I agree, the US doesn't need oil to be priced in USD to print money. I never said that. What I was alluding to was because oil happens to be dominated in USD, the US (aka the Fed-a private entity) can print money that is never disseminated into the economy (i.e. lended to banks as you've said above). What this allows the US to do is simultaneously buy oil with money that is non-inflationary on the US economy, purchase a commodity and sell it back to its economy at deflationary prices for a profit. Essentially, on the books it looks like the US economy is booming with all the capital coming in (cheap gas prices mean more spending, traveling; generally linked to improved economic conditions), but in reality, the money never existed and is being injected into the economy from an outside way to mitigate economic inflation on the home front due to the printing of USD. The commodity oil is like fake money. It is a vehicle to control economic factors based upon what the commodity is denominated in primarily (currently USD). The US is the best house on a bad block right now.
Secondly, printing of money alone does not cause inflation (again I did not say this). When the real value of the economic output is mismatched with the amount of dollars circulating, this is how printing excess money (QE) becomes a problem. Without having the output to back up the QE, the US experiences inflation. If the US doesn't have the goods to support the high exchange value of the USD in the world economy, you get inflation. The only reason we have QE in the first place is because an economy that wants to grow fast and beyond its means (the US since forever) has to do it somehow
Step 1: you tell everyone your country has a ton of money by printing it
Step 2: Get them to buy your stuff/invest in you with 'real money'
Step 3: Economic boom town - profit
Step 4: Continue the process until every one is entirely dependent on your country for its economic value based on their currency that they won't let you fail
The US isn't ramping up manufacturing in response to some event. What I was talking about was bringing our manufacturing back to US soil and beginning to increase our world stake in the export market. Right now, all we export is dollars. You will see a return to American made products and a reinvestment in corporations housed in the the US. What this will do it allow us to export more products, decrease our reliance on QE and strengthen our hold on the world market. If we let go of being the reserve currency (we will eventually), we have to be a frontrunner in something otherwise the US stands to lose a hold on the world.
The debt in the US doesn't matter, it never has. In the 40s/early 50s, we actually volunteered as a country more or less to be the world reserve post WWII (see Bretton Woods Conference) since we had lots of economic resources and much power.
The volatility of Bitcoin right now is purely because of lack of no clear authoritative governance (as posters below say: a military). Eventually, if Bitcoin becomes a real thing, governments with lots of power and money and military will assume their slot in this, set up shop and push their economies in new ways using this technology.
The US cannot just spend those reserves on things like oil.. they literally sit on the bank's balance sheet as an accounting journal entry. They cannot use it to buy oil or anything else. You see, the dollars never make it to the economy UNLESS they are borrowed by people. The only way you can say QE is inflationary is if you think banks DID NOT HAVE ENOUGH RESERVES TO LEND BEFORE and this "new" QE money allows them to lend and that causes inflation. BUT, critically, the
banks NEVER had a problem with having reserves before! In fact, banks don't actually need reserves to lend - they lend FIRST then create the reserves as an offset on their books! This is so important. If you understand that you understand that
QE is just an asset for asset swap which nets to 0 - swap reserves for US Treasurys -
cash for cash - a checking account for a savings account!! So many people got this wrong since 2009, please understand how important it is.
I know they sit on a balance sheet! That's my point, they don't exist! This is how the US can mitigate inflation. They buy oil shares with money they doesn't exist! They when the oil shares are sold for profit, money comes into the US economy they never existed before. What this does is allows the US to increase its economic activity without having to print money for banks to lend to citizens (QE = this option equates to inflation).
That is the problem: Banks do not need reserves to lend! Debt is only an asset to the dispensers of that debt. Banks that originally started in the US never had their own money, they were public businesses that lent money loaned to them from the Fed to the citizens of the US.
I understand how important this. It's one of the single largest reasons that US capitalism is killing itself. When citizens/businesses/institutions fail to pay back their debts to banks, few if any banks truly go under. What happens is they bundle all that debt, refinance the it, sell it parted out to other banks and lenders, and file some nice documents to get the Fed to stimulate the economy again with newly printed dollars they can lend.
All money in the US economy since its 'humble' beginnings in 1776 are debt. Money cannot be created out of nothing.
Man oh man. You need to get your arguments squared away and correct guy.
1. China's economy is not fabricated. It is quite the opposite; it is predicted to become the largest economy in the world in the coming years. This is mirrored by India's sentiment on China's Silk Road Initiatives of 2014. India is worried because China has an increasingly large slice of the Indo-Pacific corridor. Couple this with DPRK ties, the Russian-China oil pipeline proposals and major infrastructure ties with large African nation governments and you will quickly see China is not some joke.
2. Europe isn't teetering on collapse. The European Union Commissions latest report out in autumn of last year indicated all EU countries were set for growth through fiscal years 2015-16. Historic government deficients are being refinanced and paid due to strengthened economic activity.
3. Great Britain was NOT fine after losing reserve status with the Sterling. Since the early 1900s, the Pound has been decreasing. Since the 1950s after the end of WWII, the pound has been devalued by HALF in comparison to the USD.
4. China will happily take BTC or a regulated, world approved digital currency for their goods and services. What they want to make sure of is that Chinese money is primarily spent in the Chinese economy and that when it comes to foreign affairs, they get their fair shake with the debt they are holding on behalf of others.
5. The US won't be able to tax its citizens the amount necessary to make the debt interest payments one day in the future. We can only tax so many unborn future citizens (this is a disgusting concept that is mostly true). The government cannot infinitely raise tax burdens on the public without them getting angry. See any history textbook for prime examples. It's a fine line to walk.
6. Having the best legal system has nothing to do with America being in the shitter. Having the best military has nothing to do with it either, but I'll let you rationally decide which one gets the money and which doesn't. Military spending/strength has always been an economic indicator.
7. Stop thinking so small and US-centric. Interest rates and currency strength are proxies for everything else.
For a guy that claims to be in the financial industry, reading your posts makes me think you're a teller who has sat in on a few loan officer meetings. I don't want to take away from this thread, I like your ideas and for facilitating a discussion, just don't parrot things. The world is much larger than the US and on the contrary, many countries are superior to the US in many ways.
1 - no professional investor or businessman trusts data that comes out of China. They make up numbers and hide problems. Of course they are a huge economy that will continue to grow, the issue is that people do not trust their government to put all their cash in CNY. Their legal system is nowhere near the USA, which is why China is nowhere near ready to be reserve status.
2 - Europe - lol - dude they've been saying that every year for the last half decade! Those are just projections! Greece is ready to leave and the structural problems that Europe has cannot be fixed without full fiscal and monetary integration of their banking system - something the Germans are wildly opposed to.
3 - Britain's currency being devalued is good for their economy.. they can sell more of their goods. It is only bad for people who want to take vacations, because they have to spend more. That is anything but a collapse.
4 - Dude, China was one of the first to ban BTC transactions..
5 - You are speculating, wildly. Interest expense is down as a % of total government outlays because rates have fallen. And again, the way our country works we can use the Treasury and primary dealers to buy US debt - we don't need outside forces to do this. You are saying that people will pay fewer taxes in the future - why? The US economy collapses? I think not. Because interest expense will be high? No - we can control this by issuing shorter debt maturities, and besides rates have been PLUNGING for the last 30 years, so that part of your argument is also false.
6 - Dude having best legal system is what makes people want to do business with us and supports reserve currency status, which you seem to think is so important. That is why I mentioned it.
7 - I'm not sure what this is referencing.
And BAS please understand that when I read your comments it is very clear you do not know what you are talking about so don't tell me I am a bank teller. If you are delusional enough to not see that what I am saying is based on FACTS and what you are saying is based on speculation, things you read online and general surfacy BS then please, move on. Quoting things like European estimates is just obviously clear that you are naive about many topics. Every economist every Wall Street analyst 99% of the time predicts things to get better and follow a trend. If you look at what actually happens and how often they are right, you will see that stuff like that is not worth a lick. We all know the world is more global than the US, I'm trying to address everything that I can and I am not implying that the world is not connected globally.
1- Don't hand wave by saying "no professional investor." That's a cheesy line and dates your age at about 21. China doesn't want reserve status. Why would they? It would mean losing out on collection of all the debts they have from the US and other countries. If you put yourself in the shoes of Chinese economic power, think about it? The US is the example of what happens if you take on reserve status. Why the hell would they want to wreck their economy? What they would do is given a world currency, China would back it's use for foreign economic affairs provided when they exchange all their debts both held/personal would be given an exchange rate equal to the country the currency was held in.
2- Not to sound condescending, but Europe is a conglomerate of countries, not one economic house. You talk as if all Europe functions as one. Greece was bailed out not to long ago. The Germans (one of the economic powerhouse manufacturers of Europe) want Greece to remain out of austerity. The point of the Euro was to unit Europe after the war. There are too many competing currencies and countries in the area, so the idea was to unite making trade, travel and access to Europe easier for all Europeans. In a sense bolster the economy after being crushed from the war. Of course the Germans are pissed - do you realize what happen to them after the fall of the Berlin Wall? - Try supporting an entire new eastern half of your country that was decimated by the Russians with massive influx of poor eastern Germans.
3- The devaluing is not good. Everything in the world economy is tied to the reserve currency. When you are selling products from your country at a lower value, you may sell more, but you still make less on the economic scale. How do you think GB borrows their capital? and from who? Credit lines to GB come from the US (mostly). GB may have a booming economy from sale of its goods, but when it has to borrow 2:1 to finance the increased production of those goods, it's a net loss for GB.
4- China banned Bitcoins because it meant Chinese dollars were leaving the Chinese economy. China has a heavy tradition of gambling and superstition. For instance, similar to the US, Chinese elevators don't contain the number of certain floors. Certain numbers in Chinese signify death or life and people live by it. It's may sound like a farce, but it is heavily steeped into Chinese culture and business practice. Much of Chinese is rural and poor. Bitcoin was seen as a chance to make a lot of money quickly. The government locked it down because of that.
5- I never said any of this. What I said was that every year there are taxes taken from the citizens of the US. As the debt level rises, the Fed can either adjust the interest rates/the government can increase taxes or a combination of both. For the next decades to come, the US economy is shooting out of control. There are not enough US citizens to tax (at whatever future rate needed) to make the debt payments in the future. Tax rates are based on economic status which is ultimately determined by debt ratios.
6- I quote things because that is how I root my arguments. When you want to make a statement regarding something, one must references his facts. For instance:
"Every economist every Wall Street analyst 99% of the time predicts things to get better and follow a trend." - said by you
This has nothing to do with anything. 99% of all Wall Street analysts don't agree with 1% of Wall Street analysts. This is all that you are telling me. I don't want to harp on you, but in all your responses to me, you have not stated one clear fact at all nor backed up anything besides saying "I'm in finance." I don't care if you're in Sewage sales. Everyone is entitled to their opinion, but clowning around on an internet forum where many young up and comers stop to get a perspective on Bitcoin and finance get ruined by your unsubstantiated statements.