Meta Econ Takeover Day 16 \ stacker news ~meta

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2907 sats \ 21 comments \ @Undisciplined 2 Nov 2023 meta

In @elvismercury's recent book club post he raised a great question, but I think it was after most people had already come through.

"While discussion of the petrodollar system often centers on the ways the US unfairly benefits, Lyn talks about some undesirable effects owning the reserve currency has had. In particular, she describes harsh consequences for its manufacturing capacity and infrastructure.

Aside from manufacturing, what other insidious domestic effects can you think of? What have been the social consequences of the petrodollar system?"

Let me know what your thoughts are. I'll post mine in a bit, but you can see my quick answer in the original post.

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519 sats \ 8 replies \ @siggy47 2 Nov 2023

I posted a specific example on the book club link, but generally speaking, it has turned the U.S. into a nation of consumers, with imports exceeding exports, and forcing the economy to be disproportionately weighted towards services.

542 sats \ 1 reply \ @SimpleStacker 2 Nov 2023

Orientation of the economy towards services also makes economic value creation harder to measure.

Example: Make the tax code complicated and all of a sudden you have higher demand for accountants and a larger accounting industry. This growth in accounting is measured as economic output. But the value of this is really just mitigation to previous value destruction, rather than the creation of new value.

It's hard to know how much of the growth in service industries is true value creation versus rent-seeking.

381 sats \ 0 replies \ @siggy47 2 Nov 2023

Very true. Legal services for compliance? Make work to wade through bureaucratic red tape.

218 sats \ 5 replies \ @Undisciplined OP 2 Nov 2023

So that's a separate way that fiat is privileging those with high time preference

425 sats \ 4 replies \ @siggy47 2 Nov 2023

Rewarding consumers and borrowers, while punishing savers, though I'm not sure if it applies specifically to the petrodollar or more generally to the fiat system.

218 sats \ 3 replies \ @Undisciplined OP 2 Nov 2023

In this case, I think the reserve currency designation is key. Other countries cannot easily export their inflation.

179 sats \ 2 replies \ @siggy47 2 Nov 2023

Definitely true. I kind of see that as a benefit of reserve currency, not an "undesirable effect".

218 sats \ 1 reply \ @Undisciplined OP 2 Nov 2023

I'm taking your original point as pointing to a distortion in the economy, which is undesirable if we separate it from the benefit of being able to buy real stuff with fake money.

528 sats \ 0 replies \ @siggy47 2 Nov 2023

Certainly. My point is that we can't lose sight of the fact that the U.S. consumer benefits from the "inordinate privilege" too. The U.S. has experienced inflation, and it's gotten worse recently, but inflation has been worse for every other fiat currency in the world, because we can export a chunk of our inflation. The whole world helps pay for U.S. QE. That's why it kills me when Yellen brags that inflation is worse everywhere else than in the U.S. No shit! The U.S. weaponized the dollar.

218 sats \ 3 replies \ @Undisciplined OP 2 Nov 2023

For many years, I lived in an oil state. One of the main features of oil states is government that is totally unaccountable. Since the people aren't taxed very heavily, they don't really pay attention to what the government does.

Holding the reserve currency may have had a similar effect on American politics. A lot of government expenditures are funded via inflation, rather than taxation. That means there's less popular resistance to waste, fraud, and abuse than there otherwise would be.

179 sats \ 1 reply \ @elvismercury 3 Nov 2023

It's like the "resource curse" except in this case the resource is what you get to do because the reserve currency is yours.

152 sats \ 0 replies \ @Undisciplined OP 3 Nov 2023

Exactly

179 sats \ 0 replies \ @siggy47 2 Nov 2023

Definitely

182 sats \ 1 reply \ @quark 3 Nov 2023

It is as if the US was forced to borrow and live on credit. Also, since countries need to maintain US dollar reserves, the US should have more responsibility for maintaining inflation under control because it affects all countries, not just them. Social consequences may be that many countries start hating the US because their economy is affected by whatever the US is doing and how they need to maintain the power with the military. So I have a question, is the military dominance needed in order to maintain the reserve currency? I think so.

0 sats \ 0 replies \ @Undisciplined OP 3 Nov 2023

is the military dominance needed in order to maintain the reserve currency?

I think so, too.

Good point about the foreign resentment. My understanding is that before the petrodollar Americans were pretty well liked internationally. Now, we're advised not to tell anyone we're American while travelling.

179 sats \ 5 replies \ @elvismercury 2 Nov 2023

This is sort of cheating, but I think the secondary effects are part of it: the loss of manufacturing + the effects the loss of manufacturing has had on people. Specifically, it seems like a certain kind of person used to be able to have a solid middle class living, and participate in civic affairs, and now that person can only have a lower class living, and face the subtle social pressure from that.

I'm not totally comfortable with this -- it makes it seem like some people are incapable of doing other stuff. If you were in tech for the last thirty years, maybe fourty years, the world was your oyster. It's been hard to hire good people in those industries since forever, and even average people had a lot of leverage. So one might ask: why would someone not get one of those jobs, vs working some shit job that pays only 25% as much? A host of factors. But the whole failure of the 'retraining' movement attests to the real frictions there.

So to me, that's a giant effect Not just the economics of it, but the psychology and sociology of a bunch of people feeling like they've lost their self-respect, while certain other people lord it over them. The contempt for the working class is real. The effects of the contempt are probably in the populist uprisings we've been seeing. How that all plays out, ultimately, is tbd.

152 sats \ 4 replies \ @Undisciplined OP 2 Nov 2023

That feels like a continuation of the selection pressure that civilization has been exerting on us since the beginning, but in this instance it's coming from the reserve currency.

179 sats \ 3 replies \ @elvismercury 3 Nov 2023

I think that's a fair way of putting it.

If you're not some kind of ideologue who denies science and data, you must admit that some people are smarter than others and capable of more abstract thought than others. It's not a nice thing to say, but it seems to be true. If civilization continues in the way that it's been going, requiring increasing levels of intelligence to do the jobs that the market wants done, what happens?

It's a real thing to think about, even if it's not really a thing you can talk about without getting canceled. The angle that a fiat reserve currency is accelerating this trend is a very interesting monkey wrench on top of everything.

152 sats \ 2 replies \ @Undisciplined OP 3 Nov 2023

It's not just about smarter. This modern environment is so novel that a whole host of traits that were highly adaptive 10,000 years ago are now maladaptive.

179 sats \ 1 reply \ @elvismercury 3 Nov 2023

True. Being an aggressive and violent asshole was probably socially adaptive for a long time, when there were plenty of outsiders to whom your urges could be directed. The Iliad is a nice account of some of that.

Now all they have is cryptotwitter.

152 sats \ 0 replies \ @Undisciplined OP 3 Nov 2023

At the very least, it was beneficial to have a larger share of those people around.