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And Now for Something Completely Different: the Dollar Challenged

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While the country’s attention is riveted on Florence, Kavanaugh’s confirmation and Manafort’s plea deal, certain other developments around the world may in the end prove more significant. At a meeting earlier this month in Vladivostok, Russian President Vladimir Putin and Chinese leader Xi Jinping agreed to bypass the dollar and use their own currencies in commercial relations.

This month, officials from France, Germany, and the UK have begun planning with China and Russia a special payments channel that would allow these countries to defy new American sanctions against any company doing business with Iran. This payment channel would bypass the American-dominated international banking system and the dollar.

Much of American economic and global power rests on the universal use of the dollar as the settlements and reserve currency of choice. It allows the United States, among other things, to run huge trade and budget deficits and to impose crippling economic sanctions on other countries. If the American dollar became overnight a exotic national currency like Turkey’s Lira, then in order to balance its accounts and pay for its deficit, the U.S. would have to raise interest rates to attract foreign currencies, even if that meant crippling business and home finance. If the dollar were to cease being a global currency, that would weaken the American economy and damage international trade. The moves by Russia, China, France, Germany, and the UK to begin to decouple themselves from the American-dominated monetary system could come to nothing but these could also lay the basis for a greater challenge down the road to American dominance.

It’s happening largely in response to Trump’s Hobbesian diplomacy, which sees the U.S. engaged in a zero-sum battle against its longtime allies as well as against competitors like China and also by his fiscal policies that promise huge deficits in years ahead. My friend Taggart Murphy, who wrote the definitive study of U.S.-Japan economic relations, The Weight of the Yen, says of Trump’s effect on the global economy:

Trump is doing everything he can to bring on the end of the days when the US can borrow whatever it wants in whatever amounts it wants. To be sure, there is no recipe book. The dollar is now so entrenched as the world’s money that if your assignment were to bring the curtain down on that — and thus the ability of the US to borrow whatever it wants whenever it wants — it’s not at all clear what you would do. But you’d start by doing everything that Trump is doing — pick fights with all your allies, blow the government deficit wide open at the peak of an economic recovery, abandon any notion of fiscal responsibility, threaten sanctions on anyone and everyone who seeks to honor the deal Obama struck with Iran (thereby almost begging everyone to figure out some way to bypass the US banking system in order to do business), throw spanners into the works of global trade without any clear indication of what it is precisely you want for a country that structurally consumes more than it produces and thus by the laws of accounting MUST run trade and current account deficits.

Murphy says of the Chinese, Russian, and European efforts, “They are building the groundwork for the day when they can overthrow the hegemony of the US dollar. The day that happens is the day the American imperium ends.”

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benzado
2 days ago
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New York, NY (40.785018,-73.97
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Small --> Big

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One thing I used to teach back when I taught, and which I would teach a bit differently now that I am old and wise, is how people only need to be a little bit racist (for example) for there to be big economic impacts of that racism. Weirdly I would say that back then the general point being conveyed was "sorry about your lot, but people aren't really all that racist!!!" instead of the more important point that it only takes a tiny bit of racism (or misogyny or...) for there to be big outcome differentials.

The rough economist logic is if the marginal benefits of trying harder are lower, you won't try as hard. Discontinuities in credentialing make this worse. Why get a Ph.D if you have a 20% harder time getting a job?

The important point is not "wow these shitty outcome differentials don't mean that people are really racist." The important point is "even a tiny bit of racism matters a lot."
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benzado
5 days ago
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New York, NY (40.785018,-73.97
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A Good Tweet!

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A big new organization problem these days is that when Trump says or tweets something obviously and insanely false, they just tweet it as a news story, like "President Trump says that Ohio is not a state," without any suggestion that it might possibly not be true. We can debate how much this matters, but even with the president being Trump, reporting things as presidential proclamation gives them the air of truth.

So kudos to NBC. This is how you do it!



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benzado
5 days ago
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New York, NY (40.785018,-73.97
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Katrina

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I've told this tiny story several times, but it's a good time to retell it because it shows the conservative attitude towards disasters: opportunity!

A couple of years after Katrina I was at a bar late at night in a resorty town, eavesdropping on the conversation one table over. Some 30something well-dressed bros discussing their rising fortunes in government contracting. The phrase which jumped out at me and is enough to get the point was:

And then Katrina happened, and everyone got rich.
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benzado
7 days ago
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New York, NY (40.785018,-73.97
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If you find yourself having a strong emotional response to something you see on ...

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If you find yourself having a strong emotional response to something you see on the net, take a step back and remember there's a good chance you're being programmed. You don't have to take the bait. And you shouldn't accept emotional appeals at face value.
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benzado
8 days ago
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New York, NY (40.785018,-73.97
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wam-bam-jimmy-jam: lioness–hart: reallytrying: me when offered soda: yes. love the bübblés me when...

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wam-bam-jimmy-jam:

lioness–hart:

reallytrying:

me when offered soda: yes. love the bübblés
me when offered water: yes! a fresh and sexy beverage
me when offered sparkling water: Why Are You Trying To Murder Me Under The Guise Of Hospitality

I’m gonna keep saying it: sparkling water is Angry Water and I do not need that kind of negativity in my life

Sparkling water is like sprite except instead of sugar they use hatred and sadness

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benzado
9 days ago
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no deeper feeling of betrayal than filling your paper cup with "prank sprite"
New York, NY (40.785018,-73.97
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