Hawk, I agree that if all trade stopped, the USA would be in the best position. My point was not so much that the effects would be felt in different ways so much as the exchange of value is equal in a voluntarily-traded relationship.
The fact that the USA imports products but the suppliers choose to hold the dollars rather than buy immediately means the USA gets to consume, but doesn't have to work until sometime in the future when the dollars are presented with expectation of goods and services being delivered.
My point about the debt was not the money owing by the USA, which as you say, is not a big deal though people used to worry about it a lot. My point was that a dollar is a piece of paper and it is a debt in that it is a promise to deliver some goods and services when presented.
So, when Toyota sells a bunch of cars in the USA and holds the dollars on deposit, the USA owes Toyota the value of those dollars in goods and services. That, to me, is a debt. And debts can be defaulted on. Or, in the case of fiat currency, diluted by currency printing.
I would not like to hold a fiat currency [even if it is such a good one as Uncle Green$pan's] on a long-term basis. Especially at a time when highly educated opinion is that the US$ is heading for a plummet. Of course, it's a market and there is opposing opinion, which until now has been the right opinion. I'm inclined to the view that the US$ intangible values are very robust and would not be surprised to see NO decline in value against other currencies.
BUT, all of the fiat currencies are endangered species. Cyberspace is going to come marauding through the lot of them. The fiat currencies have no foundations. They are predicated on captive national populations and legal restrictions surrounding the creation, protection and use of these fiat monies.
If, one day, the word goes out that the big US$ holdings are panicking and nobody wants to hold the US$, it can go pop faster than the dot.bomb and techwreck bubbles which had weak foundations.
When you say that there is $4 trillion in cash currently sitting in money markets looking for a home, that is a very big pile of promises. What if everyone suddenly decides those promises are like Bill Clinton's? What if somebody shouts "FIRE!! Right here in the crowded theatre!!!" And everyone wants to squeeze out the exit at once. Then there are those, like me, who have a little stack of US$ sitting in my draw, or those who have more in a bank account, or, like the Japanese, have mountains of them. Nobody wants their savings turned to confetti.
Being a civil engineer, [well, a bit like Osama, I got the degree then did something else], I like to see the foundations of stuff, soil strength, structural stability and potential risks. It's a dully pragmatic way of looking at the world, but it enabled the WTC to take two huge impacts and remain standing long enough for everyone below the flames to get out [if they had the sense to leave].
Perhaps engineers should run the money supply [and perhaps government too].
I doubt that the US$ will suddenly go poof. I think there will be a gradual erosion and one day it'll be one means of exchange, but not the dominant one. The Q cyber money, which will represent ownership in companies, will be the name of the game. Not the Euro, which is just another competitor with the US$. I expect the fiat currencies to end up looking like the Nikkei or gold graphs.
Mqurice
PS: <And even with credit cards, when you have $1 trillion in purchases made with them every year, you have to be careful about the stats. Many people are like my father, who purchases everything with his GM card, so he can receive that discount on his next vehicle. And then he pays off the balance every month. But his purchases still count as "debt" for that month, despite the fact that he has the money to pay cash.>
Hmm, me too. And I spend a LOT more than I used to, [on credit cards], so my share of the debt would be way up. I am certainly not talking about that sort of debt or even interest bearing debt when I discussed the risk of US debt. It was just the fact that a dollar is a promise. And promises are a confidence game and sometimes, people default, perhaps through no fault of their own.
$1 trillion is a lot of promises. |
