The Dollar Is Dead
mathmeetsmoney.substack.com
mathmeetsmoney.substack.com
Conrgess is totally inept and ridiculously politicized, so it's unlikely they will do anything except make the problem worse.
That leaves only the natural fall out of refusing to acknowledge a financial injury before going out on the field to play hard for your voters.
Inflation. The US will be forced, it will not decide, but be forced, to inflate away its debt. Which means that people who cannot bury their wealth in (non-treasury!) assets will pay off the debt.
I.e. people who need to work, which means it disproportionately affects the young.
This is what has to happen in a democratic society with a flattened and eventual top heavy population pyramid that will not vote to reduce old people benefits.
Everyone will see higher prices as the costs of work increase
Interest rates will be low as there’s no other option
https://www.suerf.org/wp-content/uploads/2023/12/f_fa99ccdbe...
Politically, asset prices will be inflated quicker than labor prices. You can use SP500 as an easy guage.
This is not sustainable forever, of course, but I would bet there are a few more decades it will work.
It is a stealth tax that targets the young (or those too poor to be beneficiaries), because leaders need to maintain purchasing power for their voters’ benefits (the vast majority going to the old) and the solvency of taxpayer funded defined benefit pensions.
Canada effectively has removed immigration cap. So no, not going to happen.
In general currency devaluation causes nominal wages to increase along with the price of everything else.
The people who get screwed are creditors, especially creditors who issued debt at a fixed interest rate. Which is kind of not that bad, except that creditors tend to have a lot of political power and then use it to either get bailed out by the taxpayer or get policies put in place to prevent inflation from eroding existing debts even if those policies have harsh consequences for other people.
The issues facing China and the EU make America's spending problem look mild. (And I agree by the way: America has a massive spending problem.)
US current debt to GDP is 124%, and Trump’s big beautiful bill is projected to increase the deficit to 7% next year.
America has long benefited from a more dynamic and attractive labor market than Europe, but the current administration is actively trying destroy that advantage by driving out the immigrants that were fueling it.
To be clear, I think US spending is too high. But I would take a bit more debt and thriving economic growth vs a bit less debt and zero economic growth every time.
The federal budget deficit for fiscal year 2024 totaled around 6.4% of GDP.
It's unsustainable long term.
There are times in history when a government fails, and then there are times when all governments fail, and the world re-organizes (usually after a long and bloody period of multiple wars) into a new system of social organization. The idea of a modern nation-state is only about 150 years old, dating from a series of wars (the U.S. Civil War, the German and Italian wars of unification, the Franco-Prussian War, the Meiji Restoration) in the 1860s-1880s. Before then, the early nation states and concept of nationalism arose out of European Wars of Religion in the early 1600s. Someone who lived under high-Medieval feudalism c. 1300, when the divine right of Kings was a given, would've found the world of the late 1600s quite alien.
If extreme wealth was taxed, the debt would be zero. The point isn't even to "pay for spending" but to enforce a functional social contract, and to limit the political and democratic distortions created by extreme inequality.
"Markets" should not have a veto on policy in a democracy.
Making it non-zero is a policy choice. Inflating away this debt is also a policy choice. There is nothing accidental about this.
What will not be inflated away is personal debt. That will remain linked to inflation even after the currency is revalued, and will be captured from personal assets wherever possible.
Now there is something to be said for making sure that spending is effective, but this must be engaged with in good faith; that is, changes should be made with a scalpel after gathering plenty of data supporting the change in question. Proclaiming ineffectiveness without data to ground the claim and then using that as an excuse to make broad cuts is a great way to make any dysfunction even worse.
Was there so much more that private industry "will not fill" in 2024 vs 2009? How about vs 1999? (1.7 trillion budget). We can't attribute the difference to inflation: the US government's inflation calculator says 1.7 trillion in 1999 is 3.3 trillion today.
No one is arguing that the federal government doesn't need to spend some money. But this truth has no relevance to the absurd out of control spending we're witnessing today.
That's selective apples to oranges
Deficit as % of GDP:
2009 - 10%, 2011 - 8.6%, 2012 - 6.7%, 2013 - 4% ... 2019 - 4.6%, 2020 - 15%, 2021 - 12%, 2022 - 5.4%, 2023 - 6%.
Tech allows winner-takes-all effects in many different markets (and runaway situations where labor cannot catch up at all) - you either have to have very strong antitrust (which is still not possible in some places), or basically strong redistribution (i.e. taxation of wealth in order to redistribute) to maintain a reasonable (note: not equal, but a reasonable degree of inequality - closer to the model that existed from the 1940s-1970s) distribution of wealth in society.
So the whole "cutting wasteful spending" thing... ssss yeah... not really working out I'd say.
France: https://www.theguardian.com/world/2014/dec/31/france-drops-7...
UK: https://obr.uk/box/effect-of-the-additional-rate-of-income-t...
Sweden: https://eml.berkeley.edu/~saez/course/seimAEJ17wealth.pdf
It's interesting to note that even when these tax schemes were repealed, the damage had already been done and the wealth did not return.
Here's a real plan for America:
Step 1: have a tax rate that's a little less than our peers
Step 2: return spending to pre-Covid rates circa 2019
Japan: 20%
China: 20%
India: 13%
UK: 24%
Italy: 26%
Germany: 26%
France: 30%
Then there's Canada of course... 50% with a proposal to make it 66% in 2026. Let's see how that works out!
https://www.irs.gov/newsroom/questions-and-answers-on-the-ne...
Edit: unautocorrect
As happens in any market with limited supply, which generally means desirable land and luxury goods.
Nothing at all supports that "the rich move their wealth somewhere else"
Lack of housing because it's a profitable investment class that rises in value due to lack of supply? Obviously it's the fault of NIMBYs alone and not political policy pushed by lobbying groups.
Healthcare too expensive? Totally not the fault of private equity bleeding care networks dry and public health insurance companies denying coverage to fund share buybacks and CEO raises, so it must be nurses striking for pay or the government for paying too little on Medicare.
The point is that if enough rich countries said "fuck this shit, pay up and fuck off out of politics forever", the rich can't leave. They're stuck here, on Earth, with the poors. That's not going to change anytime soon, so the only thing stopping these countries from reigning the issue in is cowardice.
Penalized by group action against defectors.
Which is to say something like this should come from the WTO, or not at all.
Anything less has too great incentives for defection.
But do you have actual evidence that we need it? (Instead of just "nice to have".) Because everybody just repeats that without evidence, like the OP.
There are plenty of reasons to expect the OP's prediction not to hold. I don't know how things play out in practice, and I don't think I've ever seen anybody that knows it.
Also your UK link does not support your argument:
> Weaker-than-expected tax liabilities from additional rate taxpayers are not necessarily an indicator of an unexpectedly low yield from the 50p rate. Incomes for those earning above £150,000 could be depressed for other reasons. For example, high income earners are more likely to derive a higher proportion of income from savings, dividends and other investments – and these have been much weaker in recent years than employment income.
Why can't they tax something that _cant_ be moved elsewhere, like property ownership?
1. Because any tax has to be politically palatable to voters, so therefore needs to exclusively target non-voters.
2. Because even if the above is satisfied, there are a large number of voters whose livelihoods are catering to non-voters.
but in general the US tax rate on the middle class is low compared to Europe
a tax credit of more than 130K USD ... for most expats this seems like completely negating their US taxe burden, no?
Sure you can move cash away but even that can be taxed with an 'exit' tax.
The only reason it doesn't work is because the will is not there to make it:
1. Unexpected
2. With no baked in loopholes
Come to our country - have our police and courts and soldiers protect you wealth - all for free.
Oh - and because you are not paying tax - can I borrow some of that wealth please so I can pay for the stuff I'm providing for you free - I'll give you a healthy return.
The rich benefit the most from civilisation - and it costs - you can't just keep running from country to country hollowing it out for ever - eventually there will be nowhere left you can free ride.
Oh and in terms of the charts where you increase a particular tax and revenue goes up in the short term and down later - that's because people adapt - they find new ways to avoid tax ( yep including to pretend to have left the country ).
Just bwcause they run, that's not a reason to stop pursing them.
Better then nothing
Or in the case of Abramovich - allegedly create a whole circular set of sham companies to avoid paying VAT on your super yacht.
See https://www.thebureauinvestigates.com/stories/2025-06-19/cyp...
You've fallen victim to the false dichotomy. I don't see anyone argue the wealthy shouldn't pay any tax at all.
This renders the 2nd paragraph wrong. And then 3rd paragraph wrong too.
> you can't just keep running from country to country hollowing it out for ever - eventually there will be nowhere left you can free ride.
Depends how much time it takes to run from one country to another, and what you mean by "for ever" - if it takes you a year to move from one country to another and you live for 100 years, you need 100 countries. Pardon my humorous remark, I know this is not the point; but the actual argument is easier to counter: we don't have a single government for the Earth. We don't have a united dominating force to unify taxes in one civilization and sanction or isolate from the other civilizations for hosting the rich.
IMO the education is poor, producing stupid societies electing the governments which are incompetent, corrupt and largely sympathizing with the rich.
And sure - while you could move from one country to another like a parasite finding a new host, and cycle around as the original host recovers - the key questions is whether that results in a few people owning more and more as a result, and paying a lower and lower marginal rate until civilisation collapses. ( or the rich decide to take the rains of power instead to keep the society they benefit from so hugely afloat ).
> IMO the education is poor, producing stupid societies electing the governments which are incompetent, corrupt and largely sympathizing with the rich.
I think you underestimate the level to which the rich judicously share their wealth in order to influence people and policy.
But besides raising capital, taxation reduces wealth inequality, which is itself beneficial as it makes society more democratic. Reducing wealth inequality reduces the concentration of power, which is better for everyone (except for the 1%).
Still, when redistributing wealth, it’s prudent to address the risk of capital flight. It’s not an insurmountable challenge. Policy can address it through: 1) financial controls 2) coordinated international efforts to raise taxes on the wealthy, and 3) harsher measures like nationalization and capital levies.
Yes, the results are always the same: Europe consistently runs lower budget deficits, yet provides greater benefits to their citizens. How awful for them.
https://www.cato.org/blog/spending-debt-oecd
https://oecdstatistics.blog/2023/02/02/sizing-up-welfare-sta...
There is an asymmetry between a government's revenue and its expenses. Revenue can increase arbitrarily if the government is allowed to take out unlimited debt. The amount a government can tax is limited first by the size of its country's economy. There is a maximum amount of revenue you can collect via taxation, and after a certain point increasing taxation decreases revenue. Countries also exist in the context of the rest of the world and there is a market for business. If the tax rate is not competitive businesses and people will leave, although this is over a longer time horizon.
In terms of the possibilities overspending is far more likely than undertaxing because you can spend an infinite amount, but you can only undershoot your optimal tax rate by a finite amount. Both are probably happening right now. The amount that the US government is undertaxing compared to its theoretical optimum might not even balance the current budget.
If extreme spending was cut, the debt would be zero.
https://fred.stlouisfed.org/series/FYFRGDA188S
Basically unchanged for 70+ years, and far lower historically. Meanwhile significant growth in real GDP per capita and therefore real government receipts per capita.
The change isn't that the government is collecting less money. They get more than ever. But growth in government spending has outstripped it, and it has been getting worse rather than better.
cough Universal single-payer healthcare with aggressive, adversarial price negotiation.
Hence the propensity to sink growing amounts of GDP into paying an ever-heightening stack of middlemen to provide medical care at market prices... instead of simplifying the stack and saving money.
The US government created a mandate, then allowed it to metastasize as health care became more technical and expensive, and is now in the business of sticking its fingers in its ears and pretending there’s not a financial problem.
https://www.cms.gov/data-research/statistics-trends-and-repo...
[1] https://siderea.dreamwidth.org/1179450.html (very long; you’ll need to get to at least part 2 to see the relevance)
The government is collecting less spending relative to taxes. A deficit is a difference between the two. Logically addressing either side would improve the deficit. However the ruling class prefers hoarding wealth, financing wars, and cutting social programs.
The actual problem is that even a lot of the "social programs" don't ultimately go to the poor. They require specific services that divert the money to contractors or landlords, or go to affluent retirees who don't really need the money. And, of course, the defense budget is entirely out of hand as well -- but why should we extract more from the economy to fund things that ought not to be funded?
The bottom 50% of incomes get 2.5% of GDP. Seems proper to me.
When I asked for its source, it replied, "The Distribution of Household Income, 2019," by the Congressional Budget Office.
I think that's fair in the context of this thread, given the present distribution realities, the bottom 50% can't contribute to tax revenue. Conversely and a bit more subtle, the top 50% ability to save doesn't seem to be impaired by their >97% contribution to revenue.
> As programmers should know better than anyone, most of the wealth in the world is in the form of people and their capacity to work on teams that solve practical problems
I'm looking at this as a practical matter, I'm far from moralism and moral philosophy so I can't really relate to your argument above.
So what do you mean be "extreme wealth"? Companies? Dividend payouts? House? Yachts?
I agree that luxury items that are out of reach of the middle class (eg sport cars etc...) should be taxed highly, but a toy that a rich person can buy vs a rich person investing money into his own or other companies is a problem if you want to tax that since no-one will then create new companies and invest in R&D.
Most regular people could sit down and cut a billion dollars of dumb shit out of the budget in a few hours (every Congress person has their little pet projects they slide in to omni bills).
The fixes needed for this are massive, and the pain will be felt by everyone. Even taking the harshed path against the 1% will still leave plenty of pain for average folks.
The collateral loan -> invested -> growth, collateral loan -> invested -> growth cycle doesn't just result in tax avoidance on a one-time basis. It's a way to indefinitely grow capital at a higher rate, by pushing taxes further and further into the future.
And when any wealth gains are finally accounted for as taxable income, it's a one time tax that doesn't reflect all the compounding. So a huge time-value of money break.
So there is a compounding of the tax that is avoided over time, despite actual liquidity accessed and deployed all along.
This is one of the primary loopholes that lets wealth gains made from capital get taxed far below wealth created by labor (which gets very reliably taxed, and at higher rates). The percentage of wealth growth that actually gets taxed as a running number keeps growing, despite the ability to make those gains liquid via loans.
Imagine if you could do labor, then instead of taking your income and getting taxed, accept loan proceeds against your "delayed" salary, and invest the net gain from not being taxed. Indefinitely. (With interest on your loan, cancelled out by the "interest" on your delayed salary.)
That would be like being able to choose to pay your own IRA instead of paying taxes.
That's how the unrealized (but real) wealth gains -> leverage (the practical and very real realization) cycle works.
Significant loans on collateral are liquidity events.
In general, any loan that was taxed up front as income, could be paired with counting loan payments on the principle as an expense against income. (And if the loan was for business, not personal, interest would also be an expense.)
This would make loans tax neutral vs. other ways of getting money out of assets.
It would eliminate the practice of cycles of leverage that lets the rich grow their wealth, use that to grow more wealth, over and over, while pushing taxation into the future indefinitely.
And it would make loans less attractive to take out (the upfront tax), and yet much easier to pay off (symmetric tax break for paying down debt). Which would result in a much less leveraged, more resilient, economy.
With current level of debt it does not matter. Taxes should be rised for everyone if huge cuts in expenses are not done.
capitalism is meant to be organic thing like a bacteria. a self-organizing network. one cannot legislate nature, one cannot legislate human nature. Imagine making crimes illegal and then nobody committing crimes. Imagine making it illegal to change lanes without using your turn signal.
a democracy can give an antibiotic by dr. democracy to clear the infection, that is the nature of control here .. but if it's a nasty bug.. the bug will veto the doctor
We have a system of laws that undergird the economic system - the legal protection of private property being the main one. Private property requires a monopoly of violence to enforce.
When capitalism colonizes a legal system, it necessarily creates the incentives for the legal system to adopt laws to maintain itself. If for some reason private property was not legally enforceable, capitalism wouldn't get off the ground.
It was probably meant in the manner of: "the purpose of a system, is what it does"...
I.e. regardless of how it evolved (system of laws written with good intent, or system of laws organically grown out of corruption and lobbying...) what capitalism does now is its purpose, and we shouldn't expect it to be meant to do anything different.
> capitalism [...] necessarily creates the incentives for the legal system to adopt laws to maintain itself
Agree
> If for some reason private property was not legally enforceable, capitalism wouldn't get off the ground
I think this makes as much sense as saying: "if money wasn't a thing, capitalism wouldn't get off the ground".
Technically true, neither capitalism nor feudalism would be able to get off the ground, but "private property not enforceable" evokes images of thugs stealing your property... The truth is that the first few people (or group thereof) who accumulate a commodity (grain, livestock, widgets, etc.) would also be the first who would be able to bribe/pay thugs with a small share of their commodities, to help protect from (deny access to) others in the community.
The monopoly of violence (and legal authority) would grow out of the initial group.
In the same way, even if money was going to be abolished, any other commodity would just take its place, and rebuild capitalism with it. It is tricky to wrestle democratic control back, and move on from capitalism.
There is obviously both - as you say it's the difference between two numbers - and sure how you portray that differences is often politicised - just as you are doing now.
Also remember there is borrowing in the equation - it's not just money in the system, but the ability to spend made up money today based on future promises, the with the rich benefitting from the interest on that debt.
ie those with assets benefit twice from a gap between spending and taxation - they get to not pay their way, and also get a nice return on lending the money then didn't pay in tax to pay for the necessary spending!
This is quite the take.
Do you run your household as “there is no ‘overspending.’ There is only under-earning.”
Do you have numbers for that? Even ignoring the issues with lots of wealth being paper wealth that cannot be translated into any kind of realized gains, and any 2nd order effects, the wealth (stock, can be depleted once) is not even in the same ballpark esp. given the deficit (flow, keeps happening).
There is also the chance of capital flight - and hyper inflation. The debt holders could also lose out remember - if the dollar becomes less valuable then any holdings in the dollar ( including debt ) become less valuable.
What about TIPS and I bonds?
Maybe it's completely unreasonable for you to assume the causation for each step isn't on the order of 99%. Your argument is too abstract to be a relevant rebuttal.
This article seems a little reductive in its analysis, but this is actually a huge topic.
I have not finished the book yet, I don't claim to understand all its implications, but I really like it because it analyzes many empires over the centuries, and tries to track multiple determinants for all of them (also a lot of pretty graphs).
Very, very recommended book if you are interested in this topic.
Dalio analysis agrees that today China power is rising and the USA is weakening (duh). It is a slow progress, and the financial aspect is merely the last determinant to show this. Dalio however does not talk much about the future, aside from the obvious initial decline of the USA.
Many point to China as the next big empire, however it might not become it as China does not seem to be too interested in becoming the world money reserve (Dalio uses this as a necessary definition for an "empire"). Also while China has imported many ideas and culture from our world, the language and culture gap remains huge even today, and that inevitably limits influence and power.
These couple of things might allow for a longer time before the big change of power, and even let the west come up again.
What I love about the book is how clear the situation is even without pointing to specific, detailed situations, political or financial decisions.
The decline did not start yesterday, or just 4 or 5 years ago either. Education, competitiveness, inequality, even military paint a clear trajectory. It takes time. Dalio tentatively gives an average of 250 years between rise and fall of an empire, and we seem to have passed the peak decade or two ago.
I'm European, and it's also very clear how Europe will definitely not be the next power, either. Too fragmented, no cohesion, etc.
You can find a few graphs of the book on the web, it should give you a clear idea of the kind of analysis.
According to his Wikipedia his employees are forced to agree to continuous recordings, the NYT claims he does some sort of (i assume perfectly legal) insider trading and just acts like he’s got the perfect system in place, he defended the CCPs actions on multiple accessions and just in general does not seem like the type of guy to provide anything of value for free.
So can someone educate me on the angle? What’s the goal here?
And why would anyone read this and not get the feeling of being scammed. There is no way this guy is in it for the book sales.
Honestly I’m sometimes questioning my sanity while reading the comments of videos like this. There are people acting like he’s a modern Prometheus, sharing the knowledge of financial whatever. I would really be amazed if my cynicism turns out to be wrong on this one.
I'm not convinced, history is written by the surviving victors and revised by those with a narrative.
I'm a firm believer that the market is not logical predictable or rational, but it is game-able.
Gain influence, increase his marketing & exposure, creating new opportunities for himself. Good chance he also believes what he is preaching. All these things can be true at the same time.
He gives away a lot of the info in the book for free, so you can consider the book as just a method of marketing his ideas.
Ray Dalio knows nothing. US just put tariffs on every other country in the world. And threatened China with 145% tariffs to get them to come to the table and open up Chinese market even more, even though China is in its own Great Depression right now.
Recognizing that China is much stronger than 10y ago does not mean supporting it.
Recognizing that the advantage the USA has is getting thinner does not mean liking it.
Why do we keep listening to amoral fools like him?
A post claiming the dollar is dead without explaining why a large freely traded currency backed by a large economy (I.e the Euro) did not take the dollar’s place is even less serious.
I'm not sure what you expect to happen? Tariffs can be a tool to promote local industry but when used like this they're more of a tax on Americans. I don't think other countries want to play the retaliatory game because it's lose lose. Instead they'll make deals where they can and otherwise get on with things. Trade is going to reorient by itself. That will take time but it's already happening.
In any case, it doesn't show the US is strong. Everyone already knew it has the strongest economy in the world. What it does show is that the US is less stable than partners believed. It's hard to see this benefiting the American economy in the long term. But you know, that might not be terrible, if American workers get more jobs and a larger share of the pie, then it might work out.
The main reason the US is a hub for well-paid programmers, is that there is a giant pool of VCs that subsidise growth for companies that can potentially find money all over the world thanks to the way the US still is a cultural hegemon to western liberal nations with strong English language skills. As long as a US based tech company leverages cultural hegemony (in a positive way) and deep VC pockets, they can succeed in Europe and the world.
The biggest tech company failing at using cultural hegemony in a positive way is Tesla. European consumers have largely abandoned Tesla thanks to E.M. He single handedly ruined the company's position of strength by thinking that US news and politics do not reach us. He did not understand the hegemonic aspect (or was too high to care).
The world doesn't need it, but unless Americans want to see their purchasing power destroyed, they do.
Pricing at international scale becomes a lot more complicated without a singular global reserve currency.
Additionally: shortage of confidence in the US Courts isn't a new thing. The reality of the US Courts system is: Money wins, and its been like this for the entire life of essentially all Americans alive today. This is, actually, rather convenient and good if you take the view that faith in the US courts system is a critical component of the US Dollar's global reserve status. If money controls the courts, and courts support the money, that's a pretty nice virtuous cycle. But, for the People; its been hit-or-miss for a long, long time.
I assume British courts can enforce contracts that deal in dollars.
BRICS might have the wealth. Would you trust that it's going to be legally stable? I wouldn't.
But, in fairness, for the first time in my life I don't trust the US in that way either. I'm beginning to see it as possible that someday the president could make some arbitrary decision that takes everything I have. (Either this president or another - but it's this president who's making the precedents that make it possible.)
But that doesn’t mean confidence in the dollar can’t die anyway before an alternative is found. Straight up chaos and collapse is a hopefully remote but real possibility.
Remember how the 2008 crisis was stopped? Strong messages from reserve banks that they’ll backstop and people believing them. That trick doesn’t work in the world author it’s describing.
Reality is that there is little motivation to invest in long term debt under 3%, normal motivation to invest in debt between 5-10% and huge appetite for debt above 10%.
Debt with a sub 2% interest rate can only be achieved with significant government intervention. We were living in an unrealistic economoic reality and now we’re going back towards something realistic with interest rates between 5-10%.
If everyone has access to ultra low rates, housing supply prices rapidly increase to match demand, and you reach a new equilibrium (albeit with higher price:income multiples).
So it’s not papering over anything — it just goosed housing prices higher.
Now we're currently papering over the resulting sky high asset values by allowing inflation to erode the relative value of the sky high real estate.
That will only be true if inflation in non-housing accelerates and housing prices stay constant, which seems unlikely in a supply-constrained market.
In any high-inflation scenario, real assets are likely to be highly attractive. Where else? Bonds, death. Equities, only if the economy keeps humming while inflation persists. Gold, bad price appreciation.
It's closer to a cold war situation than just "selling dept"
But we don't have covid this time.
We do have the same guy in the White House again though...
RFK Jr: ‘Hold my unpasteurized beer...’
Russia is a non starter, and China is unlikely to make the political change necessary to be a reserve currency.
out of curiosity, why do you believe that?
Unless they're paying Russia for energy, they're buying oil and LNG in dollars.
Africa's GDP is tiny and will not a serious contender for any sort of reserve currency status for many decades. I can't imagine a wave of automation will do anything positive for most of Africa.
Sibling comment mentions Europe needs the US for energy; Canada has known fossil gas reserves of ~200 years and LNG export capabilities, and Europe is scheduled to end Russian fossil gas consumption in 2027 [2]. The world is deploying 1GW of solar every 15 hours; like the rest of the world, everyone will arrive at energy independence/sovereignty eventually through cheap renewables (solar primarily, but also wind) and battery storage (LFP and sodium most likely, as of this comment) exported by China to the world. China is also selling inexpensive EVs to as many global consumers as they can find (while internal sales of battery electric and hybrids is already at ~50% this year). This leads me to believe the future of US oil and gas is an internal petrostate similar to Russia, not an energy exporter of relevance far into the future.
[1] https://www.sas.upenn.edu/~jesusfv/Slides_London.pdf
[2] https://news.ycombinator.com/item?id=43506589
(not investing advice)
It's hard to take your point of view seriously after that honestly.
https://direct.mit.edu/opmi/article/doi/10.1162/opmi_a_00160...
https://www.psychologytoday.com/us/blog/the-digital-self/202...
From the piece (which I agree with):
> As someone that has sold a bunch of LLM enabled software over the past 6 months, I don’t really buy the AI capex turning into huge productivity gains. Everything to date are just chatbots with RAG and API calls. None of them are going to do my laundry or file my taxes.
Low-value-add marketing copy, for example, being automated changes... what? Now LLM-generated copy is the new minimal-cost baseline, and everyone adapts to the new normal.
The real killer feature will be autonomous business planning, but we're a long way from there.
They also need to import phones, dishwashers, and cars. But how many cars do you really use? How many phones?
Africa's population growth is projected to drive steady demand for consumer products, while the West and parts of Asia are expected to see a decline. They have abundant natural resources, and they’re likely to become the cheapest labor force after countries like Vietnam and Thailand see rising wages and living standards.
We’re already seeing this in China, where wage growth is pushing some manufacturing to neighboring, lower cost countries.
Demand is ultimately limited by the number of people. You can produce as many goods as you want using AI powered factories but without demand, they’ll just end up in the garbage.
NATO funding, drug R&D and subsidized pricing, even sovereign wealth funds are invested in the USA. Their only energy option outside of the USA is Russia.
Postwar Europe as we know it does not exist without the USA.
Not sure I’d agree. Eurozone debt to gdp is around 90 while us is above 120
Specific countries are in trouble (France and Greece mainly) but overall position is somewhat respectable
No it'll be renminbi, with the euro, if they are lucky as a distant second place.
China is an exporting and manufacturing powerhouse. Something that is only accelerating. Don't get me wrong, china has a whole bunch of issues. but currently political instability kneecaping economic growth is not one of them.
Also China knows that unemployment means the end of their control. So they will do anything and everything to keep people gainfully employed. the USA less so, and we'll see if that works out for them.
Russia has a tiny economy based on war and oil.
Also Switzerland is easy to bully, as can be seen by the current US tariff regime.
That is kind of a first step. You know, actually being able to convert from one currency to another.
So what we’ll end up with is a post-WW2 supply chain but in a world where every currency dynamically floats, even the dollar. It’ll be a decade of price shocks, trade wars, and likely conflict as everyone vies to define the next era of economic power, until a smattering of core currencies (likely the Yuan, Euro, and Dollar) emerge on top for each respective region.
That’s my armchair theorycrafting, anyway.
Have you heard of the Portuguese real? Or the Spanish real? Maybe the Dutch guilder? They were all global reserve currencies in the past.
If you haven’t heard of them, don’t worry, someday, people will ask “Do you know the United States dollar?”
So, whoever has significant wealth will do exactly this and take out loans to purchase productive assets and then, later on, pay back much less because the dollar lost value in the mean time.
This works out as long as the interest rate is lower then the actual annual loss in purchasing power.
This has happened before. GFC 2008 comes to mind.
But taking a step back: It is making very strong predictions for a future state of what I would consider a chaotic system. As the author identifies as a Physicist and not a Psychic, why is there no mention of uncertainty? No mention of how you would test or refute the prediction?
Looking at very selectively picked graphs is like reading tea leaves.
If even just a few people read the article and change their investment strategy as a result you already affected the outcome.
Well, you lost 15% compared to Euros this year so far...
Have a look at the dollar index since it's inception in 1967. Does it look like the dollar is plummeting to you?
You are guaranteed to fail, no question.
The dollar is a corrupted unit of value that is meant to pump assets and exert global control. Look at any dollar buying power chart to see what your future looks like - a never ending chart down.
The stablecoins will absolutely accelerate the transition, so that when it does happen, it happens more quickly. Anyone with a stablecoin can transact on-chain for something else. And anyone holding stablecoins will be using an app that has familiarized them with the idea of alternate currencies and currency exchanges.
This is probably a good thing. A realistic not terrible scenario is a few year period where you have to pay attention to exchange rates, but your net-worth is mostly unaffected and at the end of it you're paying for groceries with something that's not USD.
Also USD's circulation in US markets has nothing to do with maintaining reserve currency status.
I usually pipe Substack to markdown and then just open it in my favorite markdown reader.
His main arguments are the politics are messy and there's a lot of debt. Such things have been true in the past over its 200 year plus history and yet it goes on. The US remains the world superpower and the center for its most valuable companies and the leader in new tech like AI. Things will go on.
The British Pound has existed since about the year 600, we had 250% debt to GDP after WW2 and all sorts of chaos over the years but the currency continues. Such things don't die easily.
Or, the country can break up with each portion rearranging its financing and resources accordingly. There's a number of options, if people choose to think beyond the next social message post.
Taxing wealth agressively and cutting defense would immediately kill the goose that lays the golden eggs.
From 2021 but shows relatively how much tax is taken before you get your after-tax income:
https://www.brusselsreport.eu/2021/07/22/new-study-compares-...
It's super annoying. There's no reason to bold the chosen text, or any text in this post. I mean, it's on substack ffs.
Worse is when authors use emojis in titles or text. Maybe we can blame tiktok brain rot or just gen-z in general. There's gotta be someone we can toss under the bus and I bet they don't know what cursive handwriting is!
(And technically this violates the HN rules)
Every person is given a similar amount of lifetime (only a few countries are exceptions).
Time can't inflate or deflate, is understood by all and easily measured, and it can't be stored. Taking it from others or trading it between people is difficult (we use money as a proxy instead).
Some obvious problems: quality of time, the value of different people's time is variable, retirement.
One of them is that your time is cheap when you're young and unskilled, and grows valuable as you grow old and become skilled (and have less time left). Each <unit of time> isn't equal for the same person, much less between them.
I was probably thinking more along the lines of: https://en.m.wikipedia.org/wiki/Tax_Freedom_Day
I get that same vibe when people say that BitCoin, StableCoins, or the US Dollar will be around forever.
While I'm tempted to think that a return to Gold and Silver is in the cards, I suspect that with modern markets, it'll be more than just those 2 metals, and might include MWh of electricity, barrels of oil, tons of coal, and many other commodities with a huge arbitrage market keeping trade liquid. (Much as it is with the various blockchain coins)
The the US dollar safe for now because of the lack of a viable alternative?
Seems like lowering interest rates and raising inflation is the only viable political solution. Sure, it causes issues with people financing our debt. But also, where else would they put their money?
Are there winners and losers here? Or does everyone lose?
How would the world work in an idealized free market without a reserve currency?
The only realistic options that exist at the moment are going back to the gold standard (not viable for most countries) or shifting to the yen (which is tied to the dollar as Japan is the largest holder of treasuries).
It will be more costly for the people doing this later, of course.
Liberals are like libertarians in this regard. Housecats that don't understand what the actual source of stability and prosperity is.
Because it might not work out so well for them? Let's not kid ourselves, this would be an invasion by sea against an opponent who's prepared for many years, has a modern defense force, and has explicitly designed a defense protocol to inflict as much damage as possible. This is not Russia stepping over fields they already encircle that are governed by a dysfunctional government. And it's not Isreal being allowed to bomb impoverished children with impunity either. And neither of those scenarios have worked out splendidly for them either.
Slightly less compressed, it should be "When a nearby state keeps saying they own you, then take the credible threat seriously and pretty much pretend they're going to act on that, even if you think it would be stupid of them to do that, because history is full of examples of states doing this kind of thing. Prepare accordingly".
Those around the president have been pretty clear that the US will defend Taiwan until the US is capable of its own supply of leading edge semi conductors. Taiwan is very easy to defend with the harsh ocean separating them, especially since North Korea gives the US an excuse to plant massive amounts of long range missiles in SK.
There are no surprises when attacks start in the era of real time world video satellites.
Basically, when China is at maximal power relative to the US. Most credible commentators in the West say that'll be in 2027.
"But what about the stuff that the factories import, to produce anything?" one might ask. Well, Trump wants no such imports - he wants the people selling stuff to the US, to relocate to the US.
Note: I'm not in favor for what Trump tries to do, but it explains why there's so little concern for the dropping dollar.
US Treasury bonds will be less attractive, because foreign investors will lose trust in the US economy
So what will come next? It can’t be gold because we already tried that. I don’t see the West letting BRICS have it. Crypto seems too polarizing.
With systems like Brazil’s Pix in place (which is supposedly gonna operate across latam countries soon), you can easily settle cross-bank instantly. Countries will then be able to build spot reserves on whatever currencies they need for trade directly, instead of an intermediate “stable” currency
It was working pretty well for thousands of years.
Makes me think.
I would argue "no longer be the _primary_ global reserve currency", but go on, I'm listening ...
> It might not even be the default unit of exchange for Americans back home.
This isn't a serious article; I don't have the time to read it.
For me, the second half of #3 is the real death knell. If Congress or the president is setting monetary policy, the dollar is in for a world of hurt.
If there's enough pain, it'll outweigh the pain of switching.
Almost every major currency has lost value relative to the US Dollar over the past 10 years. Not just, like, a little bit. Like, a lot a bit. The Indian Rupee has lost 53% since 2007. Yen, down. Pound, down. Canada, down. That's reality. There is no "switching to avoid devaluation of the USD" when the USD has devalued so much less than almost any other currency on the planet.
One major country that has managed to maintain the value of their currency relative to the USD is China. Who has by some estimates a ~300%+ debt to GDP load (if you think that number is too high, its because whatever estimates you've read before didn't take into account municipal debt, because that's where China hides it). And a 72 year old leader with zero politically-feasible line of succession. And a critically shrinking population. And literally zero global military force projection. Any faith that any country puts into China is going to be destroyed just a few short years after Xi's death; the main thing China has going for it isn't their manufacturing base, AI strategy, or whatever; its that Xi hopefully won't die in the next decade.
FWIW, my mental CAD/USD price anchor was set when I was coming of age at 0.75 CAD / USD. Today it at 0.73 CAD / USD, and I've seen it touch 0.60 ish and pass parity in my lifetime.
TLDR: Yes the dollar is weakening as a reserve currency. But the decline has been long and slow and it is not clear what, if anything, will replace it.
https://www.npr.org/2025/05/09/1250191994/reserve-currency-d...
If “Skin in the Game” has taught us anything, it’s that if you want to know what a person really believes, don’t read their blog, look at their investment portfolio.
Ok… you think the dollar is going to “melt away in a fire”? How much do you believe that? Enough to put your own money on the line and place your bets? Is your money in real estate, then? Gold? BTC?
Because if you don’t believe a financial projection enough to put your own money into it, do you really believe it?
> All of it’s noise — and none of it matters.
I've been reading libertarian de dollarization doom posts since 2008.
The question is, if the system is so messed up, why does everyone continue to put up with it? It's exactly due to the lack of viable alternatives. So long as the American monetary system is the only game in town, it will remain the reserve currency regardless of the debt or strength of the dollar.
Until markets begin penalizing companies receiving government funding (or whose workers disproportionately rely on welfare due to low wages) with shitty share prices and recognize which sectors should be private while which others should be public, this nonsense will continue unabated.
This is why I loathe believers in the mythos of “the invisible hand of the free market”: if said hand existed, it’s been firing shots into its mouth for decades and everyone in finance has seemed okay with that continuing.
Having watched colleagues spend every waking moment on their breaks digest literal propaganda as truth? Watching relatives so dosed up on misinformation by cable outlets that they only exist within that specific fantasy and never reality?
It's depressingly, distressingly common.