Discussion in 'Digital Currencies' started by hawkeye1, Apr 29, 2021.
At what point has anyone here argued that it will be good to hold USD?
Here ya go Shiney. Petrodollar.
A country wants oil.
First it has to buy US dollars (this creates a demand for USD and therefore, because supply/demand determines price, a floor to the price)
The oil producing country recycles some of that USD into treasuries which helps fund the US Government (and military)
The oil Producer gets a decent income stream from the treasury bonds. Kind of like a bank account.
A virtuous cycle you might say.
Except now the "bank" is paying virtually no interest. And giving you back heavily devalued dollars at the end. Would you still keep your money there?
I think you are basing your expectations too much on what happened last decade. I don't think this decade is going to play out the same way.
I don't buy into the petrodollar theme.
I think the value of the worldwide oil market is about USD5.5 trillion per year. US national debt alone is $28 trillion, about 5 times the value traded in oil so it's likely to have a bigger effect on USD demand, now admittedly that's not turned over every year, but demand for US debt instruments have grown while oil demand has shrunk.
I'm basing my expectations on how governments issue currency to fund expenditure and the trade data between nations, all of which shows a rise in USD demand.
^Iran will take Euro or RMB
RMB can be exchanged for gold and other imports
Russia A large oil/gas exporter will take other than USD
Russia S fund just dump their USD before Putin meet Biden
USD reserves will continue to drop, as Treasury no longer primary
BRICS bank, etc provide other alternative to the WB/IMF
Except they're actually going up.
I gather this is the MMT story.
The USD is not just the currency for America but it is the reserve currency of the world. There is much trade that happens in USD that does not involve America or American entities. This is unlike every other currency. A couple of decades ago the USD virtually had the world market to itself. That's not the case any more. It's now competing with the Euro and, ultimately, it will be competing with Bitcoin.
Printing is (somewhat) fine only when you have no competitors. For most local currencies that have a monopoly, this is true. But the USD operates on the global stage as well as the local in-country. And at that global level, it has growing competition. But monetary policy has operated, for decades, on the assumption they had it all to themselves.
I too, don't see much difference in the short-to-medium term. But I also think the dynamic is changing.
Not really. MMT is chiefly concerned with explaining how the government of a sovereign nation with a monopoly on the issuance of fiat can fund its budgetary requirements. You'll struggle to find much in-depth discussion on reserve currencies, if you do a search for "petrodollar" for example over at Bill Mitchell's blog you'll get:
... which pretty much reflects Steph Kelton's work on it, and if you do a search for Warren Mosler's view on the topic you'll get a passing quip something like They can trade peanuts instead of USD for all that it matters delivered with a cheeky billionaire grin.
This is because MMT argues that the strength of a nation's currency rests upon (a) tax obligations can only be paid in the native currency, and (b) the robustness of the nation's economy. Whether a nation's currency is a reserve currency or not doesn't enter the equation.
So firstly, if we go back to my response to you a few posts ago where you argued that the status of the USD as the world's reserve currency is what maintains the strength of the USD, then from an MMT perspective I would say no that is not the case for the two reasons above (see "a" and "b"). Secondly, we really have a basket of world reserve currencies which are used for exactly that, as reserve currencies. Not only that but trade is conducted in those world reserve currencies as well as a host of other lesser currencies, and the data shows the amount of USD held as reserves and used to invoice trade exchanges is growing.
So it's not really an MMT thing, more a reflection of what is actually happening.
And it's this bit that in contrast to your position I would argue is actually driving worldwide demand for USD. Treasury bonds. The US has a ready and willing market for its debt instruments. Why? See (a) and (b) above. And that's probably the MMT bit in my argument.
As for arguments from others that the USD and fiat currency will go to "0" within a few years, that's just complete USD FUD.
Back OT, will the US ban BTC? Why should it? Taxes will still have to be paid in USD, government contracts will be be paid in USD and Federal government workers will be paid in USD, so there will always be demand for it.
Unless we get @Skyrocket's alien prediction thing playing out.
competing with the Euro and, ultimately, it will be competing with Bitcoin....
That’s some funny stuff. Euro will have next problem standing at exit door. bitcoin heads is trying to believe that but longways to go, I wouldn’t marry it (higher price doesn’t mean bitcoin is taking over)
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