[Windchaser]

> Most likely outcome is that they make huge paper profits that are then absolutely worthless because the dollar collapses

Seems like it'd be pretty easy to diversify into inflation-protected assets after taking big profits.

But I also don't see the dollar collapsing any time soon. The dollar's strength is built on the US economy, and the US economy is still one of the strongest in the world, with high productivity per person. We'll see some inflation, sure, but nothing that the rich insider traders can't hedge against.

I do not expect that there will be any real justice here. They're not gutting the average American -- they're bleeding us, extracting a small enough amount of value that they can get away with it. And we don't live in a just world.

[delusional]

There is no "inflation-protected" asset if the economy collapses. You can't hedge societal unrest. The aliens don't want bitcoins.

[eb0la]

One of the reasons behind the dollar strength is that the US has a huge population.

Even if the central bank might does a bad job and make a mess of the economy, the activity of 350 million people is hard to ignore.

Is it enough to _fully_ sustain the US dollar?

Who knows, but at least there is a floor, even if everybody stopped using US dollars for international trade.

[nostrademons]

U.S. has only 4% of the global population.

I think this is a big part of both the impact of globalization and the U.S's waning power. Back around 1950, right after WW2, the "first world" (the developed west, not including Russia or Warsaw Pact countries) had a total population of just over 500M, and the U.S. was 150M of those, just under 1/3. And the remainder were largely dependent upon U.S. capital, machinery, and technology, having just bombed each other back to pre-industrial times.

Today, the developed world is about 3-4B people, and the U.S. is 350M of them, less than 10%. China alone has lifted about 500M people out of poverty and into the middle class in the last 2 decades, a population larger than the total population of the middle class in the U.S. The population of Asia is around 4.86B, 15x the size of the United States, and an increasingly large number of them are living a lifestyle close to what Americans enjoy.

[XorNot]

I mean sure but... How much do you want to hold the Yuan? China has always had a huge population but nobody considered the Yuan the same way.

Nobody thinks of the Indian rupee this way today.

[joe_mamba]

>Seems like it'd be pretty easy to diversify into inflation-protected assets after taking big profits.

Assets are yours only as long as there's a government to enforce your ownership rights over those assets for you. In case of government or societal collapse, your physical assets then are free for the taking to the ones with the most men with the most guns, and your paper assets are worthless.

[taurath]

I believe the dollars strength is built on its unassailability as the petrodollar and foreign reserve currency, which lets the fed set interest rates and print money while creating less inflation than any other currency. The world looks very very different when energy markets aren’t fulfilled in dollars in ways that most citizens won’t understand.

[kortilla]

That’s false. The petrodollar is irrelevant because two non-US companies trading using an intermediate currency like the USD create a balanced buy and sell of the intermediary.

[philistine]

If the petrodollar is irrelevant, why is Iran insisting that anything transiting the straight of Hormuz be bought using the Chinese Yen?

[kortilla]

Because China has a controlled currency and can lock flows back out.

Please do enough research to at least get the right currency before engaging in these discussions.

The forex markets are so extremely liquid and deep that trading in USD is no different than trading in any other free floating high volume currency.

Petrodollar might have mattered in 1975 when you couldn’t swap 100 million USD for 100 million euros in 2 seconds without even moving the market.

[linhns]

Yuan. Not Yen. Iran shouldn’t be insisting anything.

[philistine]

But why is Iran insisting the Chinese Yuan be used? Because they're idiots?

Because Petrodollars make our global economy work, and Iran wants their partner China to be in control! If Americans lose sight of their need to maintain their role as *THE* lingua franca of international trade, then all hell is lost. The US cannot afford its military without massive consequences if it can't raise extraordinarily cheap debt through purchases of oil in US dollars immediately turned around to buy US debt to maintain that money's value.