To be clear, the error caused a 'kink' in the graph which made it look like there was a 'tipping point' at a 90% debt-GDP ratio. Correcting this error did not change the overall result, which is that a 'high' debt/GDP ratio caused reduced growth.

> I'm inclined to think that is true, that the US is retreating from the world stage and the dollar will follow, but whether that happens now, later or never, I couldn't say.

I don't understand why or how that would be a goal. Doesn't the US get / consume something like 25% of the world's production while having about 5% of the population? If they're consuming 5x their share, the bottom is way, way further down than anyone can fathom, isn't it?

Thanks -- thus quote seems on the mark:

> Economics professor L. Randall Wray criticized Reinhart and Rogoff for combining data "across centuries, exchange rate regimes, public and private debt, and debt denominated in foreign currency as well as domestic currency," in addition to "statistical errors," and for lacking a "theory of sovereign currency".

Thanks for the link. My memory from that time had it as "merely" excel issues, but as described it is a fair bit worse than that.

Yep. Trusting a guy who made a rookie excel error is not something I think we should continue to do.

Especially when the consequences downstream of that error were so stark in terms of policy.

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Americans must pay the consequences for electing the people they did and for having the duopoly political system with gatekeeping that filters out the worst kind of people, and for having politicians being for sale to the special interests group like the street walkers they are

Assuming this system is stable forever is just as unrealistic as trying to rewind history.

I watched it and I found him less convincing than Dalio's Principles of a changing world order, which I found to be extremely intuitive although not at all rigorous.

Ezra gave Rogoff a lot of push back and Rogoff came off as a guy who intuitively understands things but doesn't rigorously understand them so he looked kind of foolish multiple times. Rhetorically he was poor and if I hadn't already gone in agreeing with his general consensus, I would probably have been left fairly unconvinced. Of course, the curse of knowing a lot is that your knowledge of what you don't know is much larger than other people's knowledge so it's harder to confidently present things because you can think of exceptions or why they might not be true or how things could be much worse or much better than what seems most likely.

YouTube link without paywall: https://youtu.be/pT2cohNt6a4

If I am China I lend you money I would like get paid back in dollars because I can already print as many Yuan as a I want. Why should I lend to you in a currency I can turn the printing press on for. So it feels like the Dollar will be around for awhile as long as it is accepted, convertible, and the Government tries to slow down the printing press themselves.

Shortly after JFK: https://wtfhappenedin1971.com

Yes, this is the Triffin Trap or the Triffin Dilemma

https://en.wikipedia.org/wiki/Triffin_dilemma

my understanding is that yes it is, you cant make shoes in the US, but the power that comes from pretty much all finance flowing through the American pipes is a good trade off.

> are being hollowed out.

What does this mean?

That's mixing up dominance with high value. In theory there could be a world with a lower value dollar that's still stable and used for international trade.

Can't run a trade deficit if your country is broke and inflation is 100% a year like a banana republic and that's the era that MAGA wants to put us into courtesy of kompromat Don

> Though BRICS may seem insignificant atm, it is off to an impressive start.

A semi-joke-y take on BRICS:

> Pretty straightforward really. You combine Brazil's history of monetary stability, with Russia's respect for property rights, India's domestic tranquility, China's financial transparency, and South Africa's investment opportunities - and hey presto, you've got a new global money

* https://twitter.com/davidfrum/status/1665053372402081792

Of course more countries may enrol in the system, but that dilutes the influence of the five namesake nations of BRICS. But then you have to choose an actual currency(s), so you will they trust to be stable? Or perhaps go with a 'theoretical' currency likes Keynes' bancor?

Bitcoin is so concentrated in the hands of so few that its probably the simplest thing in the world to be manipulated

BTC hasn't been seen as a viable global currency for about a decade. That's why it was pivoted to be a 'store of value'.

It's utterly unsuited to the task. Far too slow, vulnerable to quantum computing, concentrated and tending toward even further concentration, and with utterly useless environmental impacts. At it's core its a cool concept, but cannot be upgraded to match what's currently out there. It's whale oil in a world of fusion power.

Fee-less, mining-less, spam resistant, quantum resistant, decentralized and near instant technology exists, right now, and has proven itself over the last ~9 years. It's wild that people think the first-mover advantage extends so far as to accept something so vastly inferior.

The issue is the Fed has some logic behind it's methods. We're also find that a clown in the White House can also devalue American currency, status, and inflate the economy with a few strokes of the pen when there is a do-nothing congress who are cowards.

pretty much all economists and commentators state that the replacement will be a basket of currencies not a single currency, where each countries' basket will be weighted by the typical trade volume they have with other countries (more trade with Country X, then hold more of Country X's currency) plus some factor for stability/volatility/currency risk etc.

It literally says in the article that nothing is going to fully replace it. And the same way that it didn’t happen overnight for it to become the force that it’s today in the global economy, it won’t disappear overnight either.

I doubt it will be a single currency.

Something I think a lot of people miss in this discussion is that with computers and electronic markets dealing with currency conversions is fairly easy. In the past doing everything in USD vastly simplified everything, but today I think countries just trading with whatever currency works for a given market or transaction probably makes the most sense.

There is no other world currency that looks both large and stable enough to replace USD. Chinese Yuan/Renminbi is probably the closest but it's probably viewed by many as too easily manipulated. It's a pure fiat currency run by a single party state with little separation of powers.

My guess is that initially it will get eaten away by parties that currently trade in US dollar for convenience shifting to trading directly in their native currencies. It's a pure cost / risk equation for them that they have to manage this third variable in their dealings and if that outweighs the benefits of using a common currency they will make an agreement to trade directly. This will happen slowly over a long time and eventually a new default currency will emerge as a result of these decisions.

Nothing. Even the price of bitcoin is measured in dollars.

national currencies of other countries, which are backed by gold and their national reserves.

Yes, considering that it seems to be the semi-official blueprint for the current US economic strategy, it's surprising that it gets so little attention: https://www.hudsonbaycapital.com/documents/FG/hudsonbay/rese...

One can certainly debate if it's a good strategy, but I'd highly recommend that everyone read this paper. A particular part that's surprising is that the headlines are constantly ~"US unable to stop decline of dollar" when according to this paper a weaker dollar is an explicit goal.

Edit: CountSessine has an excellent (and currently downvoted) set of posts about the paper elsewhere in this thread: https://news.ycombinator.com/item?id=43941376

The government is not borrowing foreign currencies to buy an oversupply of domestically produced goods.

I think your model depends on "workers" being the only people who are taxed, so if workers are being paid less than the cost of the goods they have to consume, the government + workers must be running at a constant deficit.

But you also tax employers and owners.

Inflation is a tool intentionally used by governments to quickly lower wage costs across the board. People at the bottom end can be subsidized, and productive people whose nominal worth just went up with inflation will negotiate for higher pay. Everybody else gets a pay cut.

We detached this subthread from https://news.ycombinator.com/item?id=43940978 and marked it off topic.

Arguably more useful than gold. But unfortunately perishable.

Mmmm delicious currency

has my vote

You mean like the US President?

Aka a conflict of interest?

One of the grosser things the cryptocurrency mania did was convince people that you can only criticize things if you have a financial interest that aligns with your commentary. This is at odds with the very basics of journalistic ethics. Just patently absurd.

Hasn't BTCs value always been strongly correlated with the strength of the U.S. economy?

I think this is the most incompetent administration USA has had in modern times, and it’s perhaps the second most authoritarian (next to WW2 era FDR). The current administration seems to be taking concrete steps to weaken USA’s financial dominance in a way that has not happened in the years since you were a teenager.

I suspect these forces will combine to significantly weaken the dollar.

The bond market, and blasé attitude towards national debt and default.

In the last 35 years, the US dollar has lost 60% of its purchasing power.

https://www.bls.gov/cpi/factsheets/purchasing-power-constant...

Because this time is always different. There needs to be some accountability when pundits are wrong, just like in any other profession. I have read this prediction forever too. The dollar always has a recurring tendency of surging, typically when there is unrest or recession or any other reason, or even no reason.

Also, the dollar falling also does not make Americans poorer, as the implicit unit of wealth is the US dollar (e.g. the Forbes 400 list). Americans measure their net worth in dollar, not Euros. This would only matter if traveling oversea and purchasing power falls due to falling dollar. Otherwise, it does not matter.

Perhaps you’ve also followed politics since, oh, about 2016 or so?

You're not alone, someone in ancient Rome probably read a clay tablet saying the denarius was doomed. Centuries later, a merchant in Spain might've heard whispers about the decline of the Spanish real, and a banker in London likely scoffed at predictions of the pound’s fall from grace. Empires always feel eternal, until they’re not. History doesn’t repeat, but it does hum the same tune. Maybe this time isn’t different, just... next.

This time it isn't we will fail in our efforts to maintain a strong dollar. It's, US policy is no longer attempting to maintain a strong dollar.

We have an administration actively attempting to tank the US dollar as global reserve currency?

If you think this is a crazy thing to suggest, consider that there is a faction in the US that wants this to happen. They see a strong US dollar as harmful to manufacturing and the working class.

Because the USA is rapidly losing it's place on the world stage.

Everything has been in a headline at some point. Perhaps all that experience is hindering your ability to discern what really matters. Too much noise from your past.

Because we have a complete clown show of juvenile seniors in the White House and Congress who follow an Orange Glow Clown who is actively doing the worst financial mistakes he could possibly doing without just flat out deliberately blowing up American banks and allies all over the world

No. Stablecoins only exist because fiat <-> crypto trading is a massive pain. Nobody wants to own stablecoins, they want easier transactions. And if the USD becomes less popular, people will switch to, for example, EUR stablecoins - there's nothing special about the dollar here.

On top of that, transaction volume is meaningless. Those $27.6T could be $27.6T held in escrow being traded once, or $1 held in escrow being traded 26.6 trillion times. You can't derive USD demand from transaction volume.

Only if the other major world currencies take active (and successful) steps against stablecoins being backed by them.

If they don't, stablecoins would presumably make it even easier to convert holdings into stablecoins backed by another currency (as there is no new account to be opened etc.) as soon as the sentiment on a given world currency shifts.

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Just remember, the same things that make Bitcoin attractive are what make it really easy to steal. Namely that it has no "men with guns" to back it up and no government bank to make you whole.

Bitcoin is not treated like a currency anymore, given recent trends. It's acted upon more like an equity. In short, it's seemed to tend to follow the stock market. Whatever that means to you, YMMV.

Bitcoin is a backstop, a way to step outside manipulated currency.

This seems like a phenomenally ironic claim to me. You're giving up government manipulation in favor of rampant individual manipulation and theft.

It drives me nuts how many people support crypto for the right reason, and then miss the last step and support Bitcoin instead of Ethereum. Bitcoin is an enormous resource sink, on the scale of fiat system inflation. It doesn't have to be! The system works without it!

In the world right now, how many transaction per second in $USD are ongoing? 1000? 100,000? Visa can handle 20K/s, IIRC. Bitcoin can handle what, 3-7 per second?? Yeah, that'll scale up to "the world currency".

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Let's say some random country follows your advice and decides to go back to the gold standard – is that going to convince people globally to use their currency? Probably not.

Because even if the currency is on the gold standard today, what stops the country's government from switching back to fiat tomorrow and pocketing all the gold? Or, gradually doing so by introducing restrictions on gold redemption and slowly tightening them over time?

Whether a currency is fiat or backed, it is ultimately a statement that you trust the government which controls the currency to take good care of it – and in general, it is easier to have that trust with democracies than authoritarian regimes. And this is part of the argument for fiat currencies – if trust in the institutions ultimately counts for more than what the currency is backed by, why do we really need the backing?

Which is why replacing the USD is so hard. I think even if the US starts to go really downhill, people will be looking at currencies like the EUR, JPY, GBP as an alternative. If the IMF allowed private parties to use SDR as a currency – a move the US has always blocked as a threat to the USD, but in a global crisis the US might feel it has no choice but to change its mind – that might become a viable alternative global currency. CNY may become important in trade with China and its close allies, but who outside of China trusts the Chinese government enough to use CNY as a long-term store of value? Only as a riskier bet in a diversified portfolio including safer options.

Translated, this "all it takes is one of them to back it with gold, or a basket of commodities, and create infrastructure around it" amounts to "all it takes is to re-create the western finance system at scale and make it work better for a couple decades without falling back into developing world problems of corruption and instability."

Though we are doing a particularly spectacular job of messing that up this year.

The backing the US dollar has is the strength of the world's only superpower. It doesn't matter if it's backed by gold or commodities, what matters is whether people believe there's an entity backstopping the currency that can guarantee its stability. That means an entity strong enough to be fully independent, and governed by the rule of law, so that if you're holding a bunch of that currency you can be confident it'll be worth as much tomorrow as it is today.

It doesn't matter if Russia or China peg their currencies to gold reserves, no one trusts them keep the currency market-stable, because they're autocracies. And if Canada pegged its currency to gold or commodities, it wouldn't matter because it's not strong enough to maintain its independence by force, if it came to war.

The EU and the Euro might be a replacement for USD in terms of a currency backed by a big enough, stable enough entity to make it that trustworthy, but that's a long way in the future. Though, as US Treasuries lose their preferred status, European instruments will likely gain from that.

If this was true some country would have risen since the 70s when we completely left any semblence of that. Gold backed currency as the best path forward died in the 1800s

gold makes a horrible currency, very volatile. No one wants to settle debt in gold due to the volatility, number one goal of currency is predictability. You should be able to guess about how valuable a currency will be 10 years from now. This requires fiat.

It matters because it’s the main reason why the US is able to borrow money so cheaply and why the US doesn’t get a junk bond rating.

As it turns out, when every country holds US dollars for use in global finance, it makes it very easy for them to park US dollars in American financial assets

The controller of dollars gets to mint new dollars, making existing dollars less valuable.

Other countries who use dollars do not have that privilege.

That is effectively a 2% annual tax on the entire world, paid to the controller of the dollar.

> wealth per capita

It matters a lot to those of us among the capita who hold our wealth in US dollars.

It doesn’t matter, it’s just a clickbait headline.