A dollar crash is virtually inevitable, Asia expert Stephen Roach warns

[JustAnotherPerson]

again, youre confusing it now. i mentioned the net domestic credit and government debt as it relates to the economy and the value of the dollar. i already posted the LCU of the US from world bank which is around $22 trillion and $22 as national debt which comes to about 209%

The debt you just posted at 257% in equivalency of total debt of china would be 317% of GDP. this is an excerpt from south china morning news.
https://www.scmp.com/economy/china-...ina-debt-how-big-it-who-owns-it-and-what-next
View attachment 643965

My mistake had been not checking china current nominal gdp so thats why my percentage was off

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Its say it right there, 245% is nor financial household, government and corporate wich is in line with the FED data, 317% is with financials liabilities.
The total not financial debt of the US is 257% and the total financial debt is 77 Trillion like 350% of GDP

 

[tower9]

Yeah. The debt issue is not unique to the US; the Eurozone, China, and Japan all have their own debt problems, just different sectors in the economy. There's no solid replacement at the moment.

But I hold a contrary opinion. A declining usage of the USD will actually be good for the US domestic economy in the long term as it will finally fix their chronic current account deficit and ameliorate their inequality issue. That is why in the Plaza Accord the US wanted the USD to depreciate against the Japanese Yen and the German Mark, the USD is just too strong and it's hurting their competitiveness.

Maybe a declining usage of the USD also entails that the US will lose her geopolitical leverage through USD sanctions, but I think that is of no loss for ordinary Americans.

A hypothetical crash is probably just a 10% or 20% devaluation of the USD against major currencies, aligning the dollar more towards what its economic fundamentals would indicate. It's not becoming like Zimbabwean dollar lol.

https://carnegieendowment.org/chinafinancialmarkets/78496

America does not do fiscal responsibility, losing reserve status would be a disaster.

 

[Mista]

America does not do fiscal responsibility, losing reserve status would be a disaster.

The Eurozone (except Germany), China, and Japan does not practice fiscal prudence as well. Perhaps less so for the central government in China, but the local government? Households leveraging into the property market? Almost all major economies are having debt problems, only in different sectors of the economy.

https://www.bilibili.com/video/BV1mt411H7xC

Other countries are also having their own version of QE as well despite their currency not being the reserve currency of the world. Japan and the Europe has been implementing negative interest rates. What disaster exactly would happen if the US loses its reserve status?

 

[Mk-313]

Not anytime soon but may be faster than most of us can believe, especially if in PISA test, the US continues to rank at 35th and China continues to rank 1st, if annual number of WIPO patents filling gap between China and the US continues to expand, if International Math Olympiad US team continue to be basically an ethnic Chinese team, if US science and technology, especially AI arena, continue to be dominated by ethnic Chinese.

The world in 21th century (and I believe in 22 and 23 centuries too) will be rather dominated by knowledge, not natural resource and therefore, China has a very clear advantage over the US.

nope, ur claim is as equivalent to saying that what matters is how many chicks hatch but what matters is how many do those chicks ends up being alive

these maths test PISA are irrelevant what matters at the end is who is winning the most Nobel prizes, publishing the most research, spending most on new innovation who’s university are most in top 10 because that attracts the brightest students.

US is not an ethnic dominated country it is not a “white country” it’s the land of immigrants here Chinese, Asians, white, Latino all contribute and all have their

America does not do fiscal responsibility, losing reserve status would be a disaster.

Next time when u make a claim, lay evidence or a supporting fact that reinforces your force. Otherwise it’s just non-sense

Yeah. The debt issue is not unique to the US; the Eurozone, China, and Japan all have their own debt problems, just different sectors in the economy. There's no solid replacement at the moment.

But I hold a contrary opinion. A declining usage of the USD will actually be good for the US domestic economy in the long term as it will finally fix their chronic current account deficit and ameliorate their inequality issue. That is why in the Plaza Accord the US wanted the USD to depreciate against the Japanese Yen and the German Mark, the USD is just too strong and it's hurting their competitiveness.

Maybe a declining usage of the USD also entails that the US will lose her geopolitical leverage through USD sanctions, but I think that is of no loss for ordinary Americans.

A hypothetical crash is probably just a 10% or 20% devaluation of the USD against major currencies, aligning the dollar more towards what its economic fundamentals would indicate. It's not becoming like Zimbabwean dollar lol.

https://carnegieendowment.org/chinafinancialmarkets/78496

I don’t concur. Usage has very little effect on the valuation of currency and can easily be manipulated. If usage is decreased and so is demand US can always contract the money supply and will reach equilibrium. Similarly if US wants to decrease the value of the dollar they don’t need less demand or less usage they can merely print more money to lower the value

-Plaza accords specific purpose was to contain japans expanding economy and it was a targeted strike.
-Japan’s major exports were to us
-Japan had invested heavily in their infrastructure to get ready for higher exports
-US devalued the dollar and immediately the gdp/ the factories the infrastructure all laid to waste

 

[Mista]

Usage has very little effect on the valuation of currency

It's one major factor why investors see the US as a safe haven, which lead to capital account surplus and a current account deficit for the US. The other major factor would be the US's deep capital markets.

Similarly if US wants to decrease the value of the dollar they don’t need less demand or less usage they can merely print more money to lower the value

Demand, supply, theoretically, yes. But that's naked currency manipulation which would hurt its reputation in the financial world and an endless cycle of counter currency devaluation by trading partners. Not to mention that the Fed is nominally independent from the executive power in the US.

And how much do you have to 'print' to fix the chronic current account deficit against Japan and Germany, some of America's largest trading partners at that time?

The Plaza Accord Explained
The Plaza Accord led to the yen and Deutsche dramatically increasing in value relative to the dollar. The dollar depreciated by as much as 50 percent relative to the yen and Deutsche mark. It was signed in New York City on Sept. 22, 1985, and named after the hotel where it was signed—the Plaza Hotel.

The Plaza Accord was meant to push down the U.S. dollar, with the U.S., Japan, and Germany agreeing to implement certain measures to do so. For the U.S., it planned to reduce its federal deficit, Japan was to loosen monetary policy and Germany was to implement tax cuts.

Leading up to the Plaza Accord—from 1980 to 1985—the U.S. dollar appreciated by over 50% against the yen, Deutsche Mark, French Franc and British pound. The strong dollar put pressure on the U.S. manufacturing industry, causing many major companies like Caterpillar and IBM to lobby Congress to step in—hence, the Plaza Accord.

Following the Plaza Accord, the U.S., Japan, and Germany all agreed to intervene whenever necessary to help push down the dollar. Many of the countries didn’t meet their goals, but the overall goal of reducing the dollar worked. The dollar declined by over 50 percent relative to the yen and Deutsche mark before the end of 1987.

https://www.investopedia.com/terms/p/plaza-accord.asp

 

[Mk-313]

It's one major factor why investors see the US as a safe haven, which lead to capital account surplus and a current account deficit for the US. The other major factor would be the US's deep capital markets.

Nope, investor sees US as a safe haven because of the strength of its economy and the increasing tax collection of the US government. the strength and health of US economy provides confidence that theyre debts are always paid for. the increasing tax collection provides further confidence that US has enough cushion to pay the interest should it need to borrow more.

the primary notion of any investor investing in any govt backed bond/security is yield and risk. at that ratio US provides the least risk with its economy and having more tax dollars means they can afford more interest to pay which is when US issues new treasuries everyone jumps on it

Demand, supply, theoretically, yes. But that's naked currency manipulation which would hurt its reputation in the financial world and an endless cycle of counter currency devaluation by trading partners. Not to mention that the Fed is nominally independent from the executive power in the US.

No its not manipulation. currency printing is determined by the supply and demand as well as the value the economy created every year. for example if everything in the US amounted to $100 and US has $100 in currency notes the ratio is 1:1. if next year economy grows and now everything int he US amounted to $200. the fed will have to print another $100 of currency otherwise ratio would be 2:1 and deflation would occur

And how much do you have to 'print' to fix the chronic current account deficit against Japan and Germany, some of America's largest trading partners at that time?

in my opinion US doesnt need to "fix" its deficit. because its currency is not pegged to anything else and its floating . depreciation would automatically occur. the current value of the dollar index is the value due to the deficit it currently has . if tomorrow the deficit increases the valuation would further go down

 

[JustAnotherPerson]

Nope, investor sees US as a safe haven because of the strength of its economy and the increasing tax collection of the US government. the strength and health of US economy provides confidence that theyre debts are always paid for. the increasing tax collection provides further confidence that US has enough cushion to pay the interest on the debt it borrows.

I really hope that you say that as general statement and not an as specific time situation. Because has become more about faith rather than real value.

 

[Mk-313]

View attachment 644056\
Its say it right there, 245% is nor financial household, government and corporate wich is in line with the FED data, 317% is with financials liabilities.
The total not financial debt of the US is 257% and the total financial debt is 77 Trillion like 350% of GDP

oh my god dude.... all it saying it

IIF says the debt is 317%.a think-tank in china says its 245% as in theyre conflicting with each other. but Institute of international finance is much more credible vs a think tank


if yorue so hell bent on making chinas percentage at 247% , it gives u peace of mind and relief then think that for uw own belief. just dont mess up with the economists. economics isnt country specific its just a discipline. i've been over with it with u alot

 

[JustAnotherPerson]

oh my god dude.... all it saying it

IIF says the debt is 317%.a think-tank in china says its 245% as in theyre conflicting with each other. but Institute of international finance is much more credible vs a think tank

I just pointed to you the that data is very similar that data in the FED website and BIS website
https://stats.bis.org/statx/srs/table/f1.1 245 is non financial total debt.
Some economists for whatever reason like confuse people saying that the total debt of China including financial as percentage of nominal GDP is like the government debt.
like for China is 315% and the US is just 106% and that is wrong.
That is were you are confuse.

 

[Mk-313]

I really hope that you say that as general statement and not an as specific time situation. Because has become more about faith rather than real value.

everything that is a legal tender is faith based. i am gona teach u this as a 5th grade economics teahcer

Imagine u have the biggest house in ur community and everyone knows you, you have the highest salary and every year yoru salary increases. one day you were at the shop you forgot your wallet so you write it on a piece of paper that i will pay you $100 and sign ur name on the bottom. because the shop owner knows u int he community, knows u have the biggest house and youre so "Stable" and $100 is nothing for you hes gona take it and give u the stuff you want. now think why he took that worthless piece of paper

- you had the biggest house
- you have the highest salary
- your salary is always growing
- you have strong reputation in your community

Now that shop owner goes to another store to buy something and instead of payign he says "Justanotherperson" owes me $100. you know how rich he is $100 is nothing and hes always paid his debt before heres his sign too. instead of $100 he gave your chit to the other shopowner and got his stuff and suddenly that worthless piece of paper is now circulating in your community becasue it was backed by your big house "status of US" your salary (economy), increasing salary (increasing economy)

The value here was your word which was backed by your assets, economy etc. thats how it goes.

 

[JustAnotherPerson]

everything that is a legal tender is faith based. i am gona teach u this as a 5th grade economics teahcer

Imagine u have the biggest house in ur community and everyone knows you, you have the highest salary and every year yoru salary increases. one day you were at the shop you forgot your wallet so you write it on a piece of paper that i will pay you $100 and sign ur name on the bottom. because the shop owner knows u int he community, knows u have the biggest house and youre so "Stable" and $100 is nothing for you hes gona take it and give u the stuff you want. now think why he took that worthless piece of paper

- you had the biggest house
- you have the highest salary
- your salary is always growing
- you have strong reputation in your community

Now that shop owner goes to another store to buy something and instead of payign he says "Justanotherperson" owes me $100. you know how rich he is $100 is nothing and hes always paid his debt before heres his sign too. instead of $100 he gave your chit to the other shopowner and got his stuff and suddenly that worthless piece of paper is now circulating in your community becasue it was backed by your big house "status of US" your salary (economy), increasing salary (increasing economy)

The value here was your word which was backed by your assets, economy etc. thats how it goes.

Of course, you just repeated what you say before but with pawnshop example. i just want to make sure if what you saying more about a general or a specific timeline situation.
-You are saying some country X has an historical reputation therefore maintain some money supremacy.
-Or your are saying that even with the current situation Country X is immune because its past reputation.

 

[Mk-313]

Of course, you just repeated what you say before but with pawnshop example. i just want to make sure if what you saying more about a general or a specific timeline situation.
-You are saying some country X has an historical reputation therefore maintain some money supremacy.
-Or your are saying that even with the current situation Country X is immune because its past reputation.

Yes i mean in general, not time specific situations

i am saying even right now, of all the countries there exist US is still the safest investment there is relatively. but i am not saying that it is as safe as it was pre-corona. it is not as safe as pre-corona

but if US was the only country to be hit with corona and not the entire world. then treasuries would fall significantly and people would rush to buy next best thing which i assumed would be the euro

 

[JustAnotherPerson]

Yes i mean in general, not time specific situations

i am saying even right now, of all the countries there exist US is still the safest investment there is relatively. but i am not saying that it is as safe as it was pre-corona. it is not as safe as pre-corona

but if US was the only country to be hit with corona and not the entire world. then treasuries would fall significantly and people would rush to buy next best thing which i assumed would be the euro

Ok, that is fair and your are somehow right.
But i think in this current situation that we have today there are a lot of unknowns variables everywhere.

 

[AViet]

nope, ur claim is as equivalent to saying that what matters is how many chicks hatch but what matters is how many do those chicks ends up being alive

these maths test PISA are irrelevant what matters at the end is who is winning the most Nobel prizes, publishing the most research, spending most on new innovation who’s university are most in top 10 because that attracts the brightest students.

US is not an ethnic dominated country it is not a “white country” it’s the land of immigrants here Chinese, Asians, white, Latino all contribute and all have their

Agreed on the bold parts. Both China and the US are competing, but I can foresee that China is going to win in long term.

Nobel prizes has lost its importance as it had 40 years ago, because now it is political bias. In addition, what the difference between discovering a new star (which can receive a Nobel for Physics) against the invention of new equipment, for example, to build high-speed railways (which cannot). China is focusing on the latter and has just started on theoretical physics, which requires a lot of investment. But when necessary facilities for theoretical physics research are in place, I believe the Chinese will make the achievements which surprise the world. Probably they will not receive any Nobel prize because they are Chinese, but achievement is still achievement. It is just like Nobel committee gave the medical prize to Tu Youyou, while it should be given to Vietnamese Dr. Dang Van Ngu.

The Soviet Union received a lot of Nobel for physics, while South Korea has not got a single one. Vietnam received one Field prize for math, and again, South Korea has not received a single one. I think you understand what I mean.

And with its ranking No.1 in PISA for such a long time, most of world's brightest students would be Chinese. so we can guess who will win to attract them.

 

[Mk-313]

Agreed on the bold parts. Both China and the US are competing, but I can foresee that China is going to win in long term.

Nobel prizes has lost its importance as it has 40 years ago, because now it is political bias. In addition, what the difference between discovering a new star (which can receive a Nobel for Physics) against the invention of new equipment, for example, to build high-speed railways (which cannot). China is focusing on the latter and has just started on theoretical physics, which requires a lot of investment. But when necessary facilities for theoretical physics research are in place, I believe Chinese will bring fruits which willl surprise the world.

The Soviet Union received a lot of Nobel for physics, while South Korea has not got a single one. Vietnam received one Field prize for math, and again, South Korea has not received a single one. I think you understand what I mean.

See this is where u need the country specific information to make sense out of it all. And no Nobel prize has not lost its value and u research must be meaningful specially for STEMs

For example high-speed railways doesn’t make sense in US because one air-fare is so cheap here that it’s pointless to have railways . The other thing is that oil/car lobby is so strong here that they’ve delved into Americans mind to prefer having cars and depend on that sort of

As for theoretical physics. You do know theoretical physics delve with the stars, strong theory etc etc. it’s experimental physics that counts. Where China is just starting US has been an established leaders.

example 20 years ago every car manufacturer thought electric cars are impossible. US completed that milestone. Every scientist thought that once u send a rocket to space it is useless and hence space colonization would not be achieved spacex and blue origin achieved that or examples like hyper loop

China just launched its last satellite for its yesterday for its own GPS. US achieved that 40 years ago. China is agrarian growing fast but still agrarian

Agreed on the bold parts. Both China and the US are competing, but I can foresee that China is going to win in long term.

Nobel prizes has lost its importance as it has 40 years ago, because now it is political bias. In addition, what the difference between discovering a new star (which can receive a Nobel for Physics) against the invention of new equipment, for example, to build high-speed railways (which cannot). China is focusing on the latter and has just started on theoretical physics, which requires a lot of investment. But when necessary facilities for theoretical physics research are in place, I believe the Chinese will make the achievements which surprise the world. Probably they will not receive any Nobel prize because they are Chinese, but achievement is still achievement. It is just like Nobel committee gave the medical prize to Tu Youyou, while it should be given to Vietnamese Dr. Dang Van Ngu.

The Soviet Union received a lot of Nobel for physics, while South Korea has not got a single one. Vietnam received one Field prize for math, and again, South Korea has not received a single one. I think you understand what I mean.

And with its ranking No.1 in PISA for such a long time, most of world's brightest students would be Chinese. so we can guess who will win to attract them.

Also, in 2018 there were only 70k Asian graduates of STEM majors that includes entire ASia not just China. And 330k white graduates alone in STEM majors in US . So yeah Chinese are not dominating

I also remember when it became a bigger deal in US. When China created the fastest super computer ever. At first we didn’t care but when it became a bigger deal . US literally created 2 even faster super computers for no reason just to stick a nose to the

Microsoft going for augmented reality
Boston dynamics going to AI, robotics