[RcouF1uZ4gsC]

> But the most revealing parallels relate to a different expansionary dynamic—that of money. The key to so much else that happened to both countries was the appearance of what seemed like unlimited wealth but was actually access to unlimited quantities of a universal medium of exchange, craved and accepted everywhere.

If you can’t tell the difference between stealing a bunch of gold in a gold based economy and the US Dollar, then there is not much hope for a decent analysis.

At that time gold was the universal currency. So everyone wanted gold itself, and nobody cared where you got it from or if it was backed by anything, as long as the gold was real. So to summarize, people only cared about the material medium, not the backing of the Spanish government and economy.

With the US Dollar, nobody wants the paper or ink that is the material medium. People care about the US Dollar because of the backing of the United States and its economy. The US Dollar could be paper, plastic or digital bits. People wants what it represents, not its medium. This is exactly opposite to Spanish gold.

[pavlov]

That's what makes the comparison interesting. Intuitively Spanish colonial gold and contemporary US Treasury bills are very different kinds of national wealth outputs. But what if the outcomes are still the same?

[krona]

> People care about the US Dollar because of the backing of the United States and its military

Corrected that for you.

[nemo44x]

The backing implies the military. A strong military is necessary for any independent, thriving state.

The USA economy is the most dynamic and powerful in the world by a large margin. People want their wealth backed by this and will pay a premium for the right.

[medo-bear]

who this people ?

[nemo44x]

All the people holding trillions in treasuries. The people invested in USA markets. Etc.

[roody15]

“ People care about the US Dollar because of the backing of the United States and its economy. ”

This may be changing. The US may have overextended its “credit line” if you will.

[edgyquant]

It isn’t changing. Look at foreign reserve holdings for the US since the 90s and you’ll see it’s decreased by a total of 2% and is still over 2/3s of all of it. What happened was that during the run-up to Covid the US dollar spiked to nearly 3/4 of all global reserves and has since dipped back down to normal levels.

[yardie]

The libertarians keep saying this. Yet the US continues to sell bonds to international investors who never question if the credit line is overextended. They continue to use the economic model they learned in high school economics class to a more complex economic model that is designed by and for a hegemony.

The US has an almost unlimited credit line because investors are clamoring for it. It's literally the best, most stable investment going right now. They wanted it to be the EU and it has not been. They wanted it to be BRICs and that is a flaming dumpster fire right now. Very soon, they will state Africa is a better bet than the US. It's a young, dynamic economy; the very opposite of stable.

[somenameforme]

The US debt is $32.3 trillion, and skyrocketing. [1] Total debt held by foreign/international investors is $7.3 trillion, and declining (both in absolute $ as well as percent). [2] The largest single holder is the Federal Reserve. Other holders are disproportionately made up of domestic organizations (like pension or mutual funds) which will collapse when the USD collapses, essentially regardless of hedging efforts, so they have no motivation to consider risk of collapse in their evaluations.

[1] - https://fred.stlouisfed.org/series/GFDEBTN

[2] - https://fred.stlouisfed.org/series/HBFIGDQ188S

[mwbajor]

Could this not change in an instant though?

"The US has an almost unlimited credit line because investors are clamoring for it. It's literally the best, most stable investment going right now. "

Its hubris like this that worries people, not partisanship.

[amanaplanacanal]

What’s the alternative though? There has to be one for the dollar to fall.

[P_I_Staker]

AFAIK our debt utilization still much less than most of our peers. If you compare to whatever metric (GDP?), we're in great shape.

[rightbyte]

With enough gold mines under your control, you are essentially printing money.

[Darmody]

Not exactly because gold has an intrinsic value.

[throw0101b]

> Not exactly because gold has an intrinsic value.

Gold has zero intrinsic value. Like all forms of money, its value is a psychological and sociological construct to treat it as if it had value.

The Incas for example simply used it for religious and ornamental purposes:

* https://www.tourinperu.com/blog/inca-gold-culture-invasion-r...

Anything can be used as money, including giant rocks:

* https://en.wikipedia.org/wiki/Rai_stones

[Darmody]

Gold is the only currency that kept it's value through time.

There's a reason people buy gold. 1kg of Argentinian gold has the same value as 1kg of American gold. And both have the same value as 1kg of gold from any ancient civilization. Big rocks as currency is purely anecdotic.

Of course, if you're in the desert and you're thirsty, a bottle of water has more value to you than all the gold in the world, but that doesn't change the fact that through millennia people has seen gold as something valuable that it's not tied to an economy, a country, an empire or even a culture despite de Incas.

[throw0101b]

> Gold is the only currency that kept it's value through time.

Papers have been written on how it does not:

* https://www.nber.org/papers/w18706

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3667789

See also Roy Jastram's The Golden Constant: The English and American Experience 1560 to 1976 on how it's no good against infaltion:

> Andre Sharon, head of the international research department at Drexel Burnham, Inc., notes, “the value of gold essentially derives from its capacity to preserve real capital and purchasing power.”† I select this particular quotation because of the prestige of the organization and the position of the spokesman, but statements in this vein can be found in great numbers. They can be traced back for generations and in many countries. How can this proposition so contrary to statistical fact become so widely believed and quoted? Possibly because gold has preserved capital in cataclysmic cases it is easy to infer that it can be trusted to do the same in less severe circumstances. To extrapolate from gold’s protection in singular catastrophes to its use as a strategy against cyclical infation is an example of faulty inductive reasoning.

* PDF: http://csinvesting.org/wp-content/uploads/2016/02/RoyJastram...

* https://www.pwlcapital.com/will-gold-save-the-day/

Having gold as one's monetary base (e.g. Gold Standard) doesn't even help in stabilizing currencies:

* https://www.theatlantic.com/business/archive/2012/08/why-the...

* https://archive.ph/FWKcL

> Big rocks as currency is purely anecdotic.

Big rocks as currency is one example of how any arbitrary object can be treated as such:

* https://americanhistory.si.edu/the-value-of-money/origins-mo...

Gold (or silver) bars and coins are nothing more than shiny rocks and are just as arbitrary.

[mwbajor]

I'm not an expert on this by any means but:

Modern society needed something scarce and was hard to manufacture/process (thus ensuring price stability) to use as an intermediate currency between currencies. Those countries agreed to use gold as this intermediate currency. Other ideas have been to use groups of commodities but these incur more complexity since they're purpose is to be consumed in some process.

So does this not give gold an intrinsic value? Economists regard it as a "shiny rock" but I think that is an oversimplification used to make opponents of fiat money look stupid.

[throw0101b]

> Modern society needed something scarce and was hard to manufacture/process (thus ensuring price stability) to use as an intermediate currency between currencies.

And now we have no intermediary and no one bothers with gold when going between USD and EUR or JPY and CAD. Gold is completely useless for such exchanges in 2023 and would just add overhead. So given that it is worse than useless (being an hinderance due to an extra step) in such transactions, how can it have "intrinsic" value? If you're travelling internationally, do you exchange your domestic currency for gold, cross the border, and then exchange the gold for the destination currency?

What exactly is gold useful for in 2023 besides jewelry and some minor industrial uses? Can you buy groceries? Pay property taxes? Can you show up at a car dealership with a brick or two and get a new ride?

What is the value of me having gold in my possession?

> Those countries agreed to use gold as this intermediate currency.

It was socially agreed to it having value, but if it had "intrinsic" value, (a) no such agreement would have been needed because it would have been self-evident (the Gold Standard was only formalized in 1870), and (b) it would still be valid today. When the agreement stopped the intermediary status also stopped, showing there was nothing "intrinsic" about it: it just happened to be a convenient convention (for a time).

[mwbajor]

I agree with everything you are saying with the exception of the fact that it seemed to be a better intermediary than paper currency. I think that is something the "end the fed", "bring back gold" people don't understand. You're right, I cant do anything with gold alone, its actually quite useless.

My argument for gold (if you even want to call it that) is more to keep politicians in check from printing more money where "printing more money" really means a politicization of the financial industry and increasing wealth inequality. The human element was less when a gold standard existed. I'd be all for a paper currency if limits to politician involvement were somehow built into it, I'm not really a fan of Gold in any sense. I've read that in 1972 some of these checks were supposed to be implemented but never were, partly because the nixon shock was supposed to be temporary and partly because polticians realized they could have more power.

[krapht]

What intrinsic value? It's shiny and rare, valuable for the same reason BitCoin is. The industrial usage of gold is limited to niche uses.

The Spanish price revolution crippled the Spanish state due to the huge inflation driven by New World treasure fleets. Gold is nothing special here.

[boffinAudio]

.. and thats the point: the intrinsic value of the US Dollar is has been declining for the last year. Gold holds its value because it can always be used for the things for which it is useful - the US Dollar, not so much.

[louthy]

> People care about the US Dollar because of the backing of the United States and its economy.

Really? Or is it that oil is purchased in dollars? There's no other reason to find it useful over say the Euro (for example).