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It's more of a step by step thing. There is so much debt denominated in USD in countries across the world taken from governments and private companies. I case USD has massive gains compared to other fiat currencies, the business face sort of a death spiral
More debt and interest is needed to pay
Less profits or even losses for the companies
Less funds for R&D, re-investing and lot less investments and new ventures in general
The economy suffers. Growth rates go down. More unemployment or at least less free cash flow for expensive items/luxuries
Less profits or even losses for the companies
Eventual bankruptcies
Less profits or even losses for the companies
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.
.
.
.
IMO the USD will have to have some massive gains for this type of scenario to become real and actual wreck the world economy. A smaller versions of this scenario can happen in countries that get their currency massively devalues. But crashing world economy will mean USD will have to have massive gains compared to every other currency. Maybe right after WWII this was possible. But currently there are economies outside of USA that are strong enough to prevent such a massive spike.
The theory is mostly used to justify the inflationary BS to justify printing more money. It's not an impossible scenario. But it's mostly just Keynesian fear mongering. I don't see USD being strong enough to crash the world economy in any recent time.
The strong US Dollar means that all the US-denominated debt that the world has accumulated is more expensive to pay back. For instance, if I borrowed 10 Steem from you and the price of Steem went up to $2, it would be much harder to pay back. Those who earn in currencies other than dollars (or countries that print currencies other than the dollar) have to work harder to fulfill their obligations.
Keep in mind that the world is consistently moving away from the dollar standard. They don't want to hold dollars anymore because the US has weaponized the SWIFT system so much. All the BRICS countries are moving away from using dollars. Even the UK created its own settlement system to get around SWIFT, and they're one of the US's closest allies.
debt is denominated in dollars so it makes it harder for Non-US actors to pay off their debts, making it more difficult for emerging nations to grow
strong dollar siphons away investment from non-US countries because it usually means there is a high interest rate differential in favor of the USD (this is the monetary "cleanest shirt in the dirty laundry argument")
it hurts firms that export from the US (though US as a net importer so not too big a deal, I agree, but politicians may boohoo the strong dollar because it hurts key manufacturing interests in swing states)
Last I saw, S&P500 earnings were about 45% foreign, so a strong dollar not so good for those earnings on a relative basis.
Lastly, maybe you think dollar hegemony is bad? Because a strong dollar will only bolster that.
A strong dollar is not bad, much less for the United States. This is due to the policies carried out by Trump, it is no accident that the numbers are there, the reduction of taxes, the incentive for production, the increase in employment, greater economic growth, is a positive cycle not vicious.
If a country adopts positions that distort the economy, of course, a strong dollar will be bad.
For the most part, most financial transactions are dominated in US dollars, from trading oil contracts to issuing corporate debt, to countries issuing dollar denominated debt. So for example with Oil, foreign buyers have to pay more when the dollar strengthens thus leading to less demand.
Well, I am not bashing on the USD as after all, I do live in America and while we have a TON of issues it's still a great nation that I believe in. This being said, let's look at the other side of the coin.
First, with a strong USD we will see less tourism in the USD as it will be more expensive for people from other nations to come to visit. This will lead to a lack of cultural enrichment that happens when we have an open society of free-flowing ideas.
Next, we can say that with a higher USD, Exports from the US will cost more for other nations. This will stifle USD innovations but may boost innovations overseas. This also then makes USD companies that operate overseas also scale back as they will be making less, being based in the USD.
New markets that are based on the USD will have a hard time gaining traction as they will have to pay more to get started, so it could stifle new markets from starting.
Lastly, a strong Dollar inspired people to buy more things on credit, this then makes a BIG bubble that when it pops, drops the floor out on all those who used that credit causing a larger financial crash.
I see this is not just an issue with a Strong USD, but with any monetary system. It's like investing and putting all your investments in one company, sure its easy to manage.. but if that one thing goes down you are screwed. Best to have a wide and varied portfolio of assets, USD, BTC, ETH, PHP.
There are 3 main reasons exported goods are badly affected, global commodities become more expensive and emerging economies find it even harder to compete. I have upvoted for you mate
A strong dollar in the long run just continues to support the printing of unbacked currency. In theory, this is more debt than can ever be repaid which will only make things worst for the competitivenessnof other countries to trade with each other given that most foreign trade is in dollars.
If strong USD , it help The backward country, willing to close the gap between the big powers, willing to agree with the world = its own country, that strong USD will cause the world economy to grow.
But now the strong USD, it only own , it hits other country to wealth itself, the world economy is naturally destroyed by it.
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It's more of a step by step thing. There is so much debt denominated in USD in countries across the world taken from governments and private companies. I case USD has massive gains compared to other fiat currencies, the business face sort of a death spiral
.
.
.
.
.
IMO the USD will have to have some massive gains for this type of scenario to become real and actual wreck the world economy. A smaller versions of this scenario can happen in countries that get their currency massively devalues. But crashing world economy will mean USD will have to have massive gains compared to every other currency. Maybe right after WWII this was possible. But currently there are economies outside of USA that are strong enough to prevent such a massive spike.
The theory is mostly used to justify the inflationary BS to justify printing more money. It's not an impossible scenario. But it's mostly just Keynesian fear mongering. I don't see USD being strong enough to crash the world economy in any recent time.
The strong US Dollar means that all the US-denominated debt that the world has accumulated is more expensive to pay back. For instance, if I borrowed 10 Steem from you and the price of Steem went up to $2, it would be much harder to pay back. Those who earn in currencies other than dollars (or countries that print currencies other than the dollar) have to work harder to fulfill their obligations.
Sure, but at the same time since the US is a net importer this is great for all countries exporting to the us.
Are we saying foreign debt has a higher impact than imports?
Keep in mind that the world is consistently moving away from the dollar standard. They don't want to hold dollars anymore because the US has weaponized the SWIFT system so much. All the BRICS countries are moving away from using dollars. Even the UK created its own settlement system to get around SWIFT, and they're one of the US's closest allies.
The Strong Dollar Bad Argument is related to
That's all I got. Interesting thought experiment.
Ur again looking at this from a us perspective. All i get is the dollar and commodities argument.
Naw man, not looking from just US perspective. Look at #1 and #2.
A strong dollar is not bad, much less for the United States. This is due to the policies carried out by Trump, it is no accident that the numbers are there, the reduction of taxes, the incentive for production, the increase in employment, greater economic growth, is a positive cycle not vicious.
If a country adopts positions that distort the economy, of course, a strong dollar will be bad.
For the most part, most financial transactions are dominated in US dollars, from trading oil contracts to issuing corporate debt, to countries issuing dollar denominated debt. So for example with Oil, foreign buyers have to pay more when the dollar strengthens thus leading to less demand.
Well, I am not bashing on the USD as after all, I do live in America and while we have a TON of issues it's still a great nation that I believe in. This being said, let's look at the other side of the coin.
First, with a strong USD we will see less tourism in the USD as it will be more expensive for people from other nations to come to visit. This will lead to a lack of cultural enrichment that happens when we have an open society of free-flowing ideas.
Next, we can say that with a higher USD, Exports from the US will cost more for other nations. This will stifle USD innovations but may boost innovations overseas. This also then makes USD companies that operate overseas also scale back as they will be making less, being based in the USD.
New markets that are based on the USD will have a hard time gaining traction as they will have to pay more to get started, so it could stifle new markets from starting.
Lastly, a strong Dollar inspired people to buy more things on credit, this then makes a BIG bubble that when it pops, drops the floor out on all those who used that credit causing a larger financial crash.
I see this is not just an issue with a Strong USD, but with any monetary system. It's like investing and putting all your investments in one company, sure its easy to manage.. but if that one thing goes down you are screwed. Best to have a wide and varied portfolio of assets, USD, BTC, ETH, PHP.
Well, them are my thoughts. I hope it helps!
All of this makes sense to me. But it seems all good for the world and bad for us.
So ur not explaining how the strong dollar crushes the world economy
There are 3 main reasons exported goods are badly affected, global commodities become more expensive and emerging economies find it even harder to compete. I have upvoted for you mate
Posted using Partiko Android
A strong dollar in the long run just continues to support the printing of unbacked currency. In theory, this is more debt than can ever be repaid which will only make things worst for the competitivenessnof other countries to trade with each other given that most foreign trade is in dollars.
Posted using Partiko iOS
But how does this negatively affect foreign countries?
Everyone exports to the us, so stronger $ just increases us demand which is great for the world
If strong USD , it help The backward country, willing to close the gap between the big powers, willing to agree with the world = its own country, that strong USD will cause the world economy to grow.
But now the strong USD, it only own , it hits other country to wealth itself, the world economy is naturally destroyed by it.