 80s. I guess maybe the play is to put them into circulation so nobody notices but by 2028 they will have about 6 trillion treasury dollars in circulation and still have 17 trillion in fed reserve notes out there. I don't disagree with you unless they pull some legal shenanigan that turns the two currencies into a non 1:1 exchange rate.
It feels like they are going to use crypto, perhaps bitcoin, as the 3rd leg of the 3 card monte. ie get bitcoin valued at 100k reserve notes, then in a year or 5 years they break the 1:1 exchange between notes and dollars and set the exchange rate between bitcoin and treasury dollars to be 8.37:1 versus todays exchange of 73000 notes to 1 bitcoin. It ends up a reverse collapse. And then they make crypto coins illegal across the board so people have to take the payback from investing in logical tokens.
I think most people must see it as you do, if they're even aware of it. I guess we'll see how it plays out. Theres gotta be a collapse somewhere...
It occurred to me that holding notes will be better than holding crypto when that day comes since they already have 1:1 exchange between notes and treasury dollars. Maybe thats why the stock owners of corporations that bought bitcoin were selling their Shares so they don't feel the bite when bitcoin evaporates and the corporations who own it, and individuals, will be left hanging. There was also an article on zerohedge noting trump supported the dollar, not that that means much but its a hint. I dunno... its been stewing with me for a month or so now...
https://www.thetruthseeker.co.uk/?p=283499