Friends, we abandoned the gold standard (by which the dollar was exchangable for gold) back in 1971, but let's not waste time reconsidering that decision. Today I want to draw your attention to the fact that the Dutch have decided to move a lot of their gold reserves from the U.S. and Canada to the U.K. Big deal, you say? (Meaning that it's actually a small deal...) Well, yeah, in itself it doesn't mean much, but we can't deny the fact that international confidence in the U.S. political system, and by extension our economic system, is flagging. The U.S. dollar is still the reserve currency, but the world's appetite for dollars, and for U.S. government bonds, is dwindling. To some degree that was always inevitable, but on the other hand the reign of DJT, and the contempt that most of the world holds him in, is relevant, because it accelerates the decline of American economic hegemony. Don't get me wrong: in many ways, the U.S. economy is strong and is even the envy of the world. Despite this, we shouldn't kid ourselves: possessing the global reserve currency allows us to live far higher on the hog than would otherwise be the case. We can spend like drunken sailors because the world has decided that we're "good for it". Slowly but surely, the world is reconsidering. That matters. Someday, it may matter a whole lot more than it does today.
https://www.bbc.com/news/articles/cvgy51xlz39o
But there's hope! Countries can lose their economic hegemony without falling into terminal decline, and even without severe economic trauma. The U.K. is a good case in point. The British used to rule the seas, and more importantly they had the world's reserve currency: the pound. That was all terrific, until the cost of two world wars, and the meteoric rise of two superpower competitors, made Britain a second rate power. The standard of living of the British people, however, continued to rise, and, quite wisely, the British hitched their wagon to the American star, and all was well. Anyway, on to the "hope" part: Elon Musk says that, in the near future, A.I. and robots will cause a spectacular, unprecedented rise in the productivity of the American and the world economies. I believe he's right. The timescale can be debated, but very fundamental changes are coming that will make life easier and more prosperous for almost everyone. This may well make a "soft landing" for the USA a lot simpler. I sure hope so.
Dr. Waddy: I have very little understanding of economics ;I learned a lot from your commentary.
ReplyDeleteMy gut tells me that the US economy is an astonishing and unprecedented generator of material well being and all of the benefit which attends that incalculable good fortune . It was tested by the terrible Depression but emerged from it with theretofore unimaginable prosperity. I understand WWII production played a major role in that recovery but the destitution which cursed so much of the world in the '20s and '' 30s was also a significant cause of that war. Its been over 80 years since the end of that war and the economies of the developed world appear to have generated everyday living salubrious perhaps beyond the imaginations of the wisest people in history even still within some living memories. Most blessed has been the success of proven western style free economies in helping deliver teeming China (along with China being allowed to be China again) and India from seemingly insoluble material hopelessness. My amateur guess would be that our economy is as immensely strong as to be able to weather virtually any mishap.
But I think it does face one mortal threat, that of the most wrongheaded economical thinking in world history, that of its very own Marxists.
Dr. Waddy : The breathtaking presumptuousness of their tragically counterintuitive intent in its earlier iterations is outdone in intensity today by our "American"pretenders to economic totalitarianism. In 1917, decent people could have had creditable discourse on possible merits and demerits of the new doctrine. But one hundred and ten years in the crucible they forced on hundreds of millions of hopeful unfortunates has put paid to any further consideration of any worth in it. It killed probably more than 100 million of its own citizens and ruined the lives of incalculable multitudes. To yet embrace it must be some form of insanity.
ReplyDeleteThe US economy has fulfilled humanity's most fundamental dream. It has made life worth living far beyond the necessities of survival! Gone for the most part is fear of starvation, the deadening burden of unrelenting toil, the ever present threat of utterly unknowable disease and universal chronic pain, the expected deaths of one's children, the political instability which makes one's security in property, freedom, and life ever tenuous . . . .
The moral foundation which is indispensable for our economic viability is also vital for our freedom.
But our economy humanly imperfect and to our domestic Marxist critics and would be "saviors" that is anathema and as such necessitates our economy's utter and complete destruction and replacement with what ever smoky and evanescent fantasies "Dear Leader" enjoyed last night.
They have already regaled us with an unrealized promise of "fundamental transformation" of our "incorrect " country. Now we are bade once again enable it to take charge of our lives.
The perverseness of their plainly Marxist intent is , in light of our country's monumental progress in advancing and accrediting freedom, almost beyond belief but history warns us: their rise in the 20th century makes this new eruption , advanced with full knowledge of its hellish precedent, appear all the more fantastic.
It takes a factor of almost unimaginable evil to want to destroy the beyond precious well being our economy has gifted us and much of the world.
RAY TO JACK
ReplyDeleteToo bad Germany (The Kaiser) decided to send Lenin back to Russia in a "sealed train" to start a Revolution so he could get out of the eastern front war with his cousin The Tsar.
". . . appear all the more fantastic", but like Marxism's monstrous debut in power , which commenced in 1917, this present revival is all too real and it manifests a very credible , openly declared and yes, fundamental threat to our economy and all the terribly precious good it provides. Jack
ReplyDeleteRay: Yes , that train brought incalculably additional misery to beleagured Russia. I wonder if Trotsky could have managed it without Lenin. The Germans might have been very wary of Trotsky because of his intentions to export a Russian revolution. As it was, Germany had a significant socialist movement and the Marxist Spartacists did try to prevail in 1919. Stalin was not yet in a position to take over.
ReplyDeleteI think at the time of Lenin's train trip Germany was not yet desperate . Yes, the Brit blockade was causing much hardship and all of the participants wanted the morass in the trenches to end. America might not yet have been a decisive factor; the size,competence of its army and General Pershing's eventual insistence that the AEF not be fed piecemeal into the allied lines might not have been anticipated. Too, the Uboats had Britain in imminent danger of strangulation. Maybe the Boche thought that that, combined with the great offensive enabled by a Russian withdrawal and possibly a Russian civil war, they would finish the Brits and deny America a British base and alliance with the Royal Fleet. Too, the intensity and carnage of allied 1917 offensives might have so wounded and drained them as to cause them to postpone the great offensive until 1918.
RAY TO JACK
DeleteThanks for sharing that. Have a good Labor Day weekend.
Dr. Waddy "Wot do ya do with a drunken sailor. . . ." Give him a paint brush while his hangover is bugging him and his money is all ashore. I ought to know. I was in that pickle plenty.
ReplyDeleteJack, I agree that the American economy possesses enormous reserves of strength. Could we face another depression? We could, but note that the Great Depression was caused, in part, but tremendous surges in productivity and (arguably) a lack of consumers who could afford all the goodies we could produce. The same thing could easily happen in the years ahead...but whatever travails we experience will essentially be side effects of abundance. In short, we may have to tighten out belts or reconsider our priorities, but we won't go hungry or groan in misery, I feel sure.
ReplyDeleteRay, yes! Germany's decision to unleash Marxism on Russia was a sound one in the short term, but a fantastically destructive one in the long term. Of course, who could have predicted that a clown like Lenin could have actually come to power? And that he and his fellow nutjobs could have held onto power for 70+ years? BTW, I'm not sure "the Kaiser" had much to do with it. He was busy polishing his helmets.