In the USA, the current standard of living is extremely dependent on the rest of the world continuing to use US currency to trade with one another.....but if Russia starts selling natural gas to China without the U.S. dollar being involved, that would be a monumental blow to the petrodollar:
Yes, that's true. There are many ignorant people out there who have no understanding of anything. They tip their hand showing their ignorance by mentioning the Weimar Republic, Zimbabwe, and Venezuela.
Those are closed systems. In a closed system, the value of the currency is a function of the money supply and domestic GDP. What I'm talking about here is monetary inflation and monetary deflation. When the money supply exceeds the domestic GDP then prices rise because the currency is worth less. Understand we aren't talking about the value of the currency relative to other currencies, we're talking about the value of the currency related to domestic GDP. Some people phrase it as "Too many dollars chasing too few goods." That isn't really accurate, but I'll take it.
In addition to being closed systems, none of the currencies of those three countries were international reserve currencies or international currencies of trade. In fact, you can't trade anything on the global market in Zimbabwean or Venezuelan Dollars. Because they were closed systems, none of those countries were able to monetize their debt.
In stark contrast (and so a logical fallacy to even attempt to equate the US to those three countries or any other), the US is an open system. The US Dollar is an international reserve currency and currency of trade. The US monetizes its debt as marketable interest-bearing treasury securities and critical point is that we're looking at the money supply versus domestic GDP + global GDP.
Global GDP consists of all global transactions taking place in US Dollars.
No one hates Hiden more than I do, but he is not responsible for the current "inflation" in the US. In fact, there is no monetary inflation. What Americans have been experiencing is demand-pull inflation stemming from supply chain issues resulting from the fact that US governors stupidly shut down their economies during STUPID-19. Yes, you can stop an economy on a dime just by flipping a switch, but you cannot restart the economy by simply flipping a switch.
In addition to localized wage inflation due to a shortage of workers which drives up prices (especially rents) there is cost-push inflation caused by higher than normal oil and natural gas prices and costs incurred by companies related to STUPID-19 prevention and mitigation (higher sanitation, maintenance, cleaning costs passed onto consumers).
Fertilizers, pesticides, and herbicides, all made from natural gas cost more, plus diesel costs more so crop prices go up, and they go up more getting transported to processing facilities and then go up more getting transported to warehouse/distribution centers, and then go up more getting transported to grocery stores. The consumers bear the costs.
My sister works for Total Quality Logistics and talks to truck drivers all day long. Truckers have two economies: a tight economy, and a loose economy.
In a loose economy, there are more truckers than there are goods and so sellers/producers set the price of transporting goods. It has been and still is a tight economy ever since the STUPID-19 restrictions ended and there are more goods than there are truckers and so truckers set the price of transporting goods. Either you pay the price truckers demand, or your goods sit collecting dust until you find one willing to transport at your price.
Supply chain issues are slowly being resolved, but there are still two major issues on the borders. Canada requires a CDC vaccination card and the majority of US truckers refuse to get vaccinated so all those cars and car parts made in Canada are sitting there which is why many car dealers in the US have no new car inventory. On the southern border, there's a back log because all trucks are now searched or at least examined because of the deaths of illegal immigrants entering in a semi-trailer and being left in the desert to die. The biased media blamed Governor Abbott even though he is constitutionally and statutorily barred from enforcing border security.
The goal of the US is to enforce the use of the US Dollar as the global trade currency which is why the conflicts in Yugoslavia, Libya, Tunisia, Iraq, Afghanistan, Syria, and Ukraine happened/are happening.
Any major decline in global transactions of US Dollars will result in monetary inflation because it is money supply versus domestic GDP + global GDP.
That issue is heightened because of the looming disaster in Europe. Save Britain, none of the European countries can afford to pay their pension and healthcare programs through 2045. Italy is the basket case at 300% of GDP. Germany is 260%-285% of GDP (depending on the source and one is the European Central Bank). France is about 135% of GDP. No level of taxation will pay for those programs so those countries will have to enact steep cuts. Sweden is already privatizing its national healthcare system (national healthcare in the US is constitutionally barred but universal healthcare is not). France slashed pensions from 50% of wages to 37.5% of wages, then raised the number of years of required work to 42 (43 for those born after 1973 and note it is only 35 years in the US), and then implemented penalty reductions in pensions if retiring before full-retirement age.
France will have to cut pensions again to 32.5% and may end up cutting them to 28.5% in order to be able to pay for them.
Juxtapose that against US federal debt which is 1/3rd of Global GDP. By 2040, US federal debt will be close to or more than 50% of Global GDP.
Of the 200 countries on Earth, only 32-36 have the financial means to purchase US treasury securities.
Is the British government going to tell Brits, "Hey, you have to live in tents and eat porridge so's we can use all our GDP to buy US debt?"
No. No country will do that. How can France, Italy, and Germany tell their people, "Hey, we have to raise taxes and cut your pensions and healthcare so's we can buy US debt." That will go over like a lead zeppelin.
The European countries that hold US debt will be cashing in their treasury securities to pay for pensions and healthcare and that, coupled with declining use of the US Dollar will spell economic ruin for the US. The standard of living will decline and Americans will have to make choices they haven't had to make for 50 or 60 years. It will not be pretty.
