[psychlops]

Consider that this is the point of all the machinations. The US having the reserve currency is a liability in many ways and the direct reason why it's a consumer not producer economy.

Losing reserve status will be damaging to some parts of the american economy and create a boom in others.

Take a look at what current tariffs are across the world. The US isn't necessarily bullying as equalizing.

[overfeed]

> Losing reserve status will be damaging to some parts of the american economy and create a boom in others.

Which parts will benefit from higher inflation?

The only reason the US has been spared from >20% inflation after engaging in what would be called "money printing" by American press when practiced by a 3rd world country is that there are deep pools of unused reserves slowing the overall velocity. Americans don't know how good they have it.

[psychlops]

> Which parts will benefit from higher inflation?

All domestic producers which produce products that cost less than imported competitors.

I agree with you. The question to be answered is what kind of economy do americans want to have going forward. It's great to be in America at present, but what happens if global relations continue to deteriorate and fracture?

[overfeed]

> All domestic producers which produce products that cost less than imported competitors

Who will afford to buy their expensive products? Cheap imports are what is making minimum wage-earners circumstances bearable. Full-on reshoring is untenable without reforging the entire economy for higher salaries at the bottom. The whole system has feedback loops (higher wages -> higher product prices) which will cause pain for a long, long time before things stabilize. I don't think Americans have the stomach for it now, moreso with the threadbare social safety nets being shredded. Any politician or political group pushing for this will not survive long enough to see it through. The task is impossible for leaders incapable of considering second order effects, and beyond.

[psychlops]

> Who will afford to buy their expensive products?

Fewer and fewer people. Yes, a shrinking of the consumer economy. It will work, just not like it has in the past. As I see it, you are absolutely correct in your assessment. Absent a proactive approach, the alternative (which I think we will live to see) will be watching the system break.

Perhaps a lame duck president rebalancing tariffs can slow the slide, but I think the end result will be the same.

[rayiner]

And also think about which industries and constituencies are helped by the U.S. having the reserve currency, and which ones are hurt by that.

What would it take for America to have more of a German-style economy than the current American one? Who would that hurt and who would that help?

[psychlops]

I could be wrong, but think the German economy just broke last week when they blew the cap off their debt ceiling and kicked current day payments to future generations. Note that Germany protects its production with tariffs and VATs, the rough average I've found is 19-21%.

I think China is the one to watch. They have double the energy output of the US and are basically the production capital of the world for the foreseeable future unless something changes.

[xyzzyz]

Germany doesn't protect its production with tariffs any more than, say, North Carolina does. There are no German tariffs, because Germany is part of European Union, which sets up common, shared tariff regime, and tariff-free goods movement within EU. Germany can lobby within EU to propose tariffs that it considers beneficial to it, just like North Carolina can in US, but if other EU members don't like it enough, it will not go through.

Second, how does VAT protect domestic production? VAT applies to both imported and domestically manufactured goods equally. VAT is really ultimately just a sales tax, just collected in a somewhat different way, and you pay the same sales tax regardless of where the good was produced.

[psychlops]

Thank you for clarifying, it did not occur to me that member states paid VATs. From outside the EU, the VAT is no different than a tariff. They are both taxes which inflate the cost to do business. From your example, I think it's fair to sum the state taxes into US tariffs for comparison.

You did send me down a research rabbit hole trying to better understand VAT. It's complex so I picked a car as a test product. As a comparison, I found that to import a car from Germany into the US it costs 2.5% of the cars value. North Carolina charges an additional 3% state tax on it for a grand total of 5.5%.

To import the same German car into France the cost is (cough) 20%.

To import an American car into France the same 20% is paid plus a 10% import fee for a total of 30%. I'm sure I'm glazing over many, many smaller charges/exemptions in these examples.

To answer your question about protection using the numbers above, companies outside the eu that want to compete at an equal price with an equivalent German car would need to do so with a product that is at least 10% cheaper.

[xyzzyz]

To import the same German car into France the cost is (cough) 20%.

No, the cost to import is 0%. The 20% VAT you are talking about here applies equally, regardless of whether the car is imported, or (cough) French. Again, VAT is just a kind of sales tax, and you pay sales tax for all goods, imported and domestic.

To import an American car into France the same 20% is paid plus a 10% import fee for a total of 30%.

No. Importing an American car to EU is 10%, regardless of which country you import it to, and then it's 0% to move it between EU countries. As I repeatedly said, you pay 20% VAT on any car, imported or not. Often, you actually pay additional registration taxes on top of that. For example, to import a car to Poland, on top of 10% EU customs duty and 23% Polish VAT, on a car with engine over 2000cc, you'll pay additional 18.6% excise tax upon registration. So, a $25k Chevrolet Malibu imported from US will cost $38k to buy in Poland.

To answer your question about protection using the numbers above, companies outside the eu that want to compete at an equal price with an equivalent German car would need to do so with a product that is at least 10% cheaper.

Yes, EU does apply protectionist tariffs, but my point is that they are not German tariffs, they're EU-wide. Germany might benefit from these more than countries without car industries, but most large EU countries have substantial car industry. For example, Poland exports $40B of vehicles and vehicle parts each year.

[rayiner]

Why is importing an american car into the EU 10% but importing a car into the U.S. is 2.5%?

[jaredklewis]

> Losing reserve status will be damaging to some parts of the american economy and create a boom in others.

The primary effect of losing reserve currency status would be on the government's ability to borrow money. That's going to be a problem since US government debt to GDP ratio is >100%. We have no fiscal discipline now and neither party shows interest in making cuts or raising taxes. DOGE hasn't changed anything yet unfortunately, as daily government outflows are still roughly inline with where they were under Biden. Even if DOGE cut all discretionary spending (obviously impossible), we'd still have a budget deficit and massive existing debt burden.

If we lose reserve currency status, my guess is we'll go full Argentina with hyper inflation as the government prints money to pay debt and fund the government.

[psychlops]

Oh, I think that's inevitable for the reasons you listed. DOGE would need to do way more to actually matter. Observing the current upheaval due to minimal cutting guarantees the future will be Argentina.

The upside is the debt decreases in value as the currency inflates. So there's that.