Petrodollar

[Buster Bluth]

As far as the economic issue goes, you seem to misunderstand the situation.

No, you are. You don't blow away your largest trading partner, even if you're becoming a consumption-based economy. It's that fucking simple.

 

[Guest]

No, you are. You don't blow away your largest trading partner, even if you're becoming a consumption-based economy. It's that fucking simple.

In your opinion. What facts and analysis do you have to support the opinion? Economic data? Public testimony? Analysis?

Dispute the posted sources I have provided with an intelligent, documented discourse, if you can.

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Edit: I will examine Buster's argument with some economic analysis.

Buster has a point to be made, that it would be detrimental to have a world war economically where one nation would destroy or cripple a nation that is a trading partner. Fundamentally, I agree when things are going smoothly and that trading partner has an expected positive economic outcome, and hence the ability to keep purchasing your goods. However, the US economic outlook is anything but smooth.

I will show how the economic issues of the US predict that a new economic world power will emerge.

Point 1: Economic Growth
Recall the link I had earlier in the discussion from Rogoff and Reinhart. They pulled all known historical economic data for 800 years and databased it. Then they studied it and made some key findings. This is a huge treasure of information from which to analyze economic decision-making and the historical reprecussions of those decisions.

Once a country's public debt rises above 90% debt/gdp, growth is slowed down and average growth is critically affected.
The small data available for 120% debt/gdp shows more critical affects on growth.

In general, the authors note in a separate paper published at Yale that:

"Our main finding is that across both advanced countries and emerging markets, high debt/GDP levels (90 percent and above) are associated with notably lower growth outcomes. Much lower levels of external debt/GDP (60 percent) are associated with adverse outcomes."

and

"As Reinhart and Rogoff (2009b) emphasize and numerous models suggest, countries that choose to rely excessively on short term borrowing to fund growing debt levels are particularly vulnerable to crises in confidence that can provoke very sudden and “unexpected” financial crises."

Note this research included those countries who had the reserve currency (or defacto most popular currency traded at the time) in the research. Having the reserve curency did not shield countries from growth problems resulting from high debt.

Given the US debt/gdp, that means the US should not, based upon historical data, have any basis for expecting high growth until the debt comes down. Given the increase in public welfare spending (Obamacare, military, medicare, etc.), there is no reason to expect the US debt to go anywhere but up.

Currently, the US unfuded liabilities of existing promises exceeds $127 trillion, as per the Forbes. The CBO has estimated this at over $200 trillion in their AFS tables. The Forbes article notes:

"The federal unfunded liabilities are catastrophic for future taxpayers and economic growth. At usdebtclock.org, federal unfunded liabilities are estimated at near $127 trillion, which is roughly $1.1 million per taxpayer and nearly double 2012’s total world output."

So, put yourself in China's shoes. What does the economic outlook, based upon historica data, look like for the US? Are we going to be increasing share of their economy, or decreasing share?

Point 2: Currency
The money supply has exploded in recent years, gaining orders of magnitude larger within the last 5 years alone.

Nations that print this much money suffer the same consequences. Failure of the currency. It makes no difference whether you are the reserve currency at the time, or not.

All previous fiat (pure paper) currencies have failed, including previous issues in the US. Pure fiat is when the paper is not backed by gold or silver, or some combination of both. The US got off the gold standard in 1971, 43 years ago. The average life, for all 599 previous pure fiat currencies, is 38 to 39 years.

Unless the US defies all known economic history, then we can reasonably expect these two things going foward:

1) failure of the US currency, causing the US to issue a new curency type and opening the door for other world currencies to fill the 'reserve' currency trading role whether in sum or in parts

2) The US to stop growing and suffer debt shock to the point that interest rates on debt rise, payments on the debt rise, and a sharp decrease in debt issuance along with sharp rises in inflation.

China and Russia are well aware of this. All the US has to do is stop growing, and that opens the door for competitors to come in. China knows that the US is already declining as a key trading partner, opening the door for future military aggression and the chance at becoming a global empire again.

If you go back to the last link, note the following about currency failures:

"Of these 599 dead paper currencies:
(30%) 184 ended monetary unions, dissolution or other reforms, such as the creation of the Euro in 1999 (and its physical use since 2002);
(15%) 94 ended through acts of independence (former colonial states renaming or issuing new currency);
(27%) 156 were destroyed by hyper-inflation (caused by over-issuance of paper money by governments and central banks);
(28%) 165 were destroyed by war (deemed invalid through military occupation or liberation)."

3 of those 4 situations exist in regards to the US now. There is war brewing, which is easy to see by the headlines. The US faces hyperinflation and death of the currency. And other countries are forming alternative monetary unions outside of the petrodollar.

But you are right Buster, nothing to worry about here. At least for about 5-10 years, or so?

 

[Whiskeyjack]

I have already countered these arguments with hard facts, which you apparently refuse to accept, nor respond to with facts/links of your own.

No, you haven't. You've linked to some 10-20 year old sources that don't support your thesis. And while we're on that subject, let's go back and re-examine it again. Here is the post that kick-started this whole "debate"-- you think: (1) that Russia and China are actively sabotaging the American economy; (2) that Russia and China are capable of pre-emptively attacking America in such a way that will disable our ability to retaliate; and (3) Russia and China will eventually nuke, invade and pillage America for its natural resources.

I tried to be respectfully engage with you, but it's clear that I'm going to have to be more direct (and probably use smaller words): your theory is batshit insane, as evidenced by the string of dismissive gifs that were posted in response to it. Honestly, the chain emails my grandma forwards me about Obama being a secret Islamist are more credible. There is not a single reputable foreign policy source that would endorse it. And after ~1,900 views, not a single poster has agreed with you or defended your theory in any way. So either we're all sheeple and you're the only clear-eyed patriot who sees the writing on the wall, or you are radically misinformed regarding the efficacy of our nuclear deterrent.

At this point, you have clearly lost the argument. Your opinions are of little value in the face of facts.

Shall we take a poll here to see if you've really won the argument? Regardless, have a neg rep for childishly crowing over your perceived "victory" here.

The US government has formally disclaimed Russia as threat militarily (at least officially).

Because they aren't a military threat. They'd have no prayer against us in a conventional war. Their army, navy and air force are not even remotely comparable. Their special forces are reportedly respectable, and they have a powerful tank corps, though that kind of armor isn't worth much without air superiority to protect it.

I have posted links discussing such in lengthy detail. As a result, the US has mothballed their most potent nuclear warheads at the exact time Russia has modernized theirs. The US arsenal cannot compare with Russia's, even though we officially have the same number of missiles.

For sake of argument, let's go ahead and assume that the Russians have a more advanced nuclear arsenal than we do. Unless they're able to preemptively knock out our ability to retaliate (which is absolutely crucial to your crackpot theory, and which you've not even come close to establishing), then it's meaningless. Maybe they could nuke us better than we could nuke them (which, again, I don't believe for moment, since there are delivery and defense aspects to that issue as well); but if they cannot prevent a retaliatory launch, they're not going to do it, because modern nation-states reliably pursue their own perceived interests, and annihilation isn't in anyone's best interests.

Also note that the US has not been able to conduct assessments of Russia's arsenal for some time, as Russia has denied US scientists access for many years, and is now disallowing US planes from formal surveillance. The US is concentrating on Iran, Syria, and the Middle East with their nuclear policy. Which is silly, since their nuclear arsenal is not 1/10 of 1% of Russia's.

I don't dispute that our focus on Iran and Syria has been silly, but the reason why we throw our weight around against such nations instead of Russia is pretty obvious-- they don't nukes, so we can safely push them around.

In addition, the US has scratched 'launch on warning' and has been instructed to absorb the first way before firing back. This puts the US as a distinct strategic dis-advantage, especially considering Russia has more potent warheads in its arsenal than the US now does. To think this is an 'advantage' is pure idiocy.

I didn't call it an advantage, and I've never called you an idiot. "Launch on warning" means we retaliate before the missiles reach our cities; choosing to absorb an attack first means we retaliate more slowly, but without the risk of starting WWIII unnecessarily. This change in policy only matters from a deterrence perspective if China or Russia could preemptively remove our ability to retaliate; they can't do that, so the scratching of "launch on warning" has had no real affect on the balance of power here.

Once the US absorbs the attack, their ability to retaliate is severely damaged. First, the US government will be in shambles after most US cities have either been destroyed or crippled. Manufacturing infrastructure will be largely decimated, and communications channels will be severely damaged.

Where's your source for this? How is a nuclear attack on US soil going to prevent our subs and strategic bombers from retaliating? And do you really think that once NORAD detects hundreds of nukes coming our way, that we're going to be hamstrung by a silly "presidential decision directive"? Get real.

Who then will command the massive army? Even if you live in fantasy land and think the remnants of the US government could retaliate with any efficacy, how are they going to fund any sort of war or defense over the long term? The US economy would be in shambles, while China and Russia still have theirs intact.

It is a matter of who strikes first and does the most damage. And, the US ability to retaliate will be severely crippled as I am about to document.

The ships will be out at sea, no doubt, but who is going to pay for their fuel? Who will coordinate the military when communications has been severed? Will the US be able to launch 'some' nukes? Sure, but only some. And by then, it will be largely too late.

In a preemptive strike, Russia and China will have severely damaged the US economy, military, communications infrastructure, manufacturing base, and cities. And yet, we expect to retaliate in full and win such a war? This is PURE IDIOCY.

Where are your sources indicating that Russia and China could preemptively destroy our ability to retaliate? This entire paranoid delusion of yours rests on that key assumption, and you can't establish it because it's not true. We spend 3x more on our military than China and Russia combined; threat-inflation and war-mongering is a multi-billion dollar industry in this country. Yet you think those two countries could destroy us with the press of a button? And we've failed to realize this and adopt appropriate counter-measures because of... what exactly?

As far as the economic issue goes, you seem to misunderstand the situation. The US has the world reserve currency upon which everything in the US is based. If that collapses, the US economy collapses. This does not, however, collapse the rest of the world at the same time. Why?

Similar to your argument regarding the efficacy of our nuclear deterrent, the economic sources you've linked do not support your apocalyptic conclusions.

Your opinion is no longer true, and therefore not relevant.

At this point I have kicked your ass pretty good. However, if someone else wants to come to the table with facts and analysis and not unsupported and undocumented personal opinions, I would be happy to come back and discuss them.

Cheers

You've insulted pumpdog, Buster and me multiple times in this thread, so you'll be receiving an infraction. If you'd like to continue this discussion, drop the ad hominem attacks from your future responses.

Cheers!

 

[Cackalacky]

 

[enrico514]

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