EPTThe idea that India and China will trust eachother enough to hold a common currency is honestly hilarious if you know anything about relations between them.
US Politics Mega-thread - Page 3947
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Sermokala
United States14061 Posts
The idea that India and China will trust eachother enough to hold a common currency is honestly hilarious if you know anything about relations between them. | ||
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JimmiC
Canada22817 Posts
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Slydie
1928 Posts
I remember back in 2008, when Greece had massive debt problems, and the interest on their state issued obligations skyrocketed, as there was legitimate doubt that the "promise" could be fullfilled. The same can happen to the US. It seems to be a known "truth" that the US dollar is the go-to safe and solid currency. As long as enough major financial players agree with that, it remains true, but it is a game of belief, not facts, and US politicians know it. I find it funny how the Norwegian Crown has plummited since the Russia/Ukraine war, even though it is backed by a solid petrol industry and a gigantic state SURPLUS fund! The reason for that is also belief: when there is unrest, you flock to the bigger, "safer" currencies, like the US dollar. Everyone knows it, so everyone does it🤷♂️ | ||
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Gorsameth
Netherlands22013 Posts
On June 04 2023 14:00 Slydie wrote: The difference is that Greece couldn't just print more Euro's. While the US can just print more dollars.I don't agree that "the value of a promise" can't go down. That is wrong, and is why the US politicians do everything they can to fulfill their downpayments. I remember back in 2008, when Greece had massive debt problems, and the interest on their state issued obligations skyrocketed, as there was legitimate doubt that the "promise" could be fullfilled. The same can happen to the US. It seems to be a known "truth" that the US dollar is the go-to safe and solid currency. As long as enough major financial players agree with that, it remains true, but it is a game of belief, not facts, and US politicians know it. I find it funny how the Norwegian Crown has plummited since the Russia/Ukraine war, even though it is backed by a solid petrol industry and a gigantic state SURPLUS fund! The reason for that is also belief: when there is unrest, you flock to the bigger, "safer" currencies, like the US dollar. Everyone knows it, so everyone does it🤷♂️ So long as the US debt is held in dollars they, in principle, can always fulfil their promise because they just print more. Of course printing endless dollars comes with its own problems, but that's a different matter. | ||
KwarK
United States43373 Posts
On June 04 2023 14:00 Slydie wrote: I don't agree that "the value of a promise" can't go down. That is wrong, and is why the US politicians do everything they can to fulfill their downpayments. I remember back in 2008, when Greece had massive debt problems, and the interest on their state issued obligations skyrocketed, as there was legitimate doubt that the "promise" could be fullfilled. The same can happen to the US. It seems to be a known "truth" that the US dollar is the go-to safe and solid currency. As long as enough major financial players agree with that, it remains true, but it is a game of belief, not facts, and US politicians know it. I find it funny how the Norwegian Crown has plummited since the Russia/Ukraine war, even though it is backed by a solid petrol industry and a gigantic state SURPLUS fund! The reason for that is also belief: when there is unrest, you flock to the bigger, "safer" currencies, like the US dollar. Everyone knows it, so everyone does it🤷♂️ The value of a promise can absolutely go down. It’s the supply that can’t. You can’t run out of the idea of owing someone something. You can’t default. | ||
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RvB
Netherlands6261 Posts
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JimmiC
Canada22817 Posts
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KwarK
United States43373 Posts
The guy whose land has the gold mine on provides almost no value to the world. He doesn't make any food, any tools, any fuel, he provides no shelter, no warmth, no iron, no livestock. All he provides is something that exists not to be consumed, something that exists to durably go from hand to hand as other people who do provide real value trade with each other. He is a complete parasite, he contributes the idea of market efficiency by existing and dispensing currency in limited amounts. And by doing so he is the richest man in the land, not because he has the most currency, he gives currency away to other people, but because he has accumulated all the actual value. He has the tallest castle, the finest steel, the best livestock, and so forth. The farmer and the ironworker can't trade without both of them sinking some of their value into his currency and without buying into a system in which his currency has value. Now imagine a giant golden meteor shower peppers the entire world with big old nuggets of gold. Gold is no longer an effective currency as everyone can make their own golden coins. The people all go back to the man with the gold mine and ask to trade in their old golden currency for all of the things they previously gave him, they want their tools and their wood and their steel and their food back. The man with the gold mine looks down from his fucking huge castle defended by the biggest army with the finest steel and replies "lol, lmao". | ||
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WombaT
Northern Ireland26225 Posts
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Slydie
1928 Posts
On June 05 2023 02:22 KwarK wrote: Imagine an economy that uses gold as a currency and that gold has no real use beyond as a means of exchange because photolithography hasn't been invented yet. Sure, some people like to wear gold but that's only because of its value of a status symbol because it's used as currency. It'd be like wearing a suit made of $100 bills today. There are other prettier metals that they could wear but none of those would convey the message "my hat is worth more than your life", even when it's used as jewelry it's still currency. The guy whose land has the gold mine on provides almost no value to the world. He doesn't make any food, any tools, any fuel, he provides no shelter, no warmth, no iron, no livestock. All he provides is something that exists not to be consumed, something that exists to durably go from hand to hand as other people who do provide real value trade with each other. He is a complete parasite, he contributes the idea of market efficiency by existing and dispensing currency in limited amounts. And by doing so he is the richest man in the land, not because he has the most currency, he gives currency away to other people, but because he has accumulated all the actual value. He has the tallest castle, the finest steel, the best livestock, and so forth. The farmer and the ironworker can't trade without both of them sinking some of their value into his currency and without buying into a system in which his currency has value. Now imagine a giant golden meteor shower peppers the entire world with big old nuggets of gold. Gold is no longer an effective currency as everyone can make their own golden coins. The people all go back to the man with the gold mine and ask to trade in their old golden currency for all of the things they previously gave him, they want their tools and their wood and their steel and their food back. The man with the gold mine looks down from his fucking huge castle defended by the biggest army with the finest steel and replies "lol, lmao". Afaik, the US does not spend their dollars to gain control over supplies of raw materials the way China has for a long time. What would the debt holders even want back, except their "gold"? The US does not have a sustainable state economy, and has no way to keep it running except printing and borrowing. If the dollar plummited, the US can't print and borrow to solve their problems anymore, and they are screwed. Unlike Greece, they don't have a powerful EU central bank to bail them out, for promises to get their state finances in order in painful ways. | ||
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KwarK
United States43373 Posts
On June 05 2023 03:31 Slydie wrote: Afaik, the US does not spend their dollars to gain control over supplies of raw materials the way China has for a long time. What would the debt holders even want back, except their "gold"? The US does not have a sustainable state economy, and has no way to keep it running except printing and borrowing. If the dollar plummited, the US can't print and borrow to solve their problems anymore, and they are screwed. Unlike Greece, they don't have a powerful EU central bank to bail them out, for promises to get their state finances in order in painful ways. At a certain point the countries aren't even trading gold anymore, they're trading the idea of gold. The guy with the gold mine writes an "IOU some gold" and gives it to country A in exchange for something. Then they give country B the "IOU some gold" in exchange for something they want from country B. Country B then uses it with country C and so forth. But only the country with the gold mine can issue the "IOU some gold"s pledged against future gold out of their gold mine. US debt is literally an export. It's something other countries need. | ||
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Acrofales
Spain18162 Posts
On June 05 2023 03:54 KwarK wrote: At a certain point the countries aren't even trading gold anymore, they're trading the idea of gold. The guy with the gold mine writes an "IOU some gold" and gives it to country A in exchange for something. Then they give country B the "IOU some gold" in exchange for something they want from country B. Country B then uses it with country C and so forth. But only the country with the gold mine can issue the "IOU some gold"s pledged against future gold out of their gold mine. US debt is literally an export. It's something other countries need. Yes and no. This analogy seems pretty tortured, but let me try to keep it relevant to US defaulting on their debt. The goldmine IOUs only work as long as, when every now and then someone knocks on his door and says "I'm here to cash in an IOU", he gives them the gold he owes. The moment he stops and says "wait, the foremen of my mine are being naughty and we can't give you gold right now, can you wait a few weeks?" People start wondering. Sure, his friends say "ehhhhh, we don't care. He's still sitting on a giant pile of gold, he's good for it", but people who didn't really like him in the first place, start rumors that his IOUs are worthless. Maybe they should start trading in smithy IOUs instead. Initially nobody really cares about smithy IOUs, but as the gold miner keeps doing stupid shit and the smith keeps calling him out, more and more villagers start considering maybe they should at least accept Smith IOUs for trade as well,even though they still prefer gold IOUs. Every little step there removes some power and influence that the gold miner can exert over the town. | ||
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KwarK
United States43373 Posts
On June 05 2023 07:03 Acrofales wrote: Yes and no. This analogy seems pretty tortured, but let me try to keep it relevant to US defaulting on their debt. The goldmine IOUs only work as long as, when every now and then someone knocks on his door and says "I'm here to cash in an IOU", he gives them the gold he owes. The moment he stops and says "wait, the foremen of my mine are being naughty and we can't give you gold right now, can you wait a few weeks?" People start wondering. Sure, his friends say "ehhhhh, we don't care. He's still sitting on a giant pile of gold, he's good for it", but people who didn't really like him in the first place, start rumors that his IOUs are worthless. Maybe they should start trading in smithy IOUs instead. Initially nobody really cares about smithy IOUs, but as the gold miner keeps doing stupid shit and the smith keeps calling him out, more and more villagers start considering maybe they should at least accept Smith IOUs for trade as well,even though they still prefer gold IOUs. Every little step there removes some power and influence that the gold miner can exert over the town. I agree and that's why there's a political risk to this if the US government fuck around and trigger a default. They're sitting on a a metaphorical gold mine, they're the only ones able to print the currency used for global trade, everyone needs what they have. But because it's so valuable it gets turned into a political hostage, the more valuable the hostage, the more you can extort by threatening to shoot it. And half the US is so fucking dumb at this point that it doesn't matter that it's their own gold mine they're threatening to blow up, they still do it because the other side will cave first and stop them. But there's not a risk of actually running out which was my whole point. The idea that the US could default by being unable to afford it the way someone can default on a credit card debt is nonsensical. | ||
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Razyda
896 Posts
On June 05 2023 02:22 KwarK wrote: Imagine an economy that uses gold as a currency and that gold has no real use beyond as a means of exchange because photolithography hasn't been invented yet. Sure, some people like to wear gold but that's only because of its value of a status symbol because it's used as currency. It'd be like wearing a suit made of $100 bills today. There are other prettier metals that they could wear but none of those would convey the message "my hat is worth more than your life", even when it's used as jewelry it's still currency. The guy whose land has the gold mine on provides almost no value to the world. He doesn't make any food, any tools, any fuel, he provides no shelter, no warmth, no iron, no livestock. All he provides is something that exists not to be consumed, something that exists to durably go from hand to hand as other people who do provide real value trade with each other. He is a complete parasite, he contributes the idea of market efficiency by existing and dispensing currency in limited amounts. And by doing so he is the richest man in the land, not because he has the most currency, he gives currency away to other people, but because he has accumulated all the actual value. He has the tallest castle, the finest steel, the best livestock, and so forth. The farmer and the ironworker can't trade without both of them sinking some of their value into his currency and without buying into a system in which his currency has value. Now imagine a giant golden meteor shower peppers the entire world with big old nuggets of gold. Gold is no longer an effective currency as everyone can make their own golden coins. The people all go back to the man with the gold mine and ask to trade in their old golden currency for all of the things they previously gave him, they want their tools and their wood and their steel and their food back. The man with the gold mine looks down from his fucking huge castle defended by the biggest army with the finest steel and replies "lol, lmao". Judging from your other posts my guess is you know how current financial system works so why false analogy? Correct would be that the guy with the gold mine traded most of the gold and way to multiply it, to lets say 5 people and they multiply it to the extent that he has to borrow from them simply to survive. There is literally nothing to stop this people from deciding overnight that they want to trade in silver, doubloons, or toilet paper instead of gold. Then he is left with worthless pile of gold and mountain of debt. Now you have the guy sitting in his fancy castle with big starving army with the finest steel, quite frankly I doubt his last words (while admittedly adequate) would be "lol, lmao" | ||
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KwarK
United States43373 Posts
On June 05 2023 09:33 Razyda wrote: Judging from your other posts my guess is you know how current financial system works so why false analogy? Correct would be that the guy with the gold mine traded most of the gold and way to multiply it, to lets say 5 people and they multiply it to the extent that he has to borrow from them simply to survive. There is literally nothing to stop this people from deciding overnight that they want to trade in silver, doubloons, or toilet paper instead of gold. Then he is left with worthless pile of gold and mountain of debt. Now you have the guy sitting in his fancy castle with big starving army with the finest steel, quite frankly I doubt his last words (while admittedly adequate) would be "lol, lmao" The US doesn't have the dollars, everyone else does, and they're very invested in the idea that the dollars are valuable because they have a shitload of them and they use them for trade. If I was China and I'd spent the last few decades trading the labour of my people for US debt I would be extremely insistent that US debt was the most valuable and stable and liquid form of currency in the world. | ||
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Sermokala
United States14061 Posts
On June 05 2023 12:54 KwarK wrote: I think you’re including debt we owe to ourselves in that number. Yes but the main trust is that its almost maybe 10 times bigger than just the us national debt number people tote around and is in the hands of everyone in the game. | ||
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KwarK
United States43373 Posts
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RvB
Netherlands6261 Posts
On June 05 2023 01:50 JimmiC wrote: Yes but those constraints are very different from every other country in the world. They almost need a different word than debt because people think its like consumer debt and it operates completely differently. It works differently but also not as different as some try to make it out to be. National debt does not have to be paid back like a consumer loan but it can still become problematic. As you say when debt becomes problematic depends on the country and nobody really knows where the line is. Even so, by the time national debt spirals out of control there are only three ways to deal with it: taxation, cutting spending, or inflation. Inflation is not any less painfull than the other two. | ||
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Ryzel
United States540 Posts
On June 05 2023 15:48 RvB wrote: It works differently but also not as different as some try to make it out to be. National debt does not have to be paid back like a consumer loan but it can still become problematic. As you say when debt becomes problematic depends on the country and nobody really knows where the line is. Even so, by the time national debt spirals out of control there are only three ways to deal with it: taxation, cutting spending, or inflation. Inflation is not any less painfull than the other two. What exactly is the mechanic that would make paying back/controlling the national debt problematic? When the monetary value of the debt exceeds the global market value of the products/labor it can be cashed in for? | ||
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gobbledydook
Australia2605 Posts
On June 05 2023 21:34 Ryzel wrote: What exactly is the mechanic that would make paying back/controlling the national debt problematic? When the monetary value of the debt exceeds the global market value of the products/labor it can be cashed in for? The problem with debt is you have to pay interest, and it becomes a problem when you don't produce enough economic output to pay the interest. | ||
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