#1 creates oversupply of dollars and #2 and #3 lower demand. This study supports the idea that wars can indeed destroy purchasing power.
Agreed. Which is why the Chinese do NOT want their currency to become the Petrodollar or world's reserve currency. They know that that is what destroyed US Manufacturing. China wants to maintain their manufacturing dominance. They've seen what de-industrialization has done to the US.
"Kill all the sparrows"
Unless of course everybody is forced to buy your currency to get an essential resource. This causes: - the currency to maintain value better - puts you in position of other countries having to maintain a trade surplus with you so they can actually purchase said resource - the oil producers end up with great amounts of your currency, which they have to spend, getting a political foothold in your country.
Petrodollar almost certainly was devastating to US economy. And like most resource curses, it's like a drug - you need to stop taking it to get better, but it will hurt as hell.
It's resource curse on steroids.
Saying it’s not an advantage is to assume those in control want to have manufacturing in the US, while such noises are made there is very little action beyond capricious crony capitalism tariffs that no normal business can possibly rely on.
It seems both you and I agree that manufacturing is an essential component to war-fighting and the health of a nation, but I think it is safe to say that you and I have effectively no control over what the US does.
USD reserve = print USD for everything liquidity to sustain debt financed existence where Triffin hollows out industry, and financialize everything because having stupid amount of liquidity incentivizes certain behaviors.
Petro-yuan = PRC gives swap lines to trusted partners to buy oil denominated in yuan in exchange for things like resources. Hormuz ships ~1 trillion USD worth energy that needs "swapping" - incidentally PRC imports around ~2-3 trillion, more than enough to cover.
So think petro-yuan = PRC gives trusted countries with resources that PRC bonds credit lines to buy yuan denominated energy (possibly at discount), in return they guarantee PRC resources or other commercial/geopolitical arrangements. It will be narrow, not like USD brrrting reserves.
This benefits PRC because get to have leverage over "need" transactions (countries need energy to survive, it's no negotiate) while US keeps supporting "want" transactions by reserve debt servicing blackhole that US cannot extricate itself from until it debases / technical defaults. PRC best game plan is... assume privileged part of exorbitant privilege, while leaving US the exorbitant.
So no one is going to take up a lot of yuan trade unless that changes or they are forced to.
But that puts China in a bind. Liberalizing their currency is going to require very careful and slow actions, China threads this needle now in a very fraught way. If they openly start trading oil at any real size in yuan that will break their peg as you’ll be able to trade through the oil markets.
This is the main reason there isn’t more petro yuan already, it’s bad for China.
So no one is going to use a controlled currency for a hard liquid commodity. So if China wants petro yuan they have to liberalize that, which will break their peg.
China could have more international trade in the yuan before all of Americas recent misadventures. But that has cast consequences for their economy, and possibly the ruling elites power structures.
- offshore yuan
- onshore yuan
The mainland vs offshore renminbi restrictions disappear in Hong Kong, Singapore, etc. where most mainland Chinese trading companies and otherwise have offices anyways. Trading offshore to onshore renminbi becomes their problem, one that they are fairly accustomed to.
This is as near an iron law as there is economics, you can’t keep a peg and have a large trade in a large liquid commodity market. China is trying to slowly thread this needle and they can get away with it with Iran and Russia because they are approaching vassal status because the petrodollars are closed to them. Everyone in the world can see this and wants to avoid it.
If you are an oil producer what you want is to diversify your currency risk. Right now China is _preventing_ this, because there is no way for them to become a major player in that market without huge impact on their economy and probably their political system.
You can spend it in China, right?
One big thing that has prevented CNY from becoming a reserve currency is that China has explicitly said it wants to preserve its ability to heavily and suddenly restrict capital flows in and out of China. If all of a sudden you can't redeem CNY outside of China inside it that makes it a very poor storage of value.
CNY is internal to China! See https://simplefx.com/education/usdcnh-differences-between-ch...
They do not need to liberalize currency. They just need to have stuff people want, and leverage to force them to transact in PRC preferred currency. Previously this was hard, PRC had goods, and affordable prices = reduce friction/switching cost vs USD liquidity, but USD liquidity still made USD transaction preferred. PRC had no leverage for others to transact in yuan.
But in persistent high global energy environment, if PRC controls basically global supply of cheap renewables... and 30% of GCC oil vs Iran enforcing petro-yuan, they have stupid leverage to snow ball system. Again key is this for 30% of GCC oil exports if Iran locks down (big if), it's not global petro-yuan, it's Costco membership only access petro-yuan.
30% of global oil is inelastic existential survival leverage, if PRC wanted to charge in blowjobs countries would pay in blowjobs, currency liberalization doesn't matter when selling water in desert.
All of that happening with the worlds biggest oil producer, its second biggest manufacturer, who is food independent and has the worlds most powerful military just lets it happen. And no shooting war breaking out between them.
I’m betting on slow currency liberalization and a transition to a multi currency petroleum industry and subsequent inefficiencies in global trade. But feel free to bet how you want.
> make any sense
GCC petro-yuan scenario is predicated on BIG IF that Iran can control Hormuz oil. Rest is the downstream logic for ~10 years, i.e. before any alternative buildout/pivot by GCC states to some how insulate... which apart from Saudi, they might not (too small). This also why PRC hasn't exactly enthusiastically signed up despite IR offer, because it would burn GCC bridge when IR fate uncertain. But if alternative is IR can hold hormuz hostage, PRC would rather participate in petro-yuan than not, at which point having priority access to energy, possibly at discount is net win. Note in this case IR as SLOC guard dog actually has leverage over PRC, gating energy access also offer PRC cannot refuse.
> US
Hence big if, if US has appetite and capability to break Iran, and it matters US settlement/conditions, because if US reasserts control over Hormuz oil and tries to throttle PRC oil as victory, then PRC may go all in on Iran support. Situation is fluid, the wild card is in fact US or ISR deciding to simply break GCC oil. There is still plenty of room for escalation and shenanigans.
You can't spend US dollars either, in 99% of the world.
> So no one is going to take up a lot of yuan trade unless that changes or they are forced to.
Related on the “forced to”point, this is where Russia is stuck with its crude oil sales to India where the payments have been made to it in Indian Rupees. There’s almost nothing that Russia can do with the Indian Rupee. This is a huge and growing problem because India’s imports from Russia eclipse its exports to Russia by more than 10 times. [1]
[1]: https://www.financialexpress.com/india-news/india-russia-sum...
Think about it, every single mother fucking year, the US roughly buys 1 trillion dollars more on services and goods from the rest of the world, than it sells.
It has this privilege/curse basically because the US dollar IS the world's global commerce and finance currency.
Trump attacked Iran thinking that this would somehow be good for the US, except it's weakening the petrodollar because it's pushed Iran to simply accept Yuan for oil.
As to how much actual money was taxed at 91%, we don’t really have records for that but certainly the top 0.01% paid significantly more in taxes as a rate than they do today.
Oh, they fight that actually.
A team of 10 SWEs can create a product worth $1B with the cost of 10 laptops. You get ten people worth $100M each.
To create $1B in value with any kind of manufacturing business, is going to take hundreds of people utilizing millions in various costs. You end up with something like 10,000 people worth $100k each once you wind your way through all those supply lines.
The endemic anti-intellectualism among white communities (especially rural and southern) has resulted in a steady decline of white people in well-paying professions in America. If you count the Jewish as a separate group, white people are likely a minority in corporate America. Combined with social upliftment of other groups ("wokism") and the opioid crisis (that has disproportionately affected hinterland communities but immigrant groups seem immune to), white people are sliding down the American totem pole. Trumpism, alt-right, anti-woke, and the general resurgence of racist rhetoric are basically just reactions to all this.
These people want manufacturing because manufacturing is largely considered a "white people sport". If America becomes a manufacturing-first society, the hope is that it puts white people at the front and center of American society again.
JD Vance wrote a book about this.
But I don't resent the people who stepped up to fill the jobs.
Rather, I am disappointed that these amazing jobs were basically gifted to US residents, but my fellow white people "Opted Out" of these high paying jobs.
Oh boy am I gonna need some actual data for this claim.
You can construct the definition of white collar in a way that makes it seem like it's mostly white people, but among high paying job titles within a company, absolutely I would say there are fewer than 50% non-Jewish whites.
Race is generally a misused concept because 99% of the time people actually mean culture, as anyone from any race can be part of a culture.
In my experience, you wouldn't know most Jews are Jews unless you start quizzing them about their religious practices.
This is one of the main points of bigotry. The facts don't matter. So when a person says something obviously ridiculous like
> among high paying job titles within a company, absolutely I would say there are fewer than 50% non-Jewish whites
the proper way to interpret is "I feel like there are too many unworthy people working there," where "too many" is entirely subjective and could be as few as one.
Not at all. That was not my implication even slightly. I'm non-white btw.
One's information environment can mislead, but perhaps the process of finding information sources you consider objective, then studying them, will lead you to reevaluate the information diet that is creating a false picture of reality.
I don't see how this can possibly be true.
> that has disproportionately affected hinterland communities but immigrant groups seem immune to
Or this, especially in light of data such as this: https://www.cdc.gov/nchs/products/databriefs/db549.htm
White American overdose deaths per capita are 6x that of Asian-Americans.
Manufacturing is just their preferred lie to get otherwise intelligent people to support their insanity.
Not every kind of "bringing manufacturing back" brings the same kind of wealth and quality of life.
And the Heritage Foundation is not in the business of improving quality of life for everyone, or even the average American.
Most billionaires will lose both money and power on the timeframe of a couple of years due to the destruction of the value of the dollar. Even internally to the US.
Some may gain both. Someone will probably gain both, and the odds are good some billionaires are included.
Only cheap labor can bring manufacturing back to the US. Are Americans willing to work in factories for the same wages as the Chinese and Indians? I don't see it happening.
Create enough poverty and soon people will be willing to do an awful lot of things.
Under conditions of free trade with low-wage countries.
Free trade with low-wage countries is a policy choice, but a lot of people confuse it for a natural law.
How do you bring down costs? generally you'd need to restrict real estate. Lock down rent costs for both residential and commercial.
But the US is a major manufacturing nation anyway. US manufacturing output is more than half of that of China while having only a quarter of the population.
When groups like the far right say bring back manufacturing they are just posturing to those voters who have been disadvantaged by changes in the commercial landscape that reduces the number of unskilled and semi-skilled jobs. If they really cared about those people they would support massive improvements to education and training so that at least the next generation had a chance rather than idiotic schemes to 'bring back' the kinds of work that no one needs.
The Heritage guys have a weird perspective where they idolize the early Federalist US and the Reagan Era. Prosperity for the common man wasn’t a highlight of either era, to put it mildly.
In 1790s New York, for example, “local control” meant that many of the people of upstate New York were a sort of serf-like tenant living on the estates of the great men, Dutch patroons who played ball with the colonial and State political infrastructure. They had the freedom to pay rent until their landlord was willing to let them go. That existed into the 1840s, when the country started getting woke.
So we can address housing issues with creative solutions. Why do poor people need their own apartments? Stuff them into a tenement. You can easily fit 15 people in a two bedroom apartment so they can build drones or whatever.
it's worse then them not being right
the only way a weak dollar would majorly matter for bringing back production is iff production is cheap
so a 20% weaker dollar must not come with 20% higher "dollar" prices (living cost, salary). You need to decrees living cost and dollar value in lock step (i.e. weaker dollar without inflation!). But this seem impossible IMHO. And if we look at what happened, if anything, it went the other way.
And if you try to force it anyway you are basically saying "we effectively disown most money of most US citizens" and use that to try to attack manufacturing, while likely not relevantly affecting the wealthiest.
That is just plain evil.
And not very surprising if you consider that many "manufacturing countries" have pretty horrifying working conditions often not "that" far apart from slavery.
Worse this likely wouldn't work either, because iff your countries population doesn't have the money to buy stuff anymore, and investments are risky, why would you even bother to produce there? To then export to countries where investments into production lines are more reliable? Like how is that supposed to work?
Naturally things can be different if we only speak about high-tech / high-end manufacturing. But the current steps do not seem promising to archive that either:
1) this kind of manufacturing lines need even higher investments, i.e. act even more allergic wrt. trade instability and uncertainty
2) Trump has brought some high tech manufacturing into the US with a mixture of force and bribes/subsidization. But honestly it looks a lot of it is mostly hollow promises, not making a relevant difference long term.
3) More then one case where companies did agree had a lot of big problems. One of the biggest issue being, that missing in depth know-how requires temp. importing people which can make sure things work while teaching that know how (if you want things to get going fast. If you go slow you can send your people to other countries to learn.). But a destroyed visa system makes this a high risk for anyone coming to the US and did lead to more then one person like that being detained and deported by ICE. The other risk is if this people don't teach enough you become dependent on foreign workers in a strange way for a while.
Either way nothing in the current politics seems to be actually well thought through ways to archive (relevantly) more manufacturing in the US long term. But everything seems to be designed to destroy the wealth of the majority of US citizens.
It's a very different thing to fire a $5m missile that you imported vs one that you made domestically with all-domestic components and labor.
Expending what it already has is true but doesn’t really help. It’s not like we’re going to sit here with a reduced stockpile forever. Those munitions will be replaced. The fact that the spending comes after using them rather than before doesn’t change the equation much.
Our wars are pre-paid for. America spends $900B/year on the military. Use it or lose it.
That $900B/year figure is for peacetime (or what passes for peacetime in an empire constantly involved in small conflicts around the world) and peacetime rates of equipment/munitions replacement. This is the most intense air war the US has been in since at least Desert Storm, maybe Vietnam. That level of expenditure is not already paid for.
A neighborhood with just a Walmart doesn't have higher purchasing power than a neighborhood with just a Whole Foods.
Having "high purchasing power" just means that you have access to low quality options that people in "low purchasing power" countries don't because there isn't a market for it.
But if Iran does successfully force countries to stop using the petrodollar by only allowing countries trading in yuan through the strait, then we could actually see that reverse. IMO destroying the petrodollar is the primary clear "victory" Iran could achieve from this war
China is actually the second-best contender now due to its growing military prowess. But it still might not be at the level where it can carry out the aforementioned task anywhere in the world without exception, like the US can. Hence the dollar will most likely stay.
Erase US government debt via hyper-inflation, and let the people that will still have liquidity buy all remaining assets the middle class will be desperate to sell at pennies on the dollar.
Also, some countries started to use other systems beside SWIFT to transfer money.
With what? The euro, yuan? Or weapons from france?
I hate to admit it, but it's much less that the US is great because it's the reserve currency, and much more that the world reserve currency is the dollar because the US is what it is.
Weapons are expensive, and it only makes sense to buy them from a country that specializes in them. And a country that makes weapons at huge scale is likely to be big enough tilt the direction of the country to be all the ugly things the modern US military industrial complex is.
The supposed "Military Industrial Complex" that Ike warned about died years later, and the end of the Cold War buried what little remained. The F-35 is basically the only big military construction project we've had in a very long time, and it comes at a few hundred airframes per year.
In WW2, we were producing 10k+ rather advanced airframes every single year. In each category.
The company that designed and built the M1 Abrams Tank doesn't really exist anymore for example. We, like Russia, might not really have a capability of building 4000 hulls in a short timeframe, which is table stakes if we are actually concerned about a war with China. We were able to do these things back in WW2 because we, through central planning (not a free market), reorganized like 1/20th of the economy into building war assets. FDR decreed that we build 120k Shermans. We eventually managed 50k.
A lot of the supposed "graft" and pork of the defense industry is about giving it a lot of leeway just to stick around. Once you lose domain knowledge it's gone forever, you have to expend considerable resources to rebuild and recollect it. No, documentation doesn't count. Reading all of our notes hasn't fixed the fact that Russia and China can't build the exceptional jet engines we can.
> A lot of the supposed "graft" and pork of the defense industry is about giving it a lot of leeway just to stick around.
Even if they stick around, will they maintain an edge? Seems like their incentives are similar to a professor on tenure - do the minimum, collect paycheck. Even if they are still creating cutting-edge weapons, could they scale up efficiently when needed? Just read Casey Handmer's extremely critical posts on Orion/SLS; I would not trust the side of Lockheed/Boeing he describes with critical national security capabilities.
Ukraine are butchering Russians for 870 USD per dead soldier.
The USA has the most expensive weapons in the world, the problem is that much of it is obsolete.
Ukraine has shown themselves very capable of surgical offensive strikes using cheap drones deep inside enemy territory , so your comparison is not valid.
The US is also bombing girls going to school.
https://www.rts.ch/info/suisse/2026/article/les-usa-detourne...
The US is not a reliable weapon supplier anymore. Contracts don't mean anything anymore.
China doesn’t seem to be squeezed when they seem to have a deal with Iran to buy in yuan.
If your currency is falling against foreign currencies but prices are also dropping domestically, you get deflation. This was happening in China a couple of years ago, and they were exporting this deflation to other countries.
https://open.substack.com/pub/endtropy/p/trumps-enormous-c-l...
As your own reply alludes, electrification was clearly strategic move to reduce their risk in a scenario such as where we find ourselves today.
However, there are things that you can do with petroleum you can never do with batteries e.g. lubricants, asphalt, plastics, cosmetics, jet fuel, etc.