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Comment by nine_zeros | Hacker News Reader

Maybe the US dollar should stop being the global reserve currency. That will really stop US imports rapidly (just as it did for the last reserve currency country UK).

Ultimately, the only reason US capital flows elsewhere is because other countries need it and will accept it. If the need for it is cut off, other countries will happily trade in their currencies and US capital stays inside.

What is impossible is being the reserve currency and yet not wanting to be integrated with the world. It will quickly get replaced by anything else, and there are countries competing to replace it now.

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China may want to replace the US as a reserve currency...

https://foreignpolicy.com/2020/08/21/dollar-global-reserve-c...

But wanting and doing are different things.

Part of the dollar's status as a reserve currency is not just what you can buy with dollars (which is a lot more than RMB right now), but the fact that it is backed by a political, economic and military institutional framework which has been by and large consistent for more than 150 years.

Maybe we should hold off on declaring the USD dead till the day China stops throwing random teenagers in black site jails with no access to outside counsel or due process.

https://www.youtube.com/watch?v=G7s3GK9T09c

In short, imagine you wake up tomorrow and find yourself in the 0.001%. Now as yourself, does that 0.001% version of yourself want to live in Hong Kong/Beijing/Taipei or NYC/LA/SF.

Obvious. At least if you want to be able to, you know, talk about stuff openly. And really, really rich people, well they tend to have a lot of opinions...

I would posit that the current state is good and we should in fact further optimize it. Imports are a benefit and exports are cost in real terms. The point of an economy is to maximize consumption. Its costs labor, raw materials, and even pollution to produce IPhones and Mercedez Benz. The problem is everyone wants to export and only America wants to import. Is that a bad thing for America ? I don't think so. If you give me an Iphone and I give you a piece of paper, or, better yet, a debit on a spreadsheet, who is getting the better deal here ? Why do you want to horde that piece of paper? You can't eat it or use it for shelter. So why not have fed policy that optimizes this rather than calling our trade partners currency manipulators .

Certainly we need to protect industries that are vital to national security and that list has increased with the pandemic. Wouldn't put iPhones on that list.

The issue is that this creates conditions in which there is no incentive for the US economy to develop the infrastructure necessary for large scale manufacturing, and that without a large manufacturing advantage national security cannot be guaranteed.

Agreed. We have to have manufacturing insofar as its needed for national security and this should be subsided by the fed to provide the incentives which kind of is the state we are in, isn't it ? Boeing, General Dynamics, Lockheed, et al.

It doesn't need to be internationally competitive in terms of price.

Again, we should optimize our trade advantages, not condemn it. It a case of financial literacy in the political policy and financial press.

If all you want to fight are small wars abroad, then sure. If you want to be ready against a peer enemy, the entire economy needs to have large manufacturing capacity, or you will get buried by your enemy.

Ray dalio seems to think that China will take over the dominant empire / reserve currency soon

https://www.linkedin.com/pulse/changing-world-order-ray-dali...

China's solid rule of law will surely be a boon to all.

I hope that is "/s"

It was. Sad it has to be clarified.

The dollar's status as the world's reserve currency allows the US to consume at a rate that wouldn't otherwise be possible. All the trade surplus countries want that to continue.

Losing that status, or changing the institutional structure in ways that undermine it, would cause huge, wrenching changes in the US but might be for the best. But again, the surplus countries really don't want that. For Germany, Japan and China these are actually the best of times - at least economically.

That might imply the end of petrodollars: not sure that'd be a sellable proposal?

America and American capitalists benefit from America’s position, so I can’t imagine American isolation going much further. The US controls many of the world’s major supply chains and trade routes and ensures them with its military. What country can offer realistic competition for a reserve currency? China is trusted even less than America in many parts of the world, and their governance is even more opaque.

The next best bet is the Euro. Which is isn’t without it’s problems... but let’s remember the debt show-downs that threaten the USD.

The "debt show-downs" aka political theater.

> The "debt show-downs" aka political theater.

Given the choice, I'd rather not have that for host country my reserve currency. You want your reserve currency as boring as a old brick in a vault.

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