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Much of our trade deficit is being repatriated as other countries buy US assets, like farm and forest lands, mines, urban real estate and businesses. The Chinese own Smithfield. It has been decades since Rockefeller Center fell to the Japanese. US farmers are being squeezed out of the land market and turned into sharecroppers by foreign money. The US has vast resources ripe for exploitation by foreign interests.
No doubt. In AZ we have local farming areas bought up by Saudi interests. We here tend to vastly underestimate the value of our fresh water.
IMO China's only weakness is in some resources, energies and agri, like pork. So Smithfield makes a lot of sense. Having the Chinese closely dependent on this is for our general good IMO. Less chance for War if we have mutual business and dependencies.
But all this strengthens, not weakens the demands for the USD.
Um, no, that would be hyper-Monetary Inflation, at least initially, until the government and Federal Reserve get things under control.
Monetary Inflation is related to GDP and the money supply.
The use of the US Dollar as a de facto international currency of trade allows you to have a larger money supply than with GDP alone without the negative effects of Monetary Inflation.
That's not to say that you could never have Monetary Inflation, tolerable, rampant or hyper-, because you could for other reasons unrelated to the fact that the US Dollar is the de facto international currency of trade.
Just wondering. Inflation? Belt tightening on the federal budget level? How to protect investments (ie own gold?). Etc.
Right now with the dollar being the world's currency we can be a bully. Which we have been for several decades now. I'd think countries might eventually get tired of ths.
The question should be what will it take for the USD to stop being world currency. The USD no longer the world currency is an effect, not the cause of anything.
The question should be what will it take for the USD to stop being world currency. The USD no longer the world currency is an effect, not the cause of anything.
Physical destruction would do it. Loss of a World War or an asteroid hit.
Just wondering. Inflation? Belt tightening on the federal budget level? How to protect investments (ie own gold?). Etc.
Right now with the dollar being the world's currency we can be a bully. Which we have been for several decades now. I'd think countries might eventually get tired of ths.
There's about $600B in currency circulated overseas, given a 1.67% 5yr treasury rate let's say that amounts to roughly $20B per year effectively saved on loan interest. The annual deficit is currently around $1000B, so $20B is 2% of the deficit.
The M2 money supply is around $10,000B, of which the $600B in foreign currency is roughly 6%, so as a first-order impact maybe we get a 6% jump in inflation the year everyone decides to suddenly dump their dollars. In reality you'd have exchange rate fluctuations and questions of how money gets dumped and whether that translates to spending, as well as Fed activity, which would affect the actual ultimate inflation.
So far as I can tell, that's the primary benefit and risk of foreign usage of USD: a 2% annual impact to the deficit (0.1% of GDP) and a possible one-time hit to price levels of up to 6%. There's other stuff like the ease of spending dollars abroad, posting prices in USD, exchanging other currencies via dollars, and so on that have an immaterial impact on our daily lives.
The dollar will not need to be replaced. It will simply shift from being the world's reserve currency to one of the world's reserve currencies. What will destroy the dollar is if the world loses confidence in the Federal Reserve system. The US, along with some other countries, simply use reserve currency dollars as their main fiat currency as well.
Recall what makes a currency valuable. It has to be convertible into things and services. Gold was once the standard for this, but gold was replaced by the US Dollar in a way that not even the Sterling ever held. However, as an economy of confidence, there is really no reason to hold US dollars over other major currencies anymore. What we have seen is a not so much a lessoning of convertibility in terms of dollars, but of growing convertibility in other currencies. Technology and communication have also improved to help facilitate the growing convertibility of other currencies. As such, dollars are no longer needed for all import/export trades. Starting in 2017 and expanding in late 2019, the petrodollar is no longer needed. Qatar will sell you oil in almost all different currencies. Will central banks keep holding their dollars? That honestly depends on whether or not they believe the Federal Reserve system will continue to be able to maintain the dollar's value. That is the difficulty of the Fed. If the Fed pushes too far to benefit America, it risks the far greater use of dollars by losing the foreign markets, but of course, it must also ensure an economy that does well locally....all while deriving a profit itself.
The touted advantage of Bitcoin (and others) is that as an independent construct, there is no country to suffice....no dual purpose. However, as in life, without any purpose there's also no value. The eventual replacement currency will likely be a basket of new digital currencies, but ones inherently backed by something that are easily traded into and out of with one tied back to gold....none of which will be beholden to any country, but the tech still has a ways of going.
The dollar will not need to be replaced. It will simply shift from being the world's reserve currency to one of the world's reserve currencies. What will destroy the dollar is if the world loses confidence in the Federal Reserve system. The US, along with some other countries, simply use reserve currency dollars as their main fiat currency as well.
Recall what makes a currency valuable. It has to be convertible into things and services. Gold was once the standard for this, but gold was replaced by the US Dollar in a way that not even the Sterling ever held. However, as an economy of confidence, there is really no reason to hold US dollars over other major currencies anymore. What we have seen is a not so much a lessoning of convertibility in terms of dollars, but of growing convertibility in other currencies. Technology and communication have also improved to help facilitate the growing convertibility of other currencies. As such, dollars are no longer needed for all import/export trades. Starting in 2017 and expanding in late 2019, the petrodollar is no longer needed. Qatar will sell you oil in almost all different currencies. Will central banks keep holding their dollars? That honestly depends on whether or not they believe the Federal Reserve system will continue to be able to maintain the dollar's value. That is the difficulty of the Fed. If the Fed pushes too far to benefit America, it risks the far greater use of dollars by losing the foreign markets, but of course, it must also ensure an economy that does well locally....all while deriving a profit itself.
The touted advantage of Bitcoin (and others) is that as an independent construct, there is no country to suffice....no dual purpose. However, as in life, without any purpose there's also no value. The eventual replacement currency will likely be a basket of new digital currencies, but ones inherently backed by something that are easily traded into and out of with one tied back to gold....none of which will be beholden to any country, but the tech still has a ways of going.
The major modern and successful sovereign nations of today are not going to all want or agree to giving up the power of their fiat and go to some basket as the or a main means of trade. A basket that is bound to best for the richest and most influential sovereigns from the get-go. Like the IMF of today or its replacement. Technology may make it more useful for some, but overall IMO I don't it becoming a major.
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