[AC__]

While you present a compelling argument, I must respectfully disagree. I may catch some flack for saying it, and many people refuse to believe it, but the U.S. is insolvent. The value of the U.S. dollar is artificially propped-up. How long do you truly believe the Russias and Chinas of the world are going to keep using greenbacks? They will feign WWIII, Israel will expand to encompass 'Greater Israel' and U.N. will formally install global government, and USD will cease to be de-facto global currency.

[dang]

We detached this subthread from https://news.ycombinator.com/item?id=10650774 and marked it off-topic.

[AC__]

Freedom of speech 2.0, it's like freedom of speech except you go in a sound proof room and scream at the wall. Yay "democracy".

[adventured]

Insolvent you say? The US owns 45% of all global wealth (per Allianz's global wealth studies, it was ~50% pre great recession, fell to about ~39% in 2010 as the US suffered heavy asset declines, and has rebounded back to around ~45% with the recovery in the US economy, that gap is mostly the arrival of China's wealth). The US is massively solvent in fact. Furthering this point, the US is now growing as fast as China in real terms (given pretty much every credible study indicates China is at least lying about half of their growth); the US is also gaining substantially against most of Europe, as its economy continues to grow faster than Europe even with a stronger dollar. South America and most emerging markets have been thrown into near-depression status, due to the stronger dollar. The US economy is likely to enjoy a very nice 10 or 20 year run in fact.

Russia's economy is now - as of the latest 2015 numbers - 1/12th the size of the US economy. It no longer matters as a global economic power (it still matters as a global commodity player). Its economy is smaller than Canada's now.

China will continue to use greenbacks because they will never have any other choice, the same as they'll continue using Euros. The US is back to being China's biggest trade customer (with the dollar having gained so much value): that trade is mostly done in dollars and that will continue.

[tosseraccount]

Do you have link to the "Allianz global wealth saying 45% of all global wealth is owned by the US"?

I am very skeptical of this.

If this ( http://www.allianz.ru/upload/iblock/ff7/ff77bf0183742b88ea8f... ) is it, then you have misread it.

[AC__]

AF http://www.usdebtclock.org/

[adventured]

That's a terrible argument.

You're talking about public debt, which is a small fraction of all US wealth holdings (household + corporate + government), and can be trivially managed. Further, unlike a lot of countries, the US has significant spare taxing capability (it rests in the middle tier globally on taxation). The US could easily raise $200 billion in new annual income taxes on the top 25% and not miss a beat - that single move alone would handle any potential issues from the public debt cost. Or better yet: the US can constrain its spending growth (as it has been), allowing income and assets to continue to outrun the problem.

And of course the US owns the global reserve currency, which enables it to export inflation to the rest of the world as a means to reduce the domestic hit of things like QE (which is why the Eurozone's QE hasn't been as effective). When the US uses the dollar to improve its fiscal circumstances, the rest of the world foots a big part of the bill. While that's sort of like cheating, it's an advantage the US possesses that nobody else does.

[dools]

A sovereign currency issuing government doesn't need to raise taxes in order to spend, and the US government only issues USD denominated "debt" in order to target the overnight interest rate. The "debt" people talk about is not a borrowing operation.

[AC__]

Yeah you're right, your argument that the entire globe will absorb U.S. inflation indefinitely is much more grounded.

[adventured]

My argument rests on the fact that the US economy is the world's #2 manufacturing economy, has among the highest median incomes (and median disposable incomes), has one of the most productive economies with one of the highest GDP per capita numbers, does not have a demographic bomb going off (Europe, Japan, China), is capable of being fully self-reliant on energy (which very few nations are), has a boom coming in energy exports via natural gas, continues to have one of the most innovative and dynamic economies, is growing as fast as or faster than competing major economies, owns 45% of all global wealth, has significant spare taxing capacity, US households dramatically reduced their debt to income ratio over the last five years (while most competing economies have seen increases in that ratio), and is the global leader across numerous major industries.

You picked out the one thing that is the easy trump card: the global reserve currency makes it all that much easier for the US.

[rrggrr]

I must disagree. The US has a shortage of employable workers as evidenced by the current unemployment rate relative to wages; it has a demographic imbalance where too few young people earn enough to support resources drawn by a much larger aging population; and there is no realistic excess taxing capacity for political and economic reasons outside the scope of this reply.

[AC__]

You're wrong. I believe you're referring to this statistic: "... 0.7% of the global adult population, and they account for 45% of global wealth"[1] The U.S., ON PAPER, holds about 1/4(25.40%) of global wealth not half. [2]

[1] - http://fortune.com/2015/10/14/1-percent-global-wealth-credit...

[2] - https://en.wikipedia.org/wiki/List_of_countries_by_distribut...

[adventured]

I'm not wrong in fact.

"Some 39 percent of the world’s wealth belongs to Americans, while Western Europe accounts for another 31 percent."

And that was before the huge asset rebound in the US, and was a drop of 12% due to the great recession.

http://economix.blogs.nytimes.com/2010/09/14/americas-domina...

Allianz's 2015 report indicates North America holds 45% of all global financial assets. Unless you're pretending that Canada and Mexico hold 20% of all global assets, your figures are wildly off the mark (Canada is less rich than the US per capita on average, and Mexico is far less so); at a minimum the US holds 40% to 42% of all global wealth.

https://www.allianz.com/v_1443702256000/media/economic_resea...

[ethbro]

The thing people who harp on debt miss is that it's a zero-sum game, not an absolute competition.

Yes, the US has debt, but if the market believes it's stronger than any of the alternatives... the US dollar still holds value.

[dools]

The US only has "debt" in USD and pays interest in USD which it creates. It deosn't even really have "debt" in the sense that it hasn't "borrowed" to fund any spending. The bond market just allows USD account holders at the fed to earn interest on reserves and is used as a tool to target the overnight interest rate. Nothing more.

[dools]

The US issues it's own currency and only issues debt in it's own currency. It can't be insolvent.

[AC__]

No the Federal Reserve issues USD, not the US government, most people don't realise this fact and it is the difference between a sovereign nation and whatever the fuck North American countries have become today. Canada, where I'm from, had control of our central banking authority up until 1974, what little sovereignty we had(we are still a constitutional monarchy) was relinquished to international banking interests.

"Permit me to issue and control the money of a nation, and I care not who makes its laws!" - Mayer Amschel Rothschild

[dools]

Firstly, anyone who mentions the name Rothschild in a conversation about economics cannot be taken seriously.

Secondly, the government creates dollars by spending -- when the US government spends, money is created. When the US government taxes, money is destroyed[1].

Same is true for the RBA in australia, it's even on their website[2]:

"As the Australian Government is a customer of the Reserve Bank, these payment flows can be very large. Expenditure by the Government adds ES funds to the account of the recipient (or their financial institution), while tax receipts have the opposite effect."

The US has several bizarre, self-imposed constraints like the "debt limit" and some crazy mechanism for the fed to buy treasury bills from the government that goes via the private banking system for no good reason but the net effect is the same. Government spending creates money and taxation destroys it.

In terms of ownership and control, the RBA is owned by the Commonwealth (probably the same for Canada) and the Fed is owned by private companies because of concerns about government control when it was setup (even though the Fed and the Treasury co-operate so much they might as well be the same institution) but ownership is very different from ownership of a normal company[3].

[1] http://www.mecpoc.org/2011/07/who-can-really-print-money-the...

[2] http://www.rba.gov.au/mkt-operations/dom-mkt-oper.html

[3] http://www.federalreserve.gov/faqs/about_14986.htm

[AC__]

Fuck off https://en.wikipedia.org/wiki/Rothschild_family

[dools]

An interesting lecture on the psychology of conspiracy theories: http://m.youtube.com/#/watch?v=jqXgE0HMMLw

[tootie]

Every currency's value is 100% artificial, yet they are miraculously effective.

[AC__]

Lots of downvotes, not much in the way of reasoned response though.