- No more trade deficiencies causes a lack of dollars in the world instead of letting it float freely ( and available)
Because of the dollar as reserve currency, the US can have debts without anyone protesting. But as soon as this advantage disappears, the debts become a problem => collapse?
The relatively "bigger picture" would be countries that carry and trade US debt in the form of Treasury bonds (which does not equate to cash reserves) and other debt-related instruments.
If you need examples of how this plays out in the grand narrative(s) of finances, look at the top holders by country of US debt, the memes/arguments of the Fed's "money printer goes brrrrr", as well as possible geopolitical risks.
The risk, I think, is that US debt is in the currency the US controls. So there is the temptation to get out of the debt by inflating it away. If it becomes perceived that this will happen it could set off the collapse. And this could happen sooner than one might think.
The end game is the federal debt has been inflated away, the dollar is much lower, and dollar denominated assets have been wiped out. So (if you think this is going to happen) get your investments into equity and the like and load up on dollar denominated debt that will also be wiped away.
I feel like we've never had Weimar-style inflation in a country with the levels of consumer debt the US has.
Much of the population is paycheque-to-paycheque, so if we spent a year or two hyperinflating the currency, they might actually see a net win. They didn't have significant savings to go poof, but their $30k in credit cards, $50k car notes, $200k student loans, and $750k mortgages suddenly look trifling when you're shipping packages by stuffing them with crumpled million-dollar notes.
When the crisis ends, and we get the equivalent of the Rentenmark, they emerge with blank balance sheets and clean title on the assets they acquired before the crisis. It would be effectively a backdoor debt jubilee.
I can't imagine the domestic financial sector being too enthused.
The downside will be permanent higher interest rates, as well as intolerance for the rest of the world to continued trade imbalance with the US. Real wages in the US will go down to compensate, making the US more competitive, but the dollar will not be so immune to fiscal shenanigans as it has been. The US will be unable to maintain the same level of real spending on government programs.
I think that depends on what effect you think the collapse would have on the market and economy.
If US cost of debt goes up, then you would either have cut spending, or raise taxes and spend a greater portion of budget on interest.
Neither of those are particular exciting for long term business growth.
Low interest rates on US public debt boosts spending and the economy. No matter if you think the government spends money in a wise or efficient manner, it is better to do so with low interest than high.
> U.S.'s position as the world's largest economy and perceived political stability.
One can tell it’s October article. I doubt anyone views the US as politically stable now
Biff Tannen only cares about his personal empire, there is really no plot twist here.
things happen slowly, and then happen all of a sudden.
TFA agrees:
> Paraphrasing Ernest Hemingway's line in "A Sun Also Rises" about bankruptcy, such catastrophes happen "gradually, then suddenly."
AKA "The Seneca Effect". There's a book written on that: https://terebess.hu/keletkultinfo/seneca.pdf
thanks
It has to happen.
Without the US as reserve currency
- Less western support because of Trump
- No more trade deficiencies causes a lack of dollars in the world instead of letting it float freely ( and available)
Because of the dollar as reserve currency, the US can have debts without anyone protesting. But as soon as this advantage disappears, the debts become a problem => collapse?
The relatively "bigger picture" would be countries that carry and trade US debt in the form of Treasury bonds (which does not equate to cash reserves) and other debt-related instruments.
If you need examples of how this plays out in the grand narrative(s) of finances, look at the top holders by country of US debt, the memes/arguments of the Fed's "money printer goes brrrrr", as well as possible geopolitical risks.
The risk, I think, is that US debt is in the currency the US controls. So there is the temptation to get out of the debt by inflating it away. If it becomes perceived that this will happen it could set off the collapse. And this could happen sooner than one might think.
The end game is the federal debt has been inflated away, the dollar is much lower, and dollar denominated assets have been wiped out. So (if you think this is going to happen) get your investments into equity and the like and load up on dollar denominated debt that will also be wiped away.
I feel like we've never had Weimar-style inflation in a country with the levels of consumer debt the US has.
Much of the population is paycheque-to-paycheque, so if we spent a year or two hyperinflating the currency, they might actually see a net win. They didn't have significant savings to go poof, but their $30k in credit cards, $50k car notes, $200k student loans, and $750k mortgages suddenly look trifling when you're shipping packages by stuffing them with crumpled million-dollar notes.
When the crisis ends, and we get the equivalent of the Rentenmark, they emerge with blank balance sheets and clean title on the assets they acquired before the crisis. It would be effectively a backdoor debt jubilee.
I can't imagine the domestic financial sector being too enthused.
The downside will be permanent higher interest rates, as well as intolerance for the rest of the world to continued trade imbalance with the US. Real wages in the US will go down to compensate, making the US more competitive, but the dollar will not be so immune to fiscal shenanigans as it has been. The US will be unable to maintain the same level of real spending on government programs.
This is golden, keep it for the children.
I feel sorry for those who cannot diversify out of their 401(k)s …
Is your 401(k) in USD? Or am I missing something?
I think that depends on what effect you think the collapse would have on the market and economy.
If US cost of debt goes up, then you would either have cut spending, or raise taxes and spend a greater portion of budget on interest.
Neither of those are particular exciting for long term business growth.
Low interest rates on US public debt boosts spending and the economy. No matter if you think the government spends money in a wise or efficient manner, it is better to do so with low interest than high.