Opinions regarding the future of US dollar as World Reserve currency

[VFK57]

Quote:

Originally Posted by rayvt Wow, there are actually some people who think that financial data coming from a Communist government has any relationship to the truth?

This data comes from IMF which has included Chinese Yuan in official world reserve currency status on October 1, 2016. Also you can find same data on Wikipedia what is most trusted site for this kind of info. I think that US$ is still going to be a leading reserve currency for a foreseeable future but slowly giving it's leading status from current SDR -IMF reserve currency basket (US$ 41.73%, Euro 30.92%, Yuan 10.92%, Yen 8.23% and Pound Sterling 8.09%). Some people advocate for a Bitcoin yet if hackers can penetrate most secure military / Government sites it will be hacked as well. Gold / Silver is another alternative but only in case of loss of confidence in paper currencies what is also not on the horizon (unless another QEs series resumes). Also PMs are highly volatile, it could be kept in small amount as insurance in case of high inflation but in no way it is an investment or US$ replacement in a near future.

[audreyh1]

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Originally Posted by Totoro You may want to rethink that assumption. There are 120 million Chinese outbound tourists in 2015, and growing rapidly. Meanwhile: Including Mexico and Canada, 6.3 million U.S. travelers took international trips in September for nearly 61 million outbound trips year-to-date. So under 100 million likely for the full year. https://skift.com/2016/12/06/u-s-out...eptember-2016/ And Chinese spend _more_ than the americans, $200 billion in fact last year which is the biggest by far. Chinese tourism spending soars 53% to record $215 billion - Mar. 21, 2016 This source has less spending, but still it's China #1 by a large margin: https://www.weforum.org/agenda/2015/...he-most-money/ The thing with lots of Chinese tourists is that you don't see them - they tend to travel in large secluded groups, or rent entire cruise ships.

I see them. I've been in several places in Europe that were overrun by Chinese tourists.

[VFK57]

Very worrisome article in Business Insider what directly relates to the US$
China is dumping US Treasuries to prop up the yuan - Business Insider

[Texas Proud]

Quote:

Originally Posted by VFK57 Very worrisome article in Business Insider what directly relates to the US$ China is dumping US Treasuries to prop up the yuan - Business Insider

Does not change much on what has been posted in the thread....


Just means interest rates will go up a bit.... heck, if Greece can sell bonds into the market the US can...

[Chuckanut]

Fear of China is messing up our economy.

[VFK57]

Quote:

Originally Posted by Chuckanut Fear of China is messing up our economy.

I could be wrong, but if no foreign country buys our Debt while our own Federal Reserve holds the largest chunks of our National Debt, about $2.5 trillions or more than 2 largest foreign US Debt foreign holders (Japan and China) combined, it tells me of a future of US$ as a major world reserve currency.

[gauss]

So if the USD value were to crash and goods and services became much more expensive in the US, would stocks/mutual funds also increase accordingly and be a natural hedge to this?

I haven't thought through these scenarios in a while.

-gauss

[rayvt]

Quote:

Originally Posted by VFK57 I could be wrong, but if no foreign country buys our Debt... it tells me of a future of US$ as a major world reserve currency.

Yeah, you are wrong here. One has nothing to do with the other.


In addition, there's more going on that you are recognizing, it's much more complex than that.
For example, you can look on it as two ways:
1) Foreigners buying US treasuries.
or
2) Foreigners putting their money in a safe place.

I think that if you look at historical money inflows, the 2nd is very strong.

[Senator]

Quote:

Originally Posted by gauss So if the USD value were to crash and goods and services became much more expensive in the US, would stocks/mutual funds also increase accordingly and be a natural hedge to this? I haven't thought through these scenarios in a while. -gauss

It isn't going to happen, we are raising interest rates and the USD will get even stronger. But, if it did happen, here is what would take place.

Stock would raise as the value of the assets would also rise. With stocks, you buy current potential, future potential, and get paid for a risk premium.

Once bonds/lower risk assets yields over take the risk premium that is inherent in stock, people switch to the lower risk assets.

So, as long as the USA is strong, and the country is firing on all cylinders, inflation will have a positive impact on stocks.

[Senator]

Quote:

Originally Posted by VFK57 I could be wrong, but if no foreign country buys our Debt while our own Federal Reserve holds the largest chunks of our National Debt, about $2.5 trillions or more than 2 largest foreign US Debt foreign holders (Japan and China) combined, it tells me of a future of US$ as a major world reserve currency.

Most of our debt that the federal reserve owns can be eliminated with a swipe of a pen, and it would not make one iota of a difference.

Social Security debt can be eliminated now and it would not matter at all. It is a pay as you go system now and will always be. The debt owed to SS is imaginary. The money to pay it back, so it can be paid to people, comes from the people.

It's like you owing yourself money. Sure, there is a line item in your books, but the money can't be taken out without getting new money. And that can be taxed, or printed. And it doesn't matter the source of it to the recipient.

[Texas Proud]

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Originally Posted by Senator Most of our debt that the federal reserve owns can be eliminated with a swipe of a pen, and it would not make one iota of a difference. Social Security debt can be eliminated now and it would not matter at all. It is a pay as you go system now and will always be. The debt owed to SS is imaginary. The money to pay it back, so it can be paid to people, comes from the people. It's like you owing yourself money. Sure, there is a line item in your books, but the money can't be taken out without getting new money. And that can be taxed, or printed. And it doesn't matter the source of it to the recipient.

Not quite.... sure, some of what you say has an appearance of being legit... the US gvmt can get rid of the debt with the stroke of the pen, but it would make a big difference...

Money only works because people believe it is what people want it to be... a storage of value... if you take that belief away then lots of bad things start to happen...


Also, the debt owed to SS being imaginary is the same as any savings bonds or other US gvmt instrument is imaginary... there are rules to be followed... sure, those rules can be broken, but not without something happening.... if the general fund can say 'we do not want to pay the SS fund'.... then they can also say 'we do not want to pay those savings bonds'....

[VFK57]

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Originally Posted by Texas Proud Not quite.... sure, some of what you say has an appearance of being legit... the US gvmt can get rid of the debt with the stroke of the pen, but it would make a big difference... Money only works because people believe it is what people want it to be... a storage of value... if you take that belief away then lots of bad things start to happen... Also, the debt owed to SS being imaginary is the same as any savings bonds or other US gvmt instrument is imaginary... there are rules to be followed... sure, those rules can be broken, but not without something happening.... if the general fund can say 'we do not want to pay the SS fund'.... then they can also say 'we do not want to pay those savings bonds'....

+1, breaking rules will usually lead to a mess.

[Danmar]

Let's assume that US hegemony declines and eventually disappears. Would probably take 75-100 years. It's not the end of the world to live in a country that doesn't "rule" the world. There are many happy prosperous people in the world that are not American, eg Canada, UK, Scandinavia, Australia, New Zealand, etc. Relax.

[Texas Proud]

Quote:

Originally Posted by Danmar Let's assume that US hegemony declines and eventually disappears. Would probably take 75-100 years. It's not the end of the world to live in a country that doesn't "rule" the world. There are many happy prosperous people in the world that are not American, eg Canada, UK, Scandinavia, Australia, New Zealand, etc. Relax.

I agree 100%.... that is one other reason I wonder about the people who talk about needing MRIs and bullets....

Heck, even countries that have experienced hyperinflation have come out OK ish afterwards....

Here is an article...

These 21 Countries Have Experienced Hyperinflation In the Last 25 Years - munKNEE dot.com


A good number of these have turned it around and as I said doing OK... and have not gone under...


I went to look... I have an old 500,000 Turkish lire saved... it was worth something at some point in time (in the 80s... I got it when it was not worth much).... now it is worth 14 cents....

When they introduced their new notes, they took off 6 zeros...

But Turkey seems to be doing pretty good from what we see on TV... not a failed country like some of the African nations....

[Senator]

There is a big difference between the US owing the US money, and the US owing a different entity.

We have a debt number that is artificially high. It can go a lot higher and not cause any issues. SS debt can be many trillions higher and it makes no difference.

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Originally Posted by Texas Proud Not quite.... sure, some of what you say has an appearance of being legit... the US gvmt can get rid of the debt with the stroke of the pen, but it would make a big difference... Money only works because people believe it is what people want it to be... a storage of value... if you take that belief away then lots of bad things start to happen... Also, the debt owed to SS being imaginary is the same as any savings bonds or other US gvmt instrument is imaginary... there are rules to be followed... sure, those rules can be broken, but not without something happening.... if the general fund can say 'we do not want to pay the SS fund'.... then they can also say 'we do not want to pay those savings bonds'....

[Texas Proud]

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Originally Posted by Senator There is a big difference between the US owing the US money, and the US owing a different entity. We have a debt number that is artificially high. It can go a lot higher and not cause any issues. SS debt can be many trillions higher and it makes no difference.

That is true... the amount of investment the SS funds make to the general fund can be as high as it wants to be.... but getting rid of that debt of the general fund with a stoke of a pen is not painless....


As long as the gvmt considers SS to be a separate fund, it is basically like a subsidiary company.... it has its one legal books and needs to follow the rules... it has an asset with the general fund and wants to get that money back at some point in time.... if the general funds says 'hey, SS, just remove that asset from your books and we can call it even'..... well, that means SS checks will not go out at full amounts the next month.... the amount of money coming in now is not enough to pay current benefits...


Edit to add.... just looking at what you wrote... I am saying that it is not the US gvmt owing the US gvmt... it is the US gvmt owing the SS trust fund.... semantics for sure, but a huge difference...

[Senator]

Quote:

Originally Posted by Texas Proud That is true... the amount of investment the SS funds make to the general fund can be as high as it wants to be.... but getting rid of that debt of the general fund with a stoke of a pen is not painless.... As long as the gvmt considers SS to be a separate fund, it is basically like a subsidiary company.... it has its one legal books and needs to follow the rules... it has an asset with the general fund and wants to get that money back at some point in time.... if the general funds says 'hey, SS, just remove that asset from your books and we can call it even'..... well, that means SS checks will not go out at full amounts the next month.... the amount of money coming in now is not enough to pay current benefits... Edit to add.... just looking at what you wrote... I am saying that it is not the US gvmt owing the US gvmt... it is the US gvmt owing the SS trust fund.... semantics for sure, but a huge difference...

I think the way the Government looks at the amount owed to the SS fund, or any internal entity is this...

[youbet]

Quote:

Originally Posted by Totoro that means SS checks will not go out at full amounts the next month.... the amount of money coming in now is not enough to pay current benefits

And that's our problem, not today's young folks. Time to belly up to the fact we didn't contribute enough and get ready to take less. It would be really, really wrong to expect today's youngsters to continue to carry us. They have their own problems.

[marko]

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Originally Posted by youbet And that's our problem, not today's young folks. Time to belly up to the fact we didn't contribute enough and get ready to take less. It would be really, really wrong to expect today's youngsters to continue to carry us. They have their own problems.

We had our own problems when we were young 'uns too. We carried the older generation. And yes, I contributed the max every year for 30 years.

Sorry, but I fully expect today's youngsters to carry me for the next 25 years.

Having said that, I seriously doubt anything will be done about SS any time soon. Back in '68 when I started working I was told that SS would be long gone by the time I hit FRA.

They might do something but it would impact the younger generation, not those already taking it.

Sorry but I've been hearing this argument for 50 years.

[VFK57]

Quote:

Originally Posted by youbet And that's our problem, not today's young folks. Time to belly up to the fact we didn't contribute enough and get ready to take less. It would be really, really wrong to expect today's youngsters to continue to carry us. They have their own problems.

Young folks have problems just because of our short sighted policies during past two decades. We allowed huge numbers of manufacturing jobs to be moved over seas, first of all China. Majority newly created jobs here are in service with much lower pay what hardly can pay taxes and frequently need Government assistance instead while working. As all modern paper currencies are tied to economy strength, we may see higher than normal inflation due to negative balance in trade and less needed dollars at world trade.