A video on the future of the dollar (and money) | 53 comments (53 topical, 0 editorial, 0 hidden)

Re: A video on the future of the dollar (none / 1)

You're the global reserve currency if you have 50% of world GDP and are the exporter of last resort. As for issuing bonds internationally, this has to do with the expectation that sovereign default won't happen, not only because you're a net exporter but also because the principle of free contract is deeply ingrained in your country's laws and mores.

The US stopped exporting oil in the 70's and much of anything else since then. But old habits die hard.

The question is whether people believe BRIC will remain the world's exporter of last resort, as well as be unlikely to default on their sovereign debt. Brazil and Russia have a history of that, not so India or China, but they also don't have a long history of issuing bonds in their own currency. China just issued Yuan bonds internatinally for the first time.

Now people are talking about making the IMF the world's central bank, possibly using SDR as a global reserve currency. Maybe that will give us another 30 years or 5 before it goes bankrupt in its turn, and then what?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Wed Oct 7th, 2009 at 04:07:42 AM EST
[ Parent ]

Re: A video on the future of the dollar (4.00 / 2)

The US is the world's #3 exporter. As has been discussed before, though, the employment profile behind the products being exported no longer supports the middle class of the 60's. Gov't policy makes the situation worse rather than better as it arguably does in France and Germany.

you are the media you consume.

by MillMan (millguy at gmail) on Wed Oct 7th, 2009 at 05:17:28 AM EST
[ Parent ]

Re: A video on the future of the dollar (none / 1)

MillMan:

The US is the world's #3 exporter.

Are you considering the EU as a unit or as 27 separate countries in that statistic?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Wed Oct 7th, 2009 at 05:23:54 AM EST
[ Parent ]

Wikipedia to the rescue (none / 1)

List of countries by exports - Wikipedia, the free encyclopedia

-- World (sum of all countries) $ 16,280,000,000,000 2008 est.
-- European Union (minus internal trade) $ 1,690,000,000,000 2007
1 Germany $ 1,530,000,000,000 2008 est.
2 People's Republic of China $ 1,465,000,000,000 2008 est.
3 United States $ 1,377,000,000,000 2008 est.
4 Japan $ 776,800,000,000 2008 est.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Wed Oct 7th, 2009 at 05:28:43 AM EST
[ Parent ]

Re: Wikipedia to the rescue (none / 1)

But experts is not what matters, but the balance of trade (or net exports)

List of countries by current account balance - Wikipedia, the free encyclopedia

Rank Country CAB USD, bn
1 People's Republic of China 371.833
2 Germany 252.501
3 Japan 210.967
4 Saudi Arabia 95.762
5 Russia 76.163
...
177 Italy -52.725
178 Australia -56.342
179 United Kingdom -105.224
180 Spain -145.141
181 United States -731.214^[2]

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Wed Oct 7th, 2009 at 05:32:23 AM EST
[ Parent ]

Re: Wikipedia to the rescue (none / 1)

That's not what we were discussing - you threw out the "American doesn't make stuff anymore" piece of "common knowledge."

But as far as balance of trade - all I'm concerned with is the level of imports required to give the US a North/Western European style quality of life (and yes, I know, economic measures are no a good measure of quality of life, but they're a really good place to start). Consumer culture in the US needs to be replaced with something more likely to result in human happiness.

you are the media you consume.

by MillMan (millguy at gmail) on Wed Oct 7th, 2009 at 05:56:51 AM EST
[ Parent ]

Re: Wikipedia to the rescue (none / 0)

This is what I was citing, yes.

you are the media you consume.

by MillMan (millguy at gmail) on Wed Oct 7th, 2009 at 05:57:19 AM EST
[ Parent ]

Re: Wikipedia to the rescue (none / 0)

So in trade-weighted terms, the world's reserve currency should be 10% EUR, 8% EUR, 9% CYN, 5% JPY ?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Wed Oct 7th, 2009 at 06:13:44 AM EST
[ Parent ]

Re: Wikipedia to the rescue (4.00 / 2)

The world's reserve currency should be an unitised measure of global ecological health.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Oct 7th, 2009 at 06:50:41 AM EST
[ Parent ]

Re: Wikipedia to the rescue (none / 0)

that's an interesting comment, TBG.

can you illustrate what you mean a little more, please?

you mean a new currency, or any currency, but with a different value?

right now a banknote is a promissory statement, and as fungible a symbol as can exist.

is there any other kind of symbol that could supplant it, that took into consideration the 'externalities' blithely dismissed with the 'deemed' value currencies presently enjoy?

i guess it will be 1's and 0's whatever form it takes in meatspace, and i guess money will not be a simple reward for creating wealth short term, but will also include an appreciation of its (symbolic) value to future generations.

my grandpa always said 'you have to learn the value of money', then when i heard how much one unit of british sterling has devalued since his time, i was really puzzled as to what he really meant.

conversations like this somewhat assuage this bewilderment. though i fumble to language exactly what i think, listening to you all is a great learning...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Oct 7th, 2009 at 10:52:48 AM EST
[ Parent ]

Re: Wikipedia to the rescue (4.00 / 3)

I think someone - probably me, when I finish this damn book - needs to write something about what value really is, and how people perceive prosperity.

Everyone knows it's not about rational actors, or even - particularly - about credit and useful things happening because of credit.

We have an interesting situation now where stock market value seems to exist even though economic activity doesn't, much.

This makes no sense - supposedly.

I think in fact it makes perfect sense - but only if you understand what's really being traded, what the motivation for trade is, and why what happens to people who don't trade on the markets doesn't actually matter a damn.

(Except in the limit, when they start starving, rioting and burning things down.)

From there it's possible - eventually - to create new theories of value that are less subjective than the ones we have now.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Oct 8th, 2009 at 12:39:29 PM EST
[ Parent ]

Re: Wikipedia to the rescue (none / 0)

thanks, i look forward to it.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Thu Oct 8th, 2009 at 12:44:05 PM EST
[ Parent ]

Re: Wikipedia to the rescue (4.00 / 2)

ThatBritGuy:

We have an interesting situation now where stock market value seems to exist even though economic activity doesn't, much.
This makes no sense - supposedly.
I think in fact it makes perfect sense - but only if you understand what's really being traded, what the motivation for trade is, and why what happens to people who don't trade on the markets doesn't actually matter a damn.

I am re-reading Veblen's Theory of Business Enterprise. In it he claims that the capitalised value of the tangible assets of firms are covered by ordinary debt and maybe preferred (non-voting) stock, whereas common (voting) shares cover the capitalization of intangible assets, that is goodwill. That this mimics the separation of ownership (debt) from management (equity) and that the goodwill of "captains of industry" can be capitalised many times over because having lend their reputation to a venture, a "captain of industry" (such as, say, Warren Buffet) doesn't have his goodwill exhausted but even increased.

Having read the book for a second time I think it is very relevant to out current predicament (it also contains an explanation of the business cycle as speculative bubbles, of recession as a psychological phenomenon of the business class, etc).

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Thu Oct 8th, 2009 at 12:45:06 PM EST
[ Parent ]

Re: Wikipedia to the rescue (none / 0)

Probably incompatible with floating exchange rates...

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Wed Oct 7th, 2009 at 11:14:03 AM EST
[ Parent ]

Re: Wikipedia to the rescue (4.00 / 2)

Or vice versa.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Oct 7th, 2009 at 03:53:21 PM EST
[ Parent ]

Re: A video on the future of the dollar (none / 0)

You're the global reserve currency if you have 50% of world GDP and are the exporter of last resort.

This doesn't seem to be the case, given that the dollar is the global resver currency.

As for issuing bonds internationally, this has to do with the expectation that sovereign default won't happen, not only because you're a net exporter but also because the principle of free contract is deeply ingrained in your country's laws and mores.

More like being so important that if you default, nothing else is secure and anything might happen. Which is why the price of gold (=hedge against systemic financial breakdown) surges when the US weaken.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Oct 7th, 2009 at 07:08:06 AM EST
[ Parent ]

Re: A video on the future of the dollar (none / 1)

You can't really default in your own currency, can you?

Because you can always print more.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Oct 7th, 2009 at 07:24:51 AM EST
[ Parent ]

Re: A video on the future of the dollar (none / 0)

Well, massive inflation and default are more or less the the same for foreign creditors, in the long run. Or if the inflation is really high, in the short run as well.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Oct 7th, 2009 at 07:29:28 AM EST
[ Parent ]

Re: A video on the future of the dollar (none / 1)

The privilege of being the issuer of a global reserve currency is that you are writing cheques you don't have to redeem.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Oct 7th, 2009 at 07:40:25 AM EST
[ Parent ]

Re: A video on the future of the dollar (none / 0)

I'm not sure what we are disagreeing on here?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Oct 7th, 2009 at 07:43:59 AM EST
[ Parent ]

Re: A video on the future of the dollar (none / 1)

"Maybe that will give us another 30 years or 5 before it goes bankrupt in its turn, and then what?"

either "more of the same-old same old" or something that consists of genuine reform taking account of hard-"learned" (?)-lessons.

For further reading,

Nicolas Bouleau:

Mathématiques et risques financiers

"Has the application of mathematics to finance contributed to the financial crisis?"

http://www.odilejacob.fr/0207/2647/Mathématiques-et-risques-financiers.html

and Paul De Grauwe:

Economics is in crisis: it is time for a profound revamp

By Paul De Grauwe

Published: July 21 2009 22:27
| Last updated: July 21 2009 22:27

link: http://www.ft.com/cms/s/0/478de136-762b-11de-9e59-00144feabdc0.html?nclick_check=1

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Wed Oct 7th, 2009 at 11:44:46 AM EST
[ Parent ]

A video on the future of the dollar (and money) | 53 comments (53 topical, 0 editorial, 0 hidden)

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