The Dollar Is Dead(mathmeetsmoney.substack.com)
mathmeetsmoney.substack.com
The Dollar Is Dead
https://mathmeetsmoney.substack.com/p/the-dollar-is-dead
366 comments
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.
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.
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.
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It's interesting to note that even when these tax schemes were repealed, the damage had already been done and the wealth did not return.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
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It's interesting to note that even when these tax schemes were repealed, the damage had already been done and the wealth did not return.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
Explain to me the benefit of attracting the wealthy if they don't pay tax?
Come to our country - have our police and courts and soldiers protect you wealth - all for free.
Oh - and because you are not paying tax - can I borrow some of that wealth please so I can pay for the stuff I'm providing for you free - I'll give you a healthy return.
The rich benefit the most from civilisation - and it costs - you can't just keep running from country to country hollowing it out for ever - eventually there will be nowhere left you can free ride.
Oh and in terms of the charts where you increase a particular tax and revenue goes up in the short term and down later - that's because people adapt - they find new ways to avoid tax ( yep including to pretend to have left the country ).
Just bwcause they run, that's not a reason to stop pursing them.
Come to our country - have our police and courts and soldiers protect you wealth - all for free.
Oh - and because you are not paying tax - can I borrow some of that wealth please so I can pay for the stuff I'm providing for you free - I'll give you a healthy return.
The rich benefit the most from civilisation - and it costs - you can't just keep running from country to country hollowing it out for ever - eventually there will be nowhere left you can free ride.
Oh and in terms of the charts where you increase a particular tax and revenue goes up in the short term and down later - that's because people adapt - they find new ways to avoid tax ( yep including to pretend to have left the country ).
Just bwcause they run, that's not a reason to stop pursing them.
> Explain to me the benefit of attracting the wealthy if they don't pay tax?
You've fallen victim to the false dichotomy. I don't see anyone argue the wealthy shouldn't pay any tax at all.
This renders the 2nd paragraph wrong. And then 3rd paragraph wrong too.
> you can't just keep running from country to country hollowing it out for ever - eventually there will be nowhere left you can free ride.
Depends how much time it takes to run from one country to another, and what you mean by "for ever" - if it takes you a year to move from one country to another and you live for 100 years, you need 100 countries. Pardon my humorous remark, I know this is not the point; but the actual argument is easier to counter: we don't have a single government for the Earth. We don't have a united dominating force to unify taxes in one civilization and sanction or isolate from the other civilizations for hosting the rich.
IMO the education is poor, producing stupid societies electing the governments which are incompetent, corrupt and largely sympathizing with the rich.
You've fallen victim to the false dichotomy. I don't see anyone argue the wealthy shouldn't pay any tax at all.
This renders the 2nd paragraph wrong. And then 3rd paragraph wrong too.
> you can't just keep running from country to country hollowing it out for ever - eventually there will be nowhere left you can free ride.
Depends how much time it takes to run from one country to another, and what you mean by "for ever" - if it takes you a year to move from one country to another and you live for 100 years, you need 100 countries. Pardon my humorous remark, I know this is not the point; but the actual argument is easier to counter: we don't have a single government for the Earth. We don't have a united dominating force to unify taxes in one civilization and sanction or isolate from the other civilizations for hosting the rich.
IMO the education is poor, producing stupid societies electing the governments which are incompetent, corrupt and largely sympathizing with the rich.
They should pay in proportion to the amount of value they capture - having in effect, much lower margin rates the wealthier you are doesn't help pay the bills or maintain some sort of meritocracy.
And sure - while you could move from one country to another like a parasite finding a new host, and cycle around as the original host recovers - the key questions is whether that results in a few people owning more and more as a result, and paying a lower and lower marginal rate until civilisation collapses. ( or the rich decide to take the rains of power instead to keep the society they benefit from so hugely afloat ).
> IMO the education is poor, producing stupid societies electing the governments which are incompetent, corrupt and largely sympathizing with the rich.
I think you underestimate the level to which the rich judicously share their wealth in order to influence people and policy.
And sure - while you could move from one country to another like a parasite finding a new host, and cycle around as the original host recovers - the key questions is whether that results in a few people owning more and more as a result, and paying a lower and lower marginal rate until civilisation collapses. ( or the rich decide to take the rains of power instead to keep the society they benefit from so hugely afloat ).
> IMO the education is poor, producing stupid societies electing the governments which are incompetent, corrupt and largely sympathizing with the rich.
I think you underestimate the level to which the rich judicously share their wealth in order to influence people and policy.
They still pay vat at least and employe cleaners etc.
Better then nothing
Better then nothing
They even try and avoid VAT - an example if flying a private jet outside the country to 'buy' it.
Or in the case of Abramovich - allegedly create a whole circular set of sham companies to avoid paying VAT on your super yacht.
See https://www.thebureauinvestigates.com/stories/2025-06-19/cyp...
Or in the case of Abramovich - allegedly create a whole circular set of sham companies to avoid paying VAT on your super yacht.
See https://www.thebureauinvestigates.com/stories/2025-06-19/cyp...
Until they lobby hard enough to have a reduced VAT on luxury goods as it happened in France. The argument being, you guessed it, otherwise they would buy stuff elsewhere.
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.
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.
>Europe has repeatedly tried to soak the rich, and the results are always the same:
Yes, the results are always the same: Europe consistently runs lower budget deficits, yet provides greater benefits to their citizens. How awful for them.
https://www.cato.org/blog/spending-debt-oecd
https://oecdstatistics.blog/2023/02/02/sizing-up-welfare-sta...
Yes, the results are always the same: Europe consistently runs lower budget deficits, yet provides greater benefits to their citizens. How awful for them.
https://www.cato.org/blog/spending-debt-oecd
https://oecdstatistics.blog/2023/02/02/sizing-up-welfare-sta...
Europe also consistently hasn't paid for its own defense in eighty years.
They spend less than the US as a percentage of GDP, yes, but they don't spend zero: 2.5% or so vs our 4%. But who's to say they aren't right and we're wrong? Think about the cost of the Iraq and Afghan wars. Good investments?
Not allowing the Soviets to annex western europe in the 1960s. Good Investment?
The US is a long way away from trying to "soak" anyone. We have a top rate on long-term capital gains of 20%.
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!
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!
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.
You should include state taxes, which in CA's case tops at 13.3% and 3.8% NII, bringing the total to 37.1%.
Not that increasing taxes on capital gains is the way to go, but America's wealthy aren't going to move to China or India.
With NIIT, it's an additional 3.8% on top of that (for the highest income filers). So 23.8%.
https://www.irs.gov/newsroom/questions-and-answers-on-the-ne...
https://www.irs.gov/newsroom/questions-and-answers-on-the-ne...
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.
It creates rich-people dollars and poor-people dollars. The poor people can still afford a buy a few necessities because rich-people money is tied up in useless vain endeavors, at least to some extent. If rich were to direct all their purchasing power toward real goods they could drive up the prices and make it unaffordable for regular people. As happens with the housing market to some extent.
Edit: unautocorrect
Edit: unautocorrect
> As happens with the housing market to some extent.
As happens in any market with limited supply, which generally means desirable land and luxury goods.
As happens in any market with limited supply, which generally means desirable land and luxury goods.
All demand is not created equal. The rich buy more houses than they need for shelter, in order to produce income. This essentially creates an artificial shortage of homes for purchase by actual homeowners. I believe that is what the commenter was referring to.
* corollary
> 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?
Why can't they tax something that _cant_ be moved elsewhere, like property ownership?
> Why can't they tax something that _cant_ be moved elsewhere, like property ownership?
1. Because any tax has to be politically palatable to voters, so therefore needs to exclusively target non-voters.
2. Because even if the above is satisfied, there are a large number of voters whose livelihoods are catering to non-voters.
1. Because any tax has to be politically palatable to voters, so therefore needs to exclusively target non-voters.
2. Because even if the above is satisfied, there are a large number of voters whose livelihoods are catering to non-voters.
Spain does that
but in general the US tax rate on the middle class is low compared to Europe
but in general the US tax rate on the middle class is low compared to Europe
Raising taxes generally raises money. In some cases it can lead to capital flight but that’s hardly some universal economic rule.
But besides raising capital, taxation reduces wealth inequality, which is itself beneficial as it makes society more democratic. Reducing wealth inequality reduces the concentration of power, which is better for everyone (except for the 1%).
Still, when redistributing wealth, it’s prudent to address the risk of capital flight. It’s not an insurmountable challenge. Policy can address it through: 1) financial controls 2) coordinated international efforts to raise taxes on the wealthy, and 3) harsher measures like nationalization and capital levies.
But besides raising capital, taxation reduces wealth inequality, which is itself beneficial as it makes society more democratic. Reducing wealth inequality reduces the concentration of power, which is better for everyone (except for the 1%).
Still, when redistributing wealth, it’s prudent to address the risk of capital flight. It’s not an insurmountable challenge. Policy can address it through: 1) financial controls 2) coordinated international efforts to raise taxes on the wealthy, and 3) harsher measures like nationalization and capital levies.
Something to point out also is that more equality is actually better even for the 1%. They are just too short-term-focused and greedy to see that. There is nothing they can get today that they wouldn’t be able to get tomorrow if we taxed them appropriately. In return, they would live in a more stable and safe society, a less brittle economy, and wouldn’t be as reviled socially. But they are just too focused on their net worth to see that.
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"
Nothing at all supports that "the rich move their wealth somewhere else"
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.
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.
The way to resolve it would be to form a first-world block and negotiate equal terms for treating extreme wealth.
Penalized by group action against defectors.
Which is to say something like this should come from the WTO, or not at all.
Anything less has too great incentives for defection.
Penalized by group action against defectors.
Which is to say something like this should come from the WTO, or not at all.
Anything less has too great incentives for defection.
That would be good and all...
But do you have actual evidence that we need it? (Instead of just "nice to have".) Because everybody just repeats that without evidence, like the OP.
There are plenty of reasons to expect the OP's prediction not to hold. I don't know how things play out in practice, and I don't think I've ever seen anybody that knows it.
But do you have actual evidence that we need it? (Instead of just "nice to have".) Because everybody just repeats that without evidence, like the OP.
There are plenty of reasons to expect the OP's prediction not to hold. I don't know how things play out in practice, and I don't think I've ever seen anybody that knows it.
The IRS taxes americans no matter where they are or where they take their money. The US is only one of two nations in the world with citizenshp based taxation. And if you want to renounce your citizenship, 35% exit tax. The only solution is to make a foreign corporation (Apple keeps its income in Ireland for example) and hide your money there (The City of London does a brisk business setting up corps in their old colonies - when the IRS comes knocking, the City of London plays dumb)
It's also not that simple for an individual. If you own more than 10% of the corporation you get hit with CFC rules, a base 37% tax on gains. Or PFIC rules if it's passive.
https://en.m.wikipedia.org/wiki/Foreign_earned_income_exclus...
a tax credit of more than 130K USD ... for most expats this seems like completely negating their US taxe burden, no?
a tax credit of more than 130K USD ... for most expats this seems like completely negating their US taxe burden, no?
I guess investment income doesnt count. Dont know about stock options your company gives you but that usually isnt considered earned income
Some will move , unless everyone does it together
Good luck moving your consumers and real-estate to another country.
The only reason it fails its because its not being properly done.
Sure you can move cash away but even that can be taxed with an 'exit' tax.
The only reason it doesn't work is because the will is not there to make it:
1. Unexpected
2. With no baked in loopholes
Sure you can move cash away but even that can be taxed with an 'exit' tax.
The only reason it doesn't work is because the will is not there to make it:
1. Unexpected
2. With no baked in loopholes
Federal receipts as a percent of GDP:
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.
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.
> But growth in government spending has outstripped it, and it has been getting worse rather than better.
cough Universal single-payer healthcare with aggressive, adversarial price negotiation.
cough Universal single-payer healthcare with aggressive, adversarial price negotiation.
That can't be the explanation because it wasn't present in the US before the government was running huge deficits either.
As in, the US still doesn’t have it.
Hence the propensity to sink growing amounts of GDP into paying an ever-heightening stack of middlemen to provide medical care at market prices... instead of simplifying the stack and saving money.
The US government created a mandate, then allowed it to metastasize as health care became more technical and expensive, and is now in the business of sticking its fingers in its ears and pretending there’s not a financial problem.
https://www.cms.gov/data-research/statistics-trends-and-repo...
Hence the propensity to sink growing amounts of GDP into paying an ever-heightening stack of middlemen to provide medical care at market prices... instead of simplifying the stack and saving money.
The US government created a mandate, then allowed it to metastasize as health care became more technical and expensive, and is now in the business of sticking its fingers in its ears and pretending there’s not a financial problem.
https://www.cms.gov/data-research/statistics-trends-and-repo...
Everyone in that spending pipeline is doing it[1], not just the US government.
[1] https://siderea.dreamwidth.org/1179450.html (very long; you’ll need to get to at least part 2 to see the relevance)
[1] https://siderea.dreamwidth.org/1179450.html (very long; you’ll need to get to at least part 2 to see the relevance)
> The change isn't that the government is collecting less money.
The government is collecting less spending relative to taxes. A deficit is a difference between the two. Logically addressing either side would improve the deficit. However the ruling class prefers hoarding wealth, financing wars, and cutting social programs.
The government is collecting less spending relative to taxes. A deficit is a difference between the two. Logically addressing either side would improve the deficit. However the ruling class prefers hoarding wealth, financing wars, and cutting social programs.
Whether you measure it as nominal dollars, real dollars or real dollars per capita, the US government's tax revenue has only increased over time, so the only explanation for why there are huge deficits now and not before is that its spending has increased by even more. Moreover, a major proportion of that spending increase did go to social programs, and the top 50% of incomes pay 97.7% of the federal taxes.
The actual problem is that even a lot of the "social programs" don't ultimately go to the poor. They require specific services that divert the money to contractors or landlords, or go to affluent retirees who don't really need the money. And, of course, the defense budget is entirely out of hand as well -- but why should we extract more from the economy to fund things that ought not to be funded?
The actual problem is that even a lot of the "social programs" don't ultimately go to the poor. They require specific services that divert the money to contractors or landlords, or go to affluent retirees who don't really need the money. And, of course, the defense budget is entirely out of hand as well -- but why should we extract more from the economy to fund things that ought not to be funded?
> and the top 50% of incomes pay 97.7% of the federal taxes.
The bottom 50% of incomes get 2.5% of GDP. Seems proper to me.
The bottom 50% of incomes get 2.5% of GDP. Seems proper to me.
Gemini 2.5 Flash thinks they get 13.9%.
When I asked for its source, it replied, "The Distribution of Household Income, 2019," by the Congressional Budget Office.
When I asked for its source, it replied, "The Distribution of Household Income, 2019," by the Congressional Budget Office.
They get 2.5% of wealth which is a better estimate of real earnings. The data is for Q3 2024.
I disagree that wealth is a better measure to use here. As programmers should know better than anyone, most of the wealth in the world is in the form of people and their capacity to work on teams that solve practical problems, but the wealth stats you want to use dont even try to estimate that form of wealth.
In economics terms, wealth is a measure of capacity to save, taxes come from that capacity too, so I use it as a better estimate of how much a particular demographics can contribute to taxes.
I think that's fair in the context of this thread, given the present distribution realities, the bottom 50% can't contribute to tax revenue. Conversely and a bit more subtle, the top 50% ability to save doesn't seem to be impaired by their >97% contribution to revenue.
> As programmers should know better than anyone, most of the wealth in the world is in the form of people and their capacity to work on teams that solve practical problems
I'm looking at this as a practical matter, I'm far from moralism and moral philosophy so I can't really relate to your argument above.
I think that's fair in the context of this thread, given the present distribution realities, the bottom 50% can't contribute to tax revenue. Conversely and a bit more subtle, the top 50% ability to save doesn't seem to be impaired by their >97% contribution to revenue.
> As programmers should know better than anyone, most of the wealth in the world is in the form of people and their capacity to work on teams that solve practical problems
I'm looking at this as a practical matter, I'm far from moralism and moral philosophy so I can't really relate to your argument above.
Yeah, but for taxation you need state capacity to enforce it which was chainsawed/DOGED away.
This isn't true. US tax revenue in 2025 is on track to be the highest ever.
Perfect, just in time to put a teeny tiny dent in our new 2 Trillion dollar raised deficit! Thanks "party of fiscal responsibility"!
Adjusted for inflation?
> There is no "overspending." There is only undertaxing. The debt is literally just the accumulated difference between spending and taxation.
There is obviously both - as you say it's the difference between two numbers - and sure how you portray that differences is often politicised - just as you are doing now.
Also remember there is borrowing in the equation - it's not just money in the system, but the ability to spend made up money today based on future promises, the with the rich benefitting from the interest on that debt.
ie those with assets benefit twice from a gap between spending and taxation - they get to not pay their way, and also get a nice return on lending the money then didn't pay in tax to pay for the necessary spending!
There is obviously both - as you say it's the difference between two numbers - and sure how you portray that differences is often politicised - just as you are doing now.
Also remember there is borrowing in the equation - it's not just money in the system, but the ability to spend made up money today based on future promises, the with the rich benefitting from the interest on that debt.
ie those with assets benefit twice from a gap between spending and taxation - they get to not pay their way, and also get a nice return on lending the money then didn't pay in tax to pay for the necessary spending!
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.
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.
[deleted]
>> 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.
With current level of debt it does not matter. Taxes should be rised for everyone if huge cuts in expenses are not done.
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.
If extreme spending was cut, the debt would be zero.
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?
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.
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.
FY2024 federal spend 6.75 trillion. FY2019 was 4.4 trillion. FY2009 was 3.1 trillion. Twice the growth in half the time.
Was there so much more that private industry "will not fill" in 2024 vs 2009? How about vs 1999? (1.7 trillion budget). We can't attribute the difference to inflation: the US government's inflation calculator says 1.7 trillion in 1999 is 3.3 trillion today.
No one is arguing that the federal government doesn't need to spend some money. But this truth has no relevance to the absurd out of control spending we're witnessing today.
Was there so much more that private industry "will not fill" in 2024 vs 2009? How about vs 1999? (1.7 trillion budget). We can't attribute the difference to inflation: the US government's inflation calculator says 1.7 trillion in 1999 is 3.3 trillion today.
No one is arguing that the federal government doesn't need to spend some money. But this truth has no relevance to the absurd out of control spending we're witnessing today.
> FY2024 federal spend 6.75 trillion.
That's selective apples to oranges
Deficit as % of GDP:
2009 - 10%, 2011 - 8.6%, 2012 - 6.7%, 2013 - 4% ... 2019 - 4.6%, 2020 - 15%, 2021 - 12%, 2022 - 5.4%, 2023 - 6%.
That's selective apples to oranges
Deficit as % of GDP:
2009 - 10%, 2011 - 8.6%, 2012 - 6.7%, 2013 - 4% ... 2019 - 4.6%, 2020 - 15%, 2021 - 12%, 2022 - 5.4%, 2023 - 6%.
I don't think _deficit_ is at all a useful metric about the appropriate level of spending by the federal government-- Outside of emergencies deficit is merely a measure of gross financial incompetence in our elected officials.
It's a neoliberal scam. Claim government programs are ineffective, destroy the institutions behind those programs, and point to the resulting chaos as proof that the initial claims are true. Rinse and repeat.
I'm sure some of it is wasteful, but that last guys who tried to find it where scam artists. And then, despite gutting multiple services including Medicaid for US citizens, we're raising the deficit. By 2 Trillion dollars.
So the whole "cutting wasteful spending" thing... ssss yeah... not really working out I'd say.
So the whole "cutting wasteful spending" thing... ssss yeah... not really working out I'd say.
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.
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.
The default depends on your party and which party is in power.
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.
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.
Paper wealth used as collateral for loans should be taxed as income (or capital gains).
While I'm all for it, the real impact of this would likely be on the order of a few billion dollars, if that.
Most regular people could sit down and cut a billion dollars of dumb shit out of the budget in a few hours (every Congress person has their little pet projects they slide in to omni bills).
The fixes needed for this are massive, and the pain will be felt by everyone. Even taking the harshed path against the 1% will still leave plenty of pain for average folks.
Most regular people could sit down and cut a billion dollars of dumb shit out of the budget in a few hours (every Congress person has their little pet projects they slide in to omni bills).
The fixes needed for this are massive, and the pain will be felt by everyone. Even taking the harshed path against the 1% will still leave plenty of pain for average folks.
> While I'm all for it, the real impact of this would likely be on the order of a few billion dollars, if that.
The collateral loan -> invested -> growth, collateral loan -> invested -> growth cycle doesn't just result in tax avoidance on a one-time basis. It's a way to indefinitely grow capital at a higher rate, by pushing taxes further and further into the future.
And when any wealth gains are finally accounted for as taxable income, it's a one time tax that doesn't reflect all the compounding. So a huge time-value of money break.
So there is a compounding of the tax that is avoided over time, despite actual liquidity accessed and deployed all along.
This is one of the primary loopholes that lets wealth gains made from capital get taxed far below wealth created by labor (which gets very reliably taxed, and at higher rates). The percentage of wealth growth that actually gets taxed as a running number keeps growing, despite the ability to make those gains liquid via loans.
Imagine if you could do labor, then instead of taking your income and getting taxed, accept loan proceeds against your "delayed" salary, and invest the net gain from not being taxed. Indefinitely. (With interest on your loan, cancelled out by the "interest" on your delayed salary.)
That would be like being able to choose to pay your own IRA instead of paying taxes.
That's how the unrealized (but real) wealth gains -> leverage (the practical and very real realization) cycle works.
The collateral loan -> invested -> growth, collateral loan -> invested -> growth cycle doesn't just result in tax avoidance on a one-time basis. It's a way to indefinitely grow capital at a higher rate, by pushing taxes further and further into the future.
And when any wealth gains are finally accounted for as taxable income, it's a one time tax that doesn't reflect all the compounding. So a huge time-value of money break.
So there is a compounding of the tax that is avoided over time, despite actual liquidity accessed and deployed all along.
This is one of the primary loopholes that lets wealth gains made from capital get taxed far below wealth created by labor (which gets very reliably taxed, and at higher rates). The percentage of wealth growth that actually gets taxed as a running number keeps growing, despite the ability to make those gains liquid via loans.
Imagine if you could do labor, then instead of taking your income and getting taxed, accept loan proceeds against your "delayed" salary, and invest the net gain from not being taxed. Indefinitely. (With interest on your loan, cancelled out by the "interest" on your delayed salary.)
That would be like being able to choose to pay your own IRA instead of paying taxes.
That's how the unrealized (but real) wealth gains -> leverage (the practical and very real realization) cycle works.
YES.
Significant loans on collateral are liquidity events.
In general, any loan that was taxed up front as income, could be paired with counting loan payments on the principle as an expense against income. (And if the loan was for business, not personal, interest would also be an expense.)
This would make loans tax neutral vs. other ways of getting money out of assets.
It would eliminate the practice of cycles of leverage that lets the rich grow their wealth, use that to grow more wealth, over and over, while pushing taxation into the future indefinitely.
And it would make loans less attractive to take out (the upfront tax), and yet much easier to pay off (symmetric tax break for paying down debt). Which would result in a much less leveraged, more resilient, economy.
Significant loans on collateral are liquidity events.
In general, any loan that was taxed up front as income, could be paired with counting loan payments on the principle as an expense against income. (And if the loan was for business, not personal, interest would also be an expense.)
This would make loans tax neutral vs. other ways of getting money out of assets.
It would eliminate the practice of cycles of leverage that lets the rich grow their wealth, use that to grow more wealth, over and over, while pushing taxation into the future indefinitely.
And it would make loans less attractive to take out (the upfront tax), and yet much easier to pay off (symmetric tax break for paying down debt). Which would result in a much less leveraged, more resilient, economy.
Whoa - dude I hope you live in a bunker. Great ideas like this will make uncle Sam disappear you.
"If extreme wealth was taxed, the debt would be zero"
Do you have numbers for that? Even ignoring the issues with lots of wealth being paper wealth that cannot be translated into any kind of realized gains, and any 2nd order effects, the wealth (stock, can be depleted once) is not even in the same ballpark esp. given the deficit (flow, keeps happening).
Do you have numbers for that? Even ignoring the issues with lots of wealth being paper wealth that cannot be translated into any kind of realized gains, and any 2nd order effects, the wealth (stock, can be depleted once) is not even in the same ballpark esp. given the deficit (flow, keeps happening).
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Math doesn't support your claim.
>"Markets" should not have a veto on policy in a democracy.
capitalism is meant to be organic thing like a bacteria. a self-organizing network. one cannot legislate nature, one cannot legislate human nature. Imagine making crimes illegal and then nobody committing crimes. Imagine making it illegal to change lanes without using your turn signal.
a democracy can give an antibiotic by dr. democracy to clear the infection, that is the nature of control here .. but if it's a nasty bug.. the bug will veto the doctor
capitalism is meant to be organic thing like a bacteria. a self-organizing network. one cannot legislate nature, one cannot legislate human nature. Imagine making crimes illegal and then nobody committing crimes. Imagine making it illegal to change lanes without using your turn signal.
a democracy can give an antibiotic by dr. democracy to clear the infection, that is the nature of control here .. but if it's a nasty bug.. the bug will veto the doctor
Capitalism isn't meant to do anything.
We have a system of laws that undergird the economic system - the legal protection of private property being the main one. Private property requires a monopoly of violence to enforce.
When capitalism colonizes a legal system, it necessarily creates the incentives for the legal system to adopt laws to maintain itself. If for some reason private property was not legally enforceable, capitalism wouldn't get off the ground.
We have a system of laws that undergird the economic system - the legal protection of private property being the main one. Private property requires a monopoly of violence to enforce.
When capitalism colonizes a legal system, it necessarily creates the incentives for the legal system to adopt laws to maintain itself. If for some reason private property was not legally enforceable, capitalism wouldn't get off the ground.
> Capitalism isn't meant to do anything.
It was probably meant in the manner of: "the purpose of a system, is what it does"...
I.e. regardless of how it evolved (system of laws written with good intent, or system of laws organically grown out of corruption and lobbying...) what capitalism does now is its purpose, and we shouldn't expect it to be meant to do anything different.
> capitalism [...] necessarily creates the incentives for the legal system to adopt laws to maintain itself
Agree
> If for some reason private property was not legally enforceable, capitalism wouldn't get off the ground
I think this makes as much sense as saying: "if money wasn't a thing, capitalism wouldn't get off the ground".
Technically true, neither capitalism nor feudalism would be able to get off the ground, but "private property not enforceable" evokes images of thugs stealing your property... The truth is that the first few people (or group thereof) who accumulate a commodity (grain, livestock, widgets, etc.) would also be the first who would be able to bribe/pay thugs with a small share of their commodities, to help protect from (deny access to) others in the community.
The monopoly of violence (and legal authority) would grow out of the initial group.
In the same way, even if money was going to be abolished, any other commodity would just take its place, and rebuild capitalism with it. It is tricky to wrestle democratic control back, and move on from capitalism.
It was probably meant in the manner of: "the purpose of a system, is what it does"...
I.e. regardless of how it evolved (system of laws written with good intent, or system of laws organically grown out of corruption and lobbying...) what capitalism does now is its purpose, and we shouldn't expect it to be meant to do anything different.
> capitalism [...] necessarily creates the incentives for the legal system to adopt laws to maintain itself
Agree
> If for some reason private property was not legally enforceable, capitalism wouldn't get off the ground
I think this makes as much sense as saying: "if money wasn't a thing, capitalism wouldn't get off the ground".
Technically true, neither capitalism nor feudalism would be able to get off the ground, but "private property not enforceable" evokes images of thugs stealing your property... The truth is that the first few people (or group thereof) who accumulate a commodity (grain, livestock, widgets, etc.) would also be the first who would be able to bribe/pay thugs with a small share of their commodities, to help protect from (deny access to) others in the community.
The monopoly of violence (and legal authority) would grow out of the initial group.
In the same way, even if money was going to be abolished, any other commodity would just take its place, and rebuild capitalism with it. It is tricky to wrestle democratic control back, and move on from capitalism.
LOL. The US is not purely capitalist. It is a mix of socialist capitalism.
>>There is no "overspending." There is only undertaxing.
This is quite the take.
Do you run your household as “there is no ‘overspending.’ There is only under-earning.”
This is quite the take.
Do you run your household as “there is no ‘overspending.’ There is only under-earning.”
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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.)
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.)
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.
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.
My budget disagrees--the inflation has been rough. We in the US need to be great, which means forcing our government to change.
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.
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.
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.
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.
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.
The federal budget deficit for fiscal year 2024 totaled around 6.4% of GDP.
It's unsustainable long term.
Your last line ruined a good post.
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>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.
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.
> 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.
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.
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
Everyone will see higher prices as the costs of work increase
Interest rates will be low as there’s no other option
Indeed, demographics are destiny.
https://www.suerf.org/wp-content/uploads/2023/12/f_fa99ccdbe...
https://link.springer.com/book/10.1007/978-3-030-42657-6
https://www.suerf.org/wp-content/uploads/2023/12/f_fa99ccdbe...
https://link.springer.com/book/10.1007/978-3-030-42657-6
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.
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.
Over the last 40 years the S&P has consistently increased around 7% a year more than wages regardless of “money printing” or interest rates
It’s not regardless of government intervention. There have been numerous bailouts and interest rates deductions specifically to backstop SP500.
It is a stealth tax that targets the young (or those too poor to be beneficiaries), because leaders need to maintain purchasing power for their voters’ benefits (the vast majority going to the old) and the solvency of taxpayer funded defined benefit pensions.
It is a stealth tax that targets the young (or those too poor to be beneficiaries), because leaders need to maintain purchasing power for their voters’ benefits (the vast majority going to the old) and the solvency of taxpayer funded defined benefit pensions.
> 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.
Canada effectively has removed immigration cap. So no, not going to happen.
> 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.
There is also the chance of capital flight - and hyper inflation. The debt holders could also lose out remember - if the dollar becomes less valuable then any holdings in the dollar ( including debt ) become less valuable.
There is also the chance of capital flight - and hyper inflation. The debt holders could also lose out remember - if the dollar becomes less valuable then any holdings in the dollar ( including debt ) become less valuable.
Agree. But debt to GDP will continue to rise, and that eventually leads to something very bad.
You forget the imperialism option
But how ??
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.
Why is 90% for each step such an insurmountable probability?
Maybe it's completely unreasonable for you to assume the causation for each step isn't on the order of 99%. Your argument is too abstract to be a relevant rebuttal.
Maybe it's completely unreasonable for you to assume the causation for each step isn't on the order of 99%. Your argument is too abstract to be a relevant rebuttal.
It’s a generic argument that can be applied to a whole class of claims. I see smart people falling into this trap all the time. Someone is making a claim by presenting a series of steps that seem quite reasonable. You then are left in a position where you can either: a) accept the overall conclusion, or b) attack the individual reasoning steps. All I’m doing is pointing out a possibility that your reasoning steps can be entirely plausible while your conclusion is completely wrong.
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.
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.
He also published animated video versions:
45min https://youtu.be/xguam0TKMw8
5min https://youtu.be/BB2r_eOjsPw
45min https://youtu.be/xguam0TKMw8
5min https://youtu.be/BB2r_eOjsPw
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.
Honestly I’m sometimes questioning my sanity while reading the comments of videos like this. There are people acting like he’s a modern Prometheus, sharing the knowledge of financial whatever. I would really be amazed if my cynicism turns out to be wrong on this one.
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.
Honestly I’m sometimes questioning my sanity while reading the comments of videos like this. There are people acting like he’s a modern Prometheus, sharing the knowledge of financial whatever. I would really be amazed if my cynicism turns out to be wrong on this one.
I work with a fellow that raves about this guy and his "historical views on empires".
I'm not convinced, history is written by the surviving victors and revised by those with a narrative.
I'm a firm believer that the market is not logical predictable or rational, but it is game-able.
I'm not convinced, history is written by the surviving victors and revised by those with a narrative.
I'm a firm believer that the market is not logical predictable or rational, but it is game-able.
> So can someone educate me on the angle? What’s the goal here?
Gain influence, increase his marketing & exposure, creating new opportunities for himself. Good chance he also believes what he is preaching. All these things can be true at the same time.
He gives away a lot of the info in the book for free, so you can consider the book as just a method of marketing his ideas.
Gain influence, increase his marketing & exposure, creating new opportunities for himself. Good chance he also believes what he is preaching. All these things can be true at the same time.
He gives away a lot of the info in the book for free, so you can consider the book as just a method of marketing his ideas.
Ray Dalio is the shortvisioned guy who thinks Putin and Xi Jingping are great leaders to their countries. He probably would have said the same about Mussolini and Hitler.
Why do we keep listening to amoral fools like him?
Why do we keep listening to amoral fools like him?
ok, Africa it is.
>Dalio analysis agrees that today China power is rising and the USA is weakening
Ray Dalio knows nothing. US just put tariffs on every other country in the world. And threatened China with 145% tariffs to get them to come to the table and open up Chinese market even more, even though China is in its own Great Depression right now.
Ray Dalio knows nothing. US just put tariffs on every other country in the world. And threatened China with 145% tariffs to get them to come to the table and open up Chinese market even more, even though China is in its own Great Depression right now.
Underestimate your enemy at your own peril, I guess.
Recognizing that China is much stronger than 10y ago does not mean supporting it.
Recognizing that the advantage the USA has is getting thinner does not mean liking it.
Recognizing that China is much stronger than 10y ago does not mean supporting it.
Recognizing that the advantage the USA has is getting thinner does not mean liking it.
[deleted]
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.
[0] https://en.wikipedia.org/wiki/Triffin_dilemma
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
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?
The dollar is weakening because the US institutions are weakening. The EU might not be wealthy compared to the US, but at this moment in time it is more rational and future-proof than the volatile US business environment.
The main reason the US is a hub for well-paid programmers, is that there is a giant pool of VCs that subsidise growth for companies that can potentially find money all over the world thanks to the way the US still is a cultural hegemon to western liberal nations with strong English language skills. As long as a US based tech company leverages cultural hegemony (in a positive way) and deep VC pockets, they can succeed in Europe and the world.
The biggest tech company failing at using cultural hegemony in a positive way is Tesla. European consumers have largely abandoned Tesla thanks to E.M. He single handedly ruined the company's position of strength by thinking that US news and politics do not reach us. He did not understand the hegemonic aspect (or was too high to care).
The main reason the US is a hub for well-paid programmers, is that there is a giant pool of VCs that subsidise growth for companies that can potentially find money all over the world thanks to the way the US still is a cultural hegemon to western liberal nations with strong English language skills. As long as a US based tech company leverages cultural hegemony (in a positive way) and deep VC pockets, they can succeed in Europe and the world.
The biggest tech company failing at using cultural hegemony in a positive way is Tesla. European consumers have largely abandoned Tesla thanks to E.M. He single handedly ruined the company's position of strength by thinking that US news and politics do not reach us. He did not understand the hegemonic aspect (or was too high to care).
addressing only paragraph 2: American VC funded startups mostly don’t hire overseas remote programmers for two reasons: 1) they don’t need to, they are overfunded and the culture/communication overhead tradeoff is not worth it; 2) they are california biased which has poor timezone overlap with overseas time zones. The companies that historically lean in on overseas workers are the bootstrappers, because they cannot afford market american salaries. The company I founded is one such company.
US just put tariffs on every other country in the world, and nothing really happened. Thus, US is strong, not weak. dollar is weaker, US is not.
> and nothing really happened
I'm not sure what you expect to happen? Tariffs can be a tool to promote local industry but when used like this they're more of a tax on Americans. I don't think other countries want to play the retaliatory game because it's lose lose. Instead they'll make deals where they can and otherwise get on with things. Trade is going to reorient by itself. That will take time but it's already happening.
In any case, it doesn't show the US is strong. Everyone already knew it has the strongest economy in the world. What it does show is that the US is less stable than partners believed. It's hard to see this benefiting the American economy in the long term. But you know, that might not be terrible, if American workers get more jobs and a larger share of the pie, then it might work out.
I'm not sure what you expect to happen? Tariffs can be a tool to promote local industry but when used like this they're more of a tax on Americans. I don't think other countries want to play the retaliatory game because it's lose lose. Instead they'll make deals where they can and otherwise get on with things. Trade is going to reorient by itself. That will take time but it's already happening.
In any case, it doesn't show the US is strong. Everyone already knew it has the strongest economy in the world. What it does show is that the US is less stable than partners believed. It's hard to see this benefiting the American economy in the long term. But you know, that might not be terrible, if American workers get more jobs and a larger share of the pie, then it might work out.
And nothing really happened, yet. History is about to rhyme with Francisco Franco.
It's kind of too soon to tell how this plays out.
Trump just fired the BLS chief because the economic data from liberation day onward was terrible..
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.
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.
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.
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.
That depends on what kind of media you consume. Feeling isn't really a good indication of reality.
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.
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.
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 economy and markets of made of people with feelings. Perception is an important part.
This is about how the courts operate with regards to international business disputes, US has proven record about being impartial in these matters.
Even if that is true, the US's proven record does not include the current administration.
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.
I don't think our system of separation of powers was designed with the modern political party system we currently have in mind.
That’s true, but doesn’t necessarily contradict the question posed. Is any other country _better_ in both of those dimensions?
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.
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.
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.
The United States won’t let their reserve currency go without a fight
> Do you even need singular global currency in modern world? Where every transaction can be in essence instant if there was desire.
Pricing at international scale becomes a lot more complicated without a singular global reserve currency.
Pricing at international scale becomes a lot more complicated without a singular global reserve currency.
> 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.
The world doesn't need it, but unless Americans want to see their purchasing power destroyed, they do.
Currency is backed by military, not courts. Courts are also backed by military.
That’s not really true, or at best reductive. The Eurozone does not have a military yet has a very valuable and relatively stable currency. Yes, various counties in the zone do have strong militaries, but it’s not the same as the body backing the currency having one.
Exactly. I can’t believe there are people on HN who believe the dollar becoming de facto currency had anything to do with USA’s savoury virtues, judicial or otherwise It didn’t “become”, it was forced.
There is no viable alternative
But that doesn’t mean confidence in the dollar can’t die anyway before an alternative is found. Straight up chaos and collapse is a hopefully remote but real possibility.
Remember how the 2008 crisis was stopped? Strong messages from reserve banks that they’ll backstop and people believing them. That trick doesn’t work in the world author it’s describing.
But that doesn’t mean confidence in the dollar can’t die anyway before an alternative is found. Straight up chaos and collapse is a hopefully remote but real possibility.
Remember how the 2008 crisis was stopped? Strong messages from reserve banks that they’ll backstop and people believing them. That trick doesn’t work in the world author it’s describing.
Why court system is relevant for the currency?
I assume British courts can enforce contracts that deal in dollars.
I assume British courts can enforce contracts that deal in dollars.
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.
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.
"... 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.)
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.)
BRICS word includes India and China. So good luck with that :)
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%.
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%.
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.
Eh. That was only true before the price hikes caused by those ultra low rates.
If everyone has access to ultra low rates, housing supply prices rapidly increase to match demand, and you reach a new equilibrium (albeit with higher price:income multiples).
So it’s not papering over anything — it just goosed housing prices higher.
If everyone has access to ultra low rates, housing supply prices rapidly increase to match demand, and you reach a new equilibrium (albeit with higher price:income multiples).
So it’s not papering over anything — it just goosed housing prices higher.
I think increasing housing values succeeded in solving the banking crisis that was created by the erosion of banking capital when they foreclosed on properties that were worth less than the loan value, because the banks lent money without downpayment to subprime borrowers.
Now we're currently papering over the resulting sky high asset values by allowing inflation to erode the relative value of the sky high real estate.
Now we're currently papering over the resulting sky high asset values by allowing inflation to erode the relative value of the sky high real estate.
> Now we're currently papering over the resulting sky high asset values by allowing inflation to erode the relative value of the sky high real estate.
That will only be true if inflation in non-housing accelerates and housing prices stay constant, which seems unlikely in a supply-constrained market.
In any high-inflation scenario, real assets are likely to be highly attractive. Where else? Bonds, death. Equities, only if the economy keeps humming while inflation persists. Gold, bad price appreciation.
That will only be true if inflation in non-housing accelerates and housing prices stay constant, which seems unlikely in a supply-constrained market.
In any high-inflation scenario, real assets are likely to be highly attractive. Where else? Bonds, death. Equities, only if the economy keeps humming while inflation persists. Gold, bad price appreciation.
Not wanting is good. From Europe POV the countries got pressured into contracts that they know were bad.
It's closer to a cold war situation than just "selling dept"
It's closer to a cold war situation than just "selling dept"
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...
But we don't have covid this time.
We do have the same guy in the White House again though...
> But we don't have covid this time.
RFK Jr: ‘Hold my unpasteurized beer...’
RFK Jr: ‘Hold my unpasteurized beer...’
water9(5)
I'm assuming you believe COVID shutdown was 2019-2020?
Covid shutdown was 2020, do you remember who was president?
What about the other three years?
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.
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?”
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?”
I wonder what the Maria Theresa dollar of the future will be.
It's which came first the chicken or egg?
The fall of the dollar will happen because anyone(everyone) with significant wealth will divest from the dollar CAUSING the de-dollarization. That's the point of the indicators.
Don’t forget that you also can invest in negative dollar by taking loans. Then, the reduction of purchasing power does actually benefit you.
So, whoever has significant wealth will do exactly this and take out loans to purchase productive assets and then, later on, pay back much less because the dollar lost value in the mean time.
This works out as long as the interest rate is lower then the actual annual loss in purchasing power.
So, whoever has significant wealth will do exactly this and take out loans to purchase productive assets and then, later on, pay back much less because the dollar lost value in the mean time.
This works out as long as the interest rate is lower then the actual annual loss in purchasing power.
Shorting is a bad idea unless you can accurately predict the timing of the crash. Otherwise it'd likely your gains will go down to -5000% before they suddenly rocket up to 99%. And you'll close your position out of fear, when it's about -1000%.
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.
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.
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.
Russia is a non starter, and China is unlikely to make the political change necessary to be a reserve currency.
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.
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.
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.
[1] https://www.sas.upenn.edu/~jesusfv/Slides_London.pdf
[2] https://news.ycombinator.com/item?id=43506589
(not investing advice)
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)
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.
> 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.
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.
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.
AI is the next .com bubble. The writing is on the wall; I have no idea why no one can see the parallels.
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.
It's hard to take your point of view seriously after that honestly.
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.
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.
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.
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.
It's under appreciated that some jobs being trivially done by LLMs doesn't mean that all jobs are trivially done by LLMs.
Low-value-add marketing copy, for example, being automated changes... what? Now LLM-generated copy is the new minimal-cost baseline, and everyone adapts to the new normal.
The real killer feature will be autonomous business planning, but we're a long way from there.
Low-value-add marketing copy, for example, being automated changes... what? Now LLM-generated copy is the new minimal-cost baseline, and everyone adapts to the new normal.
The real killer feature will be autonomous business planning, but we're a long way from there.
> If you think the US has a debt problem, the Eurozone is much worse.
Not sure I’d agree. Eurozone debt to gdp is around 90 while us is above 120
Specific countries are in trouble (France and Greece mainly) but overall position is somewhat respectable
Not sure I’d agree. Eurozone debt to gdp is around 90 while us is above 120
Specific countries are in trouble (France and Greece mainly) but overall position is somewhat respectable
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.
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.
India is not going to happen for atleast a few decades and Africa isn’t even on the remotest horizon.
> I’m somewhat confident in the Euro
out of curiosity, why do you believe that?
out of curiosity, why do you believe that?
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).
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.
Unless they're paying Russia for energy, they're buying oil and LNG in dollars.
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).
i would say this: if thanos snapped his fingers and made dollars disappear, the euro would be the best choice among a bunch of shitty choices for world reserve currency, but still trailing behind "no reserve currency at all".
Those holding gold and silver may be insulated. Historically, it's a great hedge against hyperinflation (dedollarization).
> 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.
No it'll be renminbi, with the euro, if they are lucky as a distant second place.
China is more in a debt trap than even the US. Their only clean balance sheet is the central government balance sheet.
It might help if I could actually convert to renminbi.
That is kind of a first step. You know, actually being able to convert from one currency to another.
That is kind of a first step. You know, actually being able to convert from one currency to another.
China simply cannot exist without the USA and unlike Russia they have no real natural resources to back up their currency.
I'm sorry but that is utter utter bullshit.
China is an exporting and manufacturing powerhouse. Something that is only accelerating. Don't get me wrong, china has a whole bunch of issues. but currently political instability kneecaping economic growth is not one of them.
Also China knows that unemployment means the end of their control. So they will do anything and everything to keep people gainfully employed. the USA less so, and we'll see if that works out for them.
Russia has a tiny economy based on war and oil.
China is an exporting and manufacturing powerhouse. Something that is only accelerating. Don't get me wrong, china has a whole bunch of issues. but currently political instability kneecaping economic growth is not one of them.
Also China knows that unemployment means the end of their control. So they will do anything and everything to keep people gainfully employed. the USA less so, and we'll see if that works out for them.
Russia has a tiny economy based on war and oil.
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.
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.
> Am I at great risk for having most of my wealth tied to the dollar?
You are guaranteed to fail, no question.
The dollar is a corrupted unit of value that is meant to pump assets and exert global control. Look at any dollar buying power chart to see what your future looks like - a never ending chart down.
You are guaranteed to fail, no question.
The dollar is a corrupted unit of value that is meant to pump assets and exert global control. Look at any dollar buying power chart to see what your future looks like - a never ending chart down.
Unless you're holding only cash, why would that matter? Your real wealth can grow as long as you are holding assets that appreciate faster than the dollar depreciates.
> 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...
Well, you lost 15% compared to Euros this year so far...
It's pretty obvious when I see this comment or others about the dollar losing value at a historic rate that the person commenting read it somewhere and doesn't actually understand the currency movement and has zero context. Your comment isn't even factually correct either - the USD is down 10.63% against the Euro this year, not 15%. Now to add a bit of context, it's up nearly 40% over the last 15 years against the Euro. The dollar is currently sitting at a level vs the Euro that is higher than 31 out of the last 45 years. It is at the same level it was in November 2021, which is still far above the mean.
Have a look at the dollar index since it's inception in 1967. Does it look like the dollar is plummeting to you?
https://www.tradingview.com/symbols/TVC-DXY/?timeframe=ALL
Have a look at the dollar index since it's inception in 1967. Does it look like the dollar is plummeting to you?
https://www.tradingview.com/symbols/TVC-DXY/?timeframe=ALL
Because this was a reply to my comment: It reads to me a lot like "you are reading the tea leaves wrong". Switch the graph, the time frame.
But what would be a better way to talk about this? A more helpful and actionable one?
It’s not about just switching the graph. It’s about looking at the entire graph, at which point it becomes obvious that the current pullback of the dollar has happened many times and is completely normal. Don’t get me wrong - the current administration seems hellbent on destroying it, but what we’re currently seeing does not justify alarm yet.
Really appreciate the very serious reply.
But my initial comment had a very different intent:
Economic analysis like in the linked article is crazy to me. Predictions for 15 years out! With graphs to support it! That seems mad to me, and especially the confidence of it.
Ah I see. Thanks for the clarification and sorry for the misread.
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.
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.
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.
But that is always the case, when one is dominant: No options are nearly as good. Maybe the.dollar is riskier than today, but are there any other countries less risky?
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.
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.
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.
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.
Stablecoins !== USD.
Also USD's circulation in US markets has nothing to do with maintaining reserve currency status.
Also USD's circulation in US markets has nothing to do with maintaining reserve currency status.
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.
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.
I don’t disagree.
I usually pipe Substack to markdown and then just open it in my favorite markdown reader.
https://www.substacktools.com/downloader
I usually pipe Substack to markdown and then just open it in my favorite markdown reader.
https://www.substacktools.com/downloader
I don't buy the dollar being dead.
His main arguments are the politics are messy and there's a lot of debt. Such things have been true in the past over its 200 year plus history and yet it goes on. The US remains the world superpower and the center for its most valuable companies and the leader in new tech like AI. Things will go on.
The British Pound has existed since about the year 600, we had 250% debt to GDP after WW2 and all sorts of chaos over the years but the currency continues. Such things don't die easily.
His main arguments are the politics are messy and there's a lot of debt. Such things have been true in the past over its 200 year plus history and yet it goes on. The US remains the world superpower and the center for its most valuable companies and the leader in new tech like AI. Things will go on.
The British Pound has existed since about the year 600, we had 250% debt to GDP after WW2 and all sorts of chaos over the years but the currency continues. Such things don't die easily.
One minor problem is that we do weird things with “debt” that weren’t done before (like the SSA holding billions (trillions?) in debt, along with pensions, etc). It’s actually hard to make comparisons to 100 years ago in other countries because so many things are now monetized that weren’t before.
It wouldn't surprise me if the debt causes a financial crash a bit like 2006. Crashes happen pretty regularly and things are quite lined up for one of those - all it would likely take would be an AI plateau for example. Currencies dying are rare though. They can decline in importance like the pound, but generally plow on.
But it is--it's been on fumes since the 1970s. We're in the final stages now.
Except this time you have Americans and insiders who wilfully want to kill it.
[deleted]
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.
This is very true. I have confidence in a car driver that has many years of experience, acts consistently and rationally, does not overly hesitate and is confident in their capabilities. I do not trust a driver that appears drunk at the wheel. I would argue that the Fed is the last bastion of sanity in the madhouse. When that goes and no longer acts impartially, the drunk driver is the default.
Isn’t that true of all (fiat) currencies? Maybe even gold and silver somewhat, too? There’s a faith that the value tomorrow will be somewhat similar today; otherwise trade becomes much more difficult.
I’ve been reading this article for decades.
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.
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.
> the US is the lowest-taxed Western country
From 2021 but shows relatively how much tax is taken before you get your after-tax income:
https://www.brusselsreport.eu/2021/07/22/new-study-compares-...
From 2021 but shows relatively how much tax is taken before you get your after-tax income:
https://www.brusselsreport.eu/2021/07/22/new-study-compares-...
Love it when people write a 2k word article on the death of the dollar and spend approximately 0 words outlining a viable alternative, either as the gobal reserve or US domestic currrency.
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.
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)
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)
Magazines do it a lot.
Thats a funny way of saying killed with obvious malicious intent.
Exactly
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.
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.
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.
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.
Sounds like "time banking", which has myriad flaws.
One of them is that your time is cheap when you're young and unskilled, and grows valuable as you grow old and become skilled (and have less time left). Each <unit of time> isn't equal for the same person, much less between them.
https://en.m.wikipedia.org/wiki/Time-based_currency
One of them is that your time is cheap when you're young and unskilled, and grows valuable as you grow old and become skilled (and have less time left). Each <unit of time> isn't equal for the same person, much less between them.
https://en.m.wikipedia.org/wiki/Time-based_currency
Yeah, we have 3 Time Bank organisations in my city (I'm not sure how they manage their economy internally): https://www.cinch.org.nz/categories/421/441/entries In New Zealand you can't put your professional work into the time bank (unless everyone wants to declare it as taxable).
I was probably thinking more along the lines of: https://en.m.wikipedia.org/wiki/Tax_Freedom_Day
I was probably thinking more along the lines of: https://en.m.wikipedia.org/wiki/Tax_Freedom_Day
As long as I have to pay my taxes in dollars, I will have need of dollars. That fact gives it an inherent minimum value.
For Gresham's Law, there has to be an alternative, which becomes a replacement.
As for the almighty dollar, you better believe in it even if you don't – or your country is getting bombed.
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
I remember the feeling I had back when our receptionist told us she had gotten a real estate agent license, and was hoping to make more money in that profession, and that "real estate prices can never go down, they aren't making more of it"... Just before the crash of 2008
I get that same vibe when people say that BitCoin, StableCoins, or the US Dollar will be around forever.
While I'm tempted to think that a return to Gold and Silver is in the cards, I suspect that with modern markets, it'll be more than just those 2 metals, and might include MWh of electricity, barrels of oil, tons of coal, and many other commodities with a huge arbitrage market keeping trade liquid. (Much as it is with the various blockchain coins)
I get that same vibe when people say that BitCoin, StableCoins, or the US Dollar will be around forever.
While I'm tempted to think that a return to Gold and Silver is in the cards, I suspect that with modern markets, it'll be more than just those 2 metals, and might include MWh of electricity, barrels of oil, tons of coal, and many other commodities with a huge arbitrage market keeping trade liquid. (Much as it is with the various blockchain coins)
Can people help to fill in some of the gaps in this article? There are some striking claims that seem to have some basis in reality. But the article leaves a lot questions.
The the US dollar safe for now because of the lack of a viable alternative?
Seems like lowering interest rates and raising inflation is the only viable political solution. Sure, it causes issues with people financing our debt. But also, where else would they put their money?
Are there winners and losers here? Or does everyone lose?
How would the world work in an idealized free market without a reserve currency?
The the US dollar safe for now because of the lack of a viable alternative?
Seems like lowering interest rates and raising inflation is the only viable political solution. Sure, it causes issues with people financing our debt. But also, where else would they put their money?
Are there winners and losers here? Or does everyone lose?
How would the world work in an idealized free market without a reserve currency?
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.
My friends in Taiwan think they will be invaded before 2030 so we’ll see
They won’t do it until they actually know how to make SOTA AI chips which won’t be for a very long time.
They'll do it when two conditions are met: (i) the probability of success is high enough, (ii) the probability of success will decline if they wait.
Basically, when China is at maximal power relative to the US. Most credible commentators in the West say that'll be in 2027.
Basically, when China is at maximal power relative to the US. Most credible commentators in the West say that'll be in 2027.
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.
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.
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.
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.
I am pretty sure the US is investing hard into naval drones. There's a reason Russia cannot use it's naval fleet in Ukraine as cheap torpedos and drones destroy ships.
Ships are basically sitting ducks if they are within range of drones. I am surprised better anti drone weaponry hasn’t been deployed. I would think bird shot cannons would be highly effective.
[deleted]
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?
Economy is wrecked due to real estate and internal power struggles.
Launching wars to quell internal conflict is a common tactic.
> 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.
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.
A state's security doctrine, in compressed form, needs to be "assume the worst".
Slightly less compressed, it should be "When a nearby state keeps saying they own you, then take the credible threat seriously and pretty much pretend they're going to act on that, even if you think it would be stupid of them to do that, because history is full of examples of states doing this kind of thing. Prepare accordingly".
Slightly less compressed, it should be "When a nearby state keeps saying they own you, then take the credible threat seriously and pretty much pretend they're going to act on that, even if you think it would be stupid of them to do that, because history is full of examples of states doing this kind of thing. Prepare accordingly".
What, if I (a European) decide not to buy American treasuries, a squad of Marines is going to bust my front door?
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).
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).
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.
It will be more costly for the people doing this later, of course.
treasuries are overwhelmingly impacted by federal reserve policy, not sure why you think trump would have much to do with it. if you compare US vs european treasuries since 2016 it's sort of a wash - the european ones are barely outperforming US ones, but the US ones consistently had better yields. and the big impact on US treasuries was interest rate changes, something trump has no say in
Actually less, if like the long-term trend holds
If you decided to trade oil in euros then a squad of aircraft carriers parks off your coast
See: Irak, Libia
No, but that military might turn a blind eye when your trade routes are threatened, or might decide to offshore balance against you.
Liberals are like libertarians in this regard. Housecats that don't understand what the actual source of stability and prosperity is.
Liberals are like libertarians in this regard. Housecats that don't understand what the actual source of stability and prosperity is.
The dollar has lost 15% vis-a-vis the euro this year, how does your theory explain this?
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.
"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.
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.
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.
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.
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.
The military is one required pillar of US dollar hegemony. It's not a sufficient pillar and the current administration is working hard at destroying other required pillars.
US Treasury bonds will be less attractive, because foreign investors will lose trust in the US economy
US Treasury bonds will be less attractive, because foreign investors will lose trust in the US economy
Arguably USD strength comes from geography.
“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.
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.
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
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
Why can't it be gold again?
It was working pretty well for thousands of years.
It was working pretty well for thousands of years.
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.
We moved off the gold standard in 1933 (domestic) and internationally in 1971 and there haven't been any warlike activities since then, right?
It did not scale.
Hopefully a basket of currencies, no need for one thing.
What comes next is USA 2.0.
As my late grandfather would say, "who is this kid?"
Over the Past 90 days the euro gained 10% over the dollar.
Makes me think.
Makes me think.
> By 2040, the U.S. dollar will no longer be the global reserve currency.
I would argue "no longer be the _primary_ global reserve currency", but go on, I'm listening ...
> It might not even be the default unit of exchange for Americans back home.
This isn't a serious article; I don't have the time to read it.
I would argue "no longer be the _primary_ global reserve currency", but go on, I'm listening ...
> It might not even be the default unit of exchange for Americans back home.
This isn't a serious article; I don't have the time to read it.
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.
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.
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.
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.
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.
If there's enough pain, it'll outweigh the pain of switching.
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.
Idk man, it's lost 15% against the euro this year alone...
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.
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.
You didn't mention Euros or Swiss Francs - the Euro being the obvious candidate for next reserve currency.
Huh? The CAD/USD exchange rate is exactly where I remember it being 30 years ago.
CAD/USD is down ~5.3% over the past 20 years.
How much is it down over the past 30 years?
FWIW, my mental CAD/USD price anchor was set when I was coming of age at 0.75 CAD / USD. Today it at 0.73 CAD / USD, and I've seen it touch 0.60 ish and pass parity in my lifetime.
FWIW, my mental CAD/USD price anchor was set when I was coming of age at 0.75 CAD / USD. Today it at 0.73 CAD / USD, and I've seen it touch 0.60 ish and pass parity in my lifetime.
IMO: 30 years isn't relevant to look at, because its ancient history (I'm calling both of us ancient here). It pushes back too far beyond 2008 & the GFC to capture data that isn't relevant to the modern global economy. Everything about everything about the world, today, is a consequence of the GFC, and its likely that by the year 2100 we'll still talk about it as among the most significant things to happen to the world in the past century. Maybe the most significant.
Why isnt Brazil being considered as an alternative? If they get their act together with Argentina, Chile, and Mexico to form a 'SouthAmerican Union', they could survive and thrive.
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
Nuclear weapons will be used within our lifetime.
This guy is funny: he's making 40-year predictions when we can't get a good 2-year prediction!
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.
https://www.npr.org/2025/05/09/1250191994/reserve-currency-d...
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...
But, but, if I say "it'll happen slowly and then all at once" it must be true, because its a pithy, fun phrase that sounds smart!
Dollar is not dead and not going anywhere. OP is just shocked that World is not fair.
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?
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?
> 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.
> 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.
OK. but how do i make money from this?
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.
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.
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
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.
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-...)
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.
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.
Can we just skip to the part where we all grab our pitchforks already?
This is not your parents’ economy
The Dollar: reports of my death are greatly exaggerated.
lisbbb(2)
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.