Gyroscopic Investing

http://www.washingtonpost.com/blogs/inn ... out-money/

The new China International Payments System (CIPS), which is set to debut before the end of 2015, has been described as a “worldwide payments superhighway for the yuan.”? What the creation of such a system means in the short-term is that the Chinese currency (officially known as the renminbi) has the potential to become a truly international, convertible currency and a more attractive currency for conducting international trade and finance. What it means in the long-term is that America’s long reign of economic dominance is at risk.... [more at link]

One of the best things that can happen to America is for the Dollar to lose de facto reserve currency status. That place in the hierarchy allows for a lot of really bad things to be financed that long-term are bad for America. It's a bit like closing the bar tab and taking the whiskey away from an alcoholic. Short term they will go through pain, but long-term they will be a better person.

Imagine how fewer foreign entanglements and bad domestic policies the U.S. could afford if they couldn't finance it all with endless debt that anyone would accept? They'd actually have to plan their spending and the markets would hold the government accountable if there was some competition to the dollar.

See Craig's essay on the subject: https://web.archive.org/web/20160324133 ... cy-status/
(Learned new internet slang. Apparently h/t means hat tip, a tip of the hat to. Alternatively, Heard Through).

dualstow wrote: See Craig's essay on the subject: https://web.archive.org/web/20160324133 ... cy-status/
(Learned new internet slang. Apparently h/t means hat tip, a tip of the hat to. Alternatively, Heard Through).

What icon is that now, Steve Buscemi?

I'm with craigr on this one.  It will be nice when the USA can stop playing the world's policeman.  I mean England isn't doing so bad despite losing the entire British Empire, now are they?

MachineGhost wrote: I mean England isn't doing so bad despite losing the entire British Empire, now are they?

For all the hand wringing about the American empire's inevitable decline, it should be remembered that all the benefits (such as they are) of being a British citizen were gained post empire. Indeed all of the ex-colonies are better off post empire, which raises the question of who actually accrued any benefit from the empire... or maybe not. 

I think the #1 risk with America declining is the replacement doesn't share our core democratic values.  It's hard to see how we can co-operate peacefully in military engagements with a rapacious capitalist China.  We are somehow supposed to militarily contain the world's largest financial center when they are the new "Rome"?  Decentralization of the state needs to happen faster.

TennPA,

doesn't other countries confidence in the US factor in somewhere?

abillity to pay the money back.  I have the feeling not everyone understands perhaps the term is monetary theory as well as people on this board.

Benko wrote: abillity to pay the money back.  I have the feeling not everyone understands perhaps the term is monetary theory as well as people on this board.

Their (lack of) ability to pay the money back is irrelevant, as they have no intention of ever doing so.

TennPaGa wrote:

craigr wrote: One of the best things that can happen to America is for the Dollar to lose de facto reserve currency status. That place in the hierarchy allows for a lot of really bad things to be financed that long-term are bad for America. It's a bit like closing the bar tab and taking the whiskey away from an alcoholic. Short term they will go through pain, but long-term they will be a better person.

Imagine how fewer foreign entanglements and bad domestic policies the U.S. could afford if they couldn't finance it all with endless debt that anyone would accept? They'd actually have to plan their spending and the markets would hold the government accountable if there was some competition to the dollar.

Would the U.S. losing its reserve currency status really have much of an effect on government spending?  The U.S. would still maintain the ability to print their own currency (thank goodness).

I think it would affect spending because they cannot as easily pawn off their debt without consequences. So for instance it's one thing to start a war with cheaply issued debt, it's another when it's going to cost you 10-20% a year in interest payments to pay for it.

If the U.S. has the will to meddle in the affairs of other countries and the resources (both human and natural) to make it happen, they'll do it, regardless of debt situation.

I don't think that's true. Britain was severely curtailed when the pound lost influence, same for the Dutch, etc.

And I say this not because I look forward to someone like China bellying up to the bar. They will be just as bad, if not significantly worse, than others. But I am only saying this as a U.S. citizen that wants the country to correct its course and so far nothing seems to be interfering with the trajectory. I think removing the bottomless credit line with a reserve currency status would be a good start to restoring some sanity.