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taxiya

Brigadier
Registered Member
MortyandRick said:
But they are the reserve currency. Does that debt really matter as much to them as other countries ?
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Yes it does matter to US as much as to others or even more, just in different manner.

The only way (many influencers try to make you think) that it matters less to US is to devaluate USD which will wash out the real value of the debt. Doing that will destroy USD as the reserve currency, together goes the power of US.

For others it is the lose of their wealth, to US it is the loss of the empire. Even worse, with US losing credibility of debt payment, it can not borrow new debt as an ordinary country because nobody is going to lend money further. It will be a spiral to the bottom. For fear of that, US invaded Iraq because Sandam dared to call for Euro based oil trade, US bomb Yugoslavia driving Euro down at the time when Euro was eating up USD's share as reserve.
 
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BlackWindMnt

Captain
Registered Member
MortyandRick said:
But they are the reserve currency. Does that debt really matter as much to them as other countries ?
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I thought being reserve currency meant more that you had the lowest inflation impact when printing more. Given the US creates new dollar, banks then get those dollars and buy up stuff first. Hence the ability to export most of the inflation that can happen with excessive money printing.
 
T

taxiya

Brigadier
Registered Member
BlackWindMnt said:
I thought being reserve currency meant more that you had the lowest inflation impact when printing more. Given the US creates new dollar, banks then get those dollars and buy up stuff first. Hence the ability to export most of the inflation that can happen with excessive money printing.
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You are right about the "printing money to export inflation", but this practice is a double edged sword. By doing so, you are devaluating dollar, which in term will threaten future borrowing. To counter that, you are going to increase your interest rate which is what US is doing now. That will in turn increase your borrowing cost which will increase your debt. Increased debt means more interest payment. It is a death spiral that I talked about #49,728. In Chinese it is called "饮鸠止渴", drinking poison to quench thirst.

Other countries will suffer the lose of devaluated USD denoted debt, US will push its debt interest payment higher. Nobody is better than the other except countries who can replace USD's place with its own currencies backed by something solid products like commodities and industrial/agriculture products.

The bottom line is that currency and therefor wealth that it represents must be backed by physical means, otherwise it is just waste paper. No trick can save it and whoever printed it.
 
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