I don’t think that this analysis of the importance of the dollar is correct. Everything I’ve read says reserve currency is a minor issue when it comes to living standards, and I don’t see the connection between it and US interventionism anyway. Who have you been reading on this?
It would be good for me in the future to spend some time more sufficiently defending my position in a full article. For now I'll start with a comment.
Here are two reasons why it is important for the dollars to be held in reserve status:
1. MARKET ACCESS: Reserve status allows for greater capture of global capital markets. As a matter of convenience, American financial companies can more easily serve as a hub for international investment when most countries have ample dollar reserves. In 2020, roughly 39% of Goldman Sachs investments were outside the western hemisphere, so this is an important chunk of the economy. If the dollar wasn't being used internationally, then exchange fees add up and other currencies would be preferred. When people use dollars, this benefits and privileges American investors as a matter of convenience. Otherwise, Americans would be exposed to greater competition from regional and local players.
2. INFLATIONARY OFFLOADING: The more dollars are held in reserve, globally, the more distributed are the effects of inflationary increase in the money supply. If no countries held dollars, then every dollar printed would have a greater inflationary effect. When countries hold dollars, they reduce inflationary impact, which allows the government to print more money while being punished less in the form of inflation. Reserve holdings have the effect of blunting the effects of inflation, which is why, despite massive monetary expansion during COVID, inflation is relatively low (compared with the 80s, for example).
When I say the dollar, this is imprecise, because I am also including the Euro and Pound Sterling in my analysis, even though they are technically separate currencies. This is because they are bound together by a military alliance, so the fortunes of one affects the other directly.
WHY DO COUNTRIES HOLD USD?
All forms of currency are a form of bond. When China (or any country) holds dollars, euros, or pounds in reserve, it is essentially buying a NATO bond, with the expectation that the value of the bond will hold, relative to other assets. The assumption is that the NATO basket of currencies will retain more value than local currencies, and buying into the NATO basket helps to diversify assets and reduce risk.
Countries could also buy assets like Bitcoin, but these assets are volatile, and volatility produces uncertainty and fear, which reduces investment. Countries want to increase consumer and investor confidence, so sometimes it is better to buy an asset which depreciates in a regular way with relatively low inflation (NATO basket) rather than to invest in something which may depreciate less over long periods but has higher volatility (Bitcoin).
This is part of the reason why countries stopped pegging their currencies to gold. The price of gold, since it is now an industrial good (used in lasers and computers, or something) fluctuates with a relatively high degree of volatility. Gold fell from around $1800 in 2011 to $1100 in 2015; losing 38% of the value of your assets as a country in four years is not a good investment. This doesn't mean that countries don't hold ANY gold; Assad reportedly holds millions or even billions of dollars in gold, supposedly locked away in vaults in Moscow. Gold isn't the worst investment, but the volatility of gold over short periods is much higher than the NATO basket.
You have pointed out that the USD is used because America is stable and prosperous. Why can't stability and prosperity alone be enough for a currency to achieve reserve status? Why is offensive capacity necessary?
There are two arguments I would make, with regard to the relationship between reserve status and military power:
1. Historical correlation: expansive empires had the most widely used currencies. The Roman Denarius, the British Pound, and even the Nazi German Reichsmark were all dominant currencies while those countries were militarily powerful. Yes, Switzerland is very stable and prosperous, and engages in a disproportionate amount of banking, but the stability and prosperity of Switzerland exists within the context of a larger European market, without which, Switzerland would not amount to much. And that European market is dependent on military stability. This argument alone isn't sufficient to understand the mechanisms behind reserve status, but it is a correlative argument.
2. Expectation: expansive empires are expected to grow. This is fairly straight forward. If NATO+ continues to expand, bringing in more Mexican immigrants, adding Ukraine to a free-trade zone, facilitating cooperation among the Pacific rim nations and expanding the TPP11, then the NATO economy will continue to grow. BRICS countries have a more shallow history of growth: China's growth has only become internationally relevant over the last 20 years; Russia collapsed 30 years ago and has only recently recovered in the last 10 years; South Africa is in free-fall with real GDP crashing since 2011; Brazilian GDP has also generally declined since 2011. NATO economic growth is never as good as it COULD be, but compared to the competition, it is much better.
Why is NATO growth so good, compared to everyone else? It is not just a case of low regulation, or low taxes, but is also concerned with military and political stability. In the case of Russia, the Soviet Union experienced a crisis of political confidence and nationalistic secession movements split apart its common market. In South Africa, is it ethnic and racial tensions -- not just black-vs-white affirmative action, but by black "natives" against black immigrants! -- which has introduced corruption and the pilfering of the state. Investors fear the potential conflict in Taiwan, which is a result of China's historically (pre-2010) weak navy, and its inability to exert regional influence. In each case, the reason why these economies are historically unstable is because they have some sort of military, ethnic, secessionist, racial, or nationalistic issue.
As far as people I would cite on this, this is one area where I agree with Trump, that reserve status is important and should be defended. I think he has been uniquely vocal about this, because his anti-interventionism spooks financial players who understand the link between interventionism and reserve status. He has to alleviate those fears, so he speaks more openly about it than other presidents.
The rising tide of right-wing populism is a consequence of a fundamental breakdown of trust and expectations between the people and elites and it's largely centred around immigration and identity.
If right-wing populism was driven by concerns about wokeness it would have withered away as did wokeness (at least in its most aggressive manifestations, retreating circa 2022).
Any society functions on an unwritten social contract. Expectations, rights and duties. Large-scale immigration transforms society and often leads to social and political instability that degrades said social contract.
Nationalism is dying and elites are not being honest about it. They also have no other vision beyond vague appeals to "our values" and the most tepid and watered-down version of patriotism to still keep the idea of having a nation alive for purely practical reasons (national armies to fight geopolitical adversaries/taxation/social cohesion). They're not brave enough to advocate for global federalism because that would require leadership and risk. They're lying to the people and they're out of ideas.
Right-wing populists are delusional in their own way, believing we can return to a world prior to the internet and commercial air travel. They're also unwilling to talk about pension systems/social security which incentivise governments to continually engage in biomass QE via immigration of disproportionately younger people to prop up gerontocracy.
I don't know the exact practical solutions to these massive problems but we need vision and leadership from our elites which is something we're lacking greatly.
If my kid got mad an broke a vase ON PURPOSE, I don't evict them from the house. But I agree that racial resentment is more disturbing than the physical damage caused.
Christianity is the most deeply rooted religion in Western countries as well as much of the rest of world today. The movements described in this article are mostly a response to the religion. In some cases a reaction or rebellion (nationalism) and in other cases a revolution (protestantism).
In today's world it seems like Christianity faces a lot of challenges in it's ability to answer the big questions and provide meaning. There are many different denominations and theological perspectives that people absolutely insist are the correct ones. The disagreements are often very intense and consensus seems unreachable.
Islam seems like a possibility but I think it's unlikely to resist the influence of western culture. It is landing on dry ground. It also faces many of same challenges that Christianity does but has none of the sentimentalism or cultural references. There is no going back to polytheism after converting to a monotheistic religion so that rules out paganism. I think ultimately something will have to happen in the Christian world. Some spark of inspiration. Technology is a major influence on people but it's hard to predict.
Christianity. I know, I would say that (lol). But it's in our bones as Westerners. In America I'd bet my money on Catholicism, for several reasons:
1) It's "foreign" enough to feel edgy and have outsider status
2) It's also "familiar" enough (as a western form of Christianity) to fit in, especially since the modernization of Vatican II
3) It's considered relatively high status and has cultivated its own intellectual class, particularly on the right (though it has a presence on the left too)
4) It's thrived in the US right wing circles in spite of a current spiritual leader with somewhat woke views - imagine how it would fare under a more traditional head
5) It's fairly syncretistic and "broad church" in ethos - with traditional, charismatic, conservative and liberal elements (and more)
I'm Protestant so this is not my preferred outcome - just what I'm predicting.
The cost of violence and criminality is mostly in the ways people avoid it.
For instance, we would all agree that zoning regulations cost the economy a lot of money, and a big driver of zoning regulations is trying to price out the dysfunctional because that's the only legal way to do so.
Similarly our education system revolves around trying to close gaps and this leads to ever greater dysfunction and cost increases. The budget for maintaining failing public schools no white people want to attend is staggering (NYC spends $35k/kid/year).
I could go on and on. Basically, the costs of maintaining the fiction of equality and the unwillingness to confront dysfunction directly have huge externalities beyond the direct costs. Most of our cities and some whole states have basically been wrecked by this stuff even when they should have huge things going for them.
My solution is liberal-trenchrocracy. Robert Heinlein described pretty well all the malaise we are assisting today, decades before they were just appearing. A system like that in Starship Troopers won't be perfect, but it would be the best way to suppress cultural and spiritual Marxism while preserving individual freedoms.
"Whereas BLM just burns department stores, a direct attack on federal buildings undermines public trust. If Walmart burns down, ok, you rebuild it and life goes on. If the White House burns down, that is an entirely different magnitude of chaos."
These are less two different scenarios and more the same thing:
No one believes BLM could take over the government. Trump hiding in a bunker is silly. He could have very easily killed all the BLM protestors if he wanted to. By contrast, if the police started shooting on January 6th, things would not have ended well.
There is a difference between wanting a less unequal wealth distribution and wanting either state ownership of everything (socialism), or communal ownership of everything (real communism).
Imagine a two axis political map with left vs. right being about equality and top vs. bottom is about the amount of government, with extreme libertarianism being the very top. For years, the Democratic Party was the lower left party: bigger government with promises of more equality. The Republicans were both upper right and lower right. The Bushes were big government Republicans. The Upper Left was largely unserved. Jimmy Carter was in the Upper Left quadrant; he did more deregulation than Reagan and consumers benefitted bigly. H. Ross Perot ran as an Upper Left candidate.
MAGA is basically an Upper Left position: shrink the government and reduce the income gap.
---
The Dale Gribble stare is quite appropriate. Back when the Upper Left was largely unserved, the main voices in the Upper Left were conspiracy theorists. See "None Dare Call it Conspiracy" by Gary Allen. Millions of copies were sold.
---
The economy you describe in this article resembles that of late Republican Rome. A war and dole economy doesn't mix with democracy so well.
Most on the Left claim Equality as their core value. You are a bit of an outlier.
Gary Allen had a one dimensional political spectrum where Left just meant bigger government. Basically, the vertical of the Nolan Chart. His core thesis was that many, if not most of the robber barons of yore wanted to create a world socialist government with the elite in charge. Marx was just one of their tools.
To Allen's defense, John D. Rockefeller was publicly against destructive competition. Come to think of it, so is Peter Thiel today.
I thought this would be about the people on the right that refuse elite migration because 'fuck gdp and merit I want to feel represented' finding common ground with trans people advocating for female sports inclusion
I don’t think that this analysis of the importance of the dollar is correct. Everything I’ve read says reserve currency is a minor issue when it comes to living standards, and I don’t see the connection between it and US interventionism anyway. Who have you been reading on this?
It would be good for me in the future to spend some time more sufficiently defending my position in a full article. For now I'll start with a comment.
Here are two reasons why it is important for the dollars to be held in reserve status:
1. MARKET ACCESS: Reserve status allows for greater capture of global capital markets. As a matter of convenience, American financial companies can more easily serve as a hub for international investment when most countries have ample dollar reserves. In 2020, roughly 39% of Goldman Sachs investments were outside the western hemisphere, so this is an important chunk of the economy. If the dollar wasn't being used internationally, then exchange fees add up and other currencies would be preferred. When people use dollars, this benefits and privileges American investors as a matter of convenience. Otherwise, Americans would be exposed to greater competition from regional and local players.
2. INFLATIONARY OFFLOADING: The more dollars are held in reserve, globally, the more distributed are the effects of inflationary increase in the money supply. If no countries held dollars, then every dollar printed would have a greater inflationary effect. When countries hold dollars, they reduce inflationary impact, which allows the government to print more money while being punished less in the form of inflation. Reserve holdings have the effect of blunting the effects of inflation, which is why, despite massive monetary expansion during COVID, inflation is relatively low (compared with the 80s, for example).
When I say the dollar, this is imprecise, because I am also including the Euro and Pound Sterling in my analysis, even though they are technically separate currencies. This is because they are bound together by a military alliance, so the fortunes of one affects the other directly.
WHY DO COUNTRIES HOLD USD?
All forms of currency are a form of bond. When China (or any country) holds dollars, euros, or pounds in reserve, it is essentially buying a NATO bond, with the expectation that the value of the bond will hold, relative to other assets. The assumption is that the NATO basket of currencies will retain more value than local currencies, and buying into the NATO basket helps to diversify assets and reduce risk.
Countries could also buy assets like Bitcoin, but these assets are volatile, and volatility produces uncertainty and fear, which reduces investment. Countries want to increase consumer and investor confidence, so sometimes it is better to buy an asset which depreciates in a regular way with relatively low inflation (NATO basket) rather than to invest in something which may depreciate less over long periods but has higher volatility (Bitcoin).
This is part of the reason why countries stopped pegging their currencies to gold. The price of gold, since it is now an industrial good (used in lasers and computers, or something) fluctuates with a relatively high degree of volatility. Gold fell from around $1800 in 2011 to $1100 in 2015; losing 38% of the value of your assets as a country in four years is not a good investment. This doesn't mean that countries don't hold ANY gold; Assad reportedly holds millions or even billions of dollars in gold, supposedly locked away in vaults in Moscow. Gold isn't the worst investment, but the volatility of gold over short periods is much higher than the NATO basket.
You have pointed out that the USD is used because America is stable and prosperous. Why can't stability and prosperity alone be enough for a currency to achieve reserve status? Why is offensive capacity necessary?
There are two arguments I would make, with regard to the relationship between reserve status and military power:
1. Historical correlation: expansive empires had the most widely used currencies. The Roman Denarius, the British Pound, and even the Nazi German Reichsmark were all dominant currencies while those countries were militarily powerful. Yes, Switzerland is very stable and prosperous, and engages in a disproportionate amount of banking, but the stability and prosperity of Switzerland exists within the context of a larger European market, without which, Switzerland would not amount to much. And that European market is dependent on military stability. This argument alone isn't sufficient to understand the mechanisms behind reserve status, but it is a correlative argument.
2. Expectation: expansive empires are expected to grow. This is fairly straight forward. If NATO+ continues to expand, bringing in more Mexican immigrants, adding Ukraine to a free-trade zone, facilitating cooperation among the Pacific rim nations and expanding the TPP11, then the NATO economy will continue to grow. BRICS countries have a more shallow history of growth: China's growth has only become internationally relevant over the last 20 years; Russia collapsed 30 years ago and has only recently recovered in the last 10 years; South Africa is in free-fall with real GDP crashing since 2011; Brazilian GDP has also generally declined since 2011. NATO economic growth is never as good as it COULD be, but compared to the competition, it is much better.
Why is NATO growth so good, compared to everyone else? It is not just a case of low regulation, or low taxes, but is also concerned with military and political stability. In the case of Russia, the Soviet Union experienced a crisis of political confidence and nationalistic secession movements split apart its common market. In South Africa, is it ethnic and racial tensions -- not just black-vs-white affirmative action, but by black "natives" against black immigrants! -- which has introduced corruption and the pilfering of the state. Investors fear the potential conflict in Taiwan, which is a result of China's historically (pre-2010) weak navy, and its inability to exert regional influence. In each case, the reason why these economies are historically unstable is because they have some sort of military, ethnic, secessionist, racial, or nationalistic issue.
As far as people I would cite on this, this is one area where I agree with Trump, that reserve status is important and should be defended. I think he has been uniquely vocal about this, because his anti-interventionism spooks financial players who understand the link between interventionism and reserve status. He has to alleviate those fears, so he speaks more openly about it than other presidents.
The rising tide of right-wing populism is a consequence of a fundamental breakdown of trust and expectations between the people and elites and it's largely centred around immigration and identity.
If right-wing populism was driven by concerns about wokeness it would have withered away as did wokeness (at least in its most aggressive manifestations, retreating circa 2022).
Any society functions on an unwritten social contract. Expectations, rights and duties. Large-scale immigration transforms society and often leads to social and political instability that degrades said social contract.
Nationalism is dying and elites are not being honest about it. They also have no other vision beyond vague appeals to "our values" and the most tepid and watered-down version of patriotism to still keep the idea of having a nation alive for purely practical reasons (national armies to fight geopolitical adversaries/taxation/social cohesion). They're not brave enough to advocate for global federalism because that would require leadership and risk. They're lying to the people and they're out of ideas.
Right-wing populists are delusional in their own way, believing we can return to a world prior to the internet and commercial air travel. They're also unwilling to talk about pension systems/social security which incentivise governments to continually engage in biomass QE via immigration of disproportionately younger people to prop up gerontocracy.
I don't know the exact practical solutions to these massive problems but we need vision and leadership from our elites which is something we're lacking greatly.
“You don’t evict your child from the house just because of $40 in damages per year, on average.”
Right. But if your child were destructive on purpose, it would be disturbing far beyond any financial losses.
If my kid got mad an broke a vase ON PURPOSE, I don't evict them from the house. But I agree that racial resentment is more disturbing than the physical damage caused.
Christianity is the most deeply rooted religion in Western countries as well as much of the rest of world today. The movements described in this article are mostly a response to the religion. In some cases a reaction or rebellion (nationalism) and in other cases a revolution (protestantism).
In today's world it seems like Christianity faces a lot of challenges in it's ability to answer the big questions and provide meaning. There are many different denominations and theological perspectives that people absolutely insist are the correct ones. The disagreements are often very intense and consensus seems unreachable.
Islam seems like a possibility but I think it's unlikely to resist the influence of western culture. It is landing on dry ground. It also faces many of same challenges that Christianity does but has none of the sentimentalism or cultural references. There is no going back to polytheism after converting to a monotheistic religion so that rules out paganism. I think ultimately something will have to happen in the Christian world. Some spark of inspiration. Technology is a major influence on people but it's hard to predict.
Here's my diagnosis of Islam:
https://deepleft.substack.com/p/is-sharia-the-future
Christianity. I know, I would say that (lol). But it's in our bones as Westerners. In America I'd bet my money on Catholicism, for several reasons:
1) It's "foreign" enough to feel edgy and have outsider status
2) It's also "familiar" enough (as a western form of Christianity) to fit in, especially since the modernization of Vatican II
3) It's considered relatively high status and has cultivated its own intellectual class, particularly on the right (though it has a presence on the left too)
4) It's thrived in the US right wing circles in spite of a current spiritual leader with somewhat woke views - imagine how it would fare under a more traditional head
5) It's fairly syncretistic and "broad church" in ethos - with traditional, charismatic, conservative and liberal elements (and more)
I'm Protestant so this is not my preferred outcome - just what I'm predicting.
The cost of violence and criminality is mostly in the ways people avoid it.
For instance, we would all agree that zoning regulations cost the economy a lot of money, and a big driver of zoning regulations is trying to price out the dysfunctional because that's the only legal way to do so.
Similarly our education system revolves around trying to close gaps and this leads to ever greater dysfunction and cost increases. The budget for maintaining failing public schools no white people want to attend is staggering (NYC spends $35k/kid/year).
I could go on and on. Basically, the costs of maintaining the fiction of equality and the unwillingness to confront dysfunction directly have huge externalities beyond the direct costs. Most of our cities and some whole states have basically been wrecked by this stuff even when they should have huge things going for them.
I have a post planned to discuss the cost of civil rights which addresses this. stay tuned
My solution is liberal-trenchrocracy. Robert Heinlein described pretty well all the malaise we are assisting today, decades before they were just appearing. A system like that in Starship Troopers won't be perfect, but it would be the best way to suppress cultural and spiritual Marxism while preserving individual freedoms.
BLM is cultural Christianity, out of context this shit is going to get some people mad haha
"Whereas BLM just burns department stores, a direct attack on federal buildings undermines public trust. If Walmart burns down, ok, you rebuild it and life goes on. If the White House burns down, that is an entirely different magnitude of chaos."
These are less two different scenarios and more the same thing:
https://apnews.com/article/donald-trump-ap-top-news-george-floyd-politics-a2326518da6b25b4509bef1ec85f5d7f
No one believes BLM could take over the government. Trump hiding in a bunker is silly. He could have very easily killed all the BLM protestors if he wanted to. By contrast, if the police started shooting on January 6th, things would not have ended well.
The J 6 protestors *could* all have been killed too.
BLM has buy-in from the Fortune 500. J6'ers otoh have buy-in from Sea-Doo retailers.
There is a difference between wanting a less unequal wealth distribution and wanting either state ownership of everything (socialism), or communal ownership of everything (real communism).
Imagine a two axis political map with left vs. right being about equality and top vs. bottom is about the amount of government, with extreme libertarianism being the very top. For years, the Democratic Party was the lower left party: bigger government with promises of more equality. The Republicans were both upper right and lower right. The Bushes were big government Republicans. The Upper Left was largely unserved. Jimmy Carter was in the Upper Left quadrant; he did more deregulation than Reagan and consumers benefitted bigly. H. Ross Perot ran as an Upper Left candidate.
Diagram can be found here: https://rulesforreactionaries.substack.com/p/populism-is-the-way
MAGA is basically an Upper Left position: shrink the government and reduce the income gap.
---
The Dale Gribble stare is quite appropriate. Back when the Upper Left was largely unserved, the main voices in the Upper Left were conspiracy theorists. See "None Dare Call it Conspiracy" by Gary Allen. Millions of copies were sold.
---
The economy you describe in this article resembles that of late Republican Rome. A war and dole economy doesn't mix with democracy so well.
You're really calling anti-communist Gary Allen "the upper left"? Seriously? What?
Most on the Left claim Equality as their core value. You are a bit of an outlier.
Gary Allen had a one dimensional political spectrum where Left just meant bigger government. Basically, the vertical of the Nolan Chart. His core thesis was that many, if not most of the robber barons of yore wanted to create a world socialist government with the elite in charge. Marx was just one of their tools.
To Allen's defense, John D. Rockefeller was publicly against destructive competition. Come to think of it, so is Peter Thiel today.
I thought this would be about the people on the right that refuse elite migration because 'fuck gdp and merit I want to feel represented' finding common ground with trans people advocating for female sports inclusion
it's up to you to write that article