Consequences of a World with only one currency of exchange

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Re: Consequences of a World with only one currency of exchange

#41  Postby Evolving » Nov 21, 2022 6:09 pm

And I was looking at buying a Renault recently.

Sorry.
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Re: Consequences of a World with only one currency of exchange

#43  Postby Evolving » Nov 21, 2022 6:30 pm

:)
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Re: Consequences of a World with only one currency of exchange

#44  Postby THWOTH » Nov 21, 2022 9:28 pm

jamest wrote:
THWOTH wrote:
jamest wrote:
THWOTH wrote:We had a massive market failure in 2007/8. What happened to the amount of value in the system?

Are you just asking about the value of the markets? Because although they've roughly tripled in value (I had a quick look at the historical data for the dow jones), so has the national debt for the USA. Yet, whereas 2022 sees the national debt as being about 130% of GDP, back in 2007/08 this was closer to 65% of GDP*.

So, I guess it all depends on how you want to measure value. For me, a rising market fuelled by a rising debt which may yet destroy the whole system (debt default) is a system which has an ever-decreasing value... approaching zero.

* https://tradingeconomics.com/united-sta ... ebt-to-gdp
When I say 'the amount of value in the system' I mean 'the amount of value in the system'. Remember, one person's debt is another person's income stream.

I don't see any long-term value in a debt-fuelled system that is likely to implode due to debt default. More money could be printed, sure, but then say hello to hyperinflation.

You're conflating two different concepts: money and value. Surely you'll allow that there's value in any 'debt-fuelled system' for the lender? So, I've noted your opinion, but my question remains: We had a massive market failure in 2007/8. What happened to the amount of value in the system?
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Re: Consequences of a World with only one currency of exchange

#45  Postby jamest » Nov 21, 2022 11:21 pm

THWOTH wrote:
jamest wrote:
I don't see any long-term value in a debt-fuelled system that is likely to implode due to debt default. More money could be printed, sure, but then say hello to hyperinflation.

You're conflating two different concepts: money and value. Surely you'll allow that there's value in any 'debt-fuelled system' for the lender?

Yes, of course. Until the borrower fails to make payments on that debt.

So, I've noted your opinion, but my question remains: We had a massive market failure in 2007/8. What happened to the amount of value in the system?

During that particular failure itself the value went to nothing for the likes of Bear Stearns and many other such lenders. Afterwards, due to government bail-outs (QE), surviving banks started a new cycle of lending for reward.

I'm not sure what your point is, really. Perhaps you could spell it out?
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Re: Consequences of a World with only one currency of exchange

#46  Postby jamest » Nov 21, 2022 11:39 pm

Thommo wrote:
Evolving wrote:Good points; and I'll admit that I wasn't thinking of bitcoin, but about a worldwide fiat currency run by a worldwide central bank.


With good reason I suspect, as fiat is really the only game in town right now.

If it ever happens that there becomes a single currency for the whole world, I think it will happen overnight so to speak, because of an economic catastrophe.

Thommo is right to say that fiat currency with the $ as the world's reserve currency has had a good innings, but with the national debt at about 130% of GDP and generally trending higher, combined with a current treasury/bond (debt) market sell-off and high inflation with nothing but a recession on the cards, that catastrophe looks very probable to me.
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Re: Consequences of a World with only one currency of exchange

#47  Postby THWOTH » Nov 21, 2022 11:48 pm

jamest wrote:
THWOTH wrote:
jamest wrote:
I don't see any long-term value in a debt-fuelled system that is likely to implode due to debt default. More money could be printed, sure, but then say hello to hyperinflation.

You're conflating two different concepts: money and value. Surely you'll allow that there's value in any 'debt-fuelled system' for the lender?

Yes, of course. Until the borrower fails to make payments on that debt.

So, I've noted your opinion, but my question remains: We had a massive market failure in 2007/8. What happened to the amount of value in the system?

During that particular failure itself the value went to nothing for the likes of Bear Stearns and many other such lenders. Afterwards, due to government bail-outs (QE), surviving banks started a new cycle of lending for reward.

I'm not sure what your point is, really. Perhaps you could spell it out?
Yeah, sure, I'll spell it out. Our intuitions are not a reliable guide to understanding complex systems like economies.

You're not thinking systematically, or systemically. Lenders insure against defaults and spread and offset risk in interesting and novel ways. I'm still going to prod you on this though: Did QE create additional value in the system, replace value, or mitigate devaluation? Of course, it did all three, just in different areas of the system. What I'm suggesting is we have to look at the system as a whole. Focusing on a single feature or aspect of the system, like currency or inflation, has little power to explain the system as a whole.
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Re: Consequences of a World with only one currency of exchange

#48  Postby jamest » Nov 22, 2022 3:19 am

THWOTH wrote:What I'm suggesting is we have to look at the system as a whole. Focusing on a single feature or aspect of the system, like currency or inflation, has little power to explain the system as a whole.

Well, for sure I'm not an economist and until about 4 years ago I knew nothing about the space, so feel free to educate me on relevant matters. Whatever others think about me here, I'm very open to becoming educated.

However, if what you are suggesting here is that the current economic climate is [in fact] 'okay' as long as we bury our heads in the sand and ignore the national debt and its increasingly negative ratio relative to GDP, high inflation, the debt market sell-off, a stock-market sell-off, an energy crisis, a supply crisis, a climate crisis, war in the Ukraine, a potential war everywhere, a dangerously divisive societal crisis, and gawd knows what else... then forgive me for being a tad annoyed.
Or else, make your case for suggesting that this is just a 'blip' because, frankly, I don't think that you can. Not in a month of Sundays.

This thread isn't about the economical/societal collapse that we are witnessing, but when it happens the option to rewind the clock to 2007/08 and rinse-repeat will not be an option, such will be the scale of the next big financial collapse. Although, they will at least try to stave off the disaster by printing so much money that todays national debt will look like pocket-money in comparison. However, this will quickly lead to hyperinflation and [consequently] societal collapse (anarchy) and [even] possibly WW3.

THEN, the only option for the world - other than destroying itself - will be to adopt a singular path out of the mud that they've all been treading in. And then, perhaps, we might finally be looking at a world with a singular/universal currency. For, let us be clear here, after several thousands years of experience, economic history should have taught us that numerous competing economies all founded upon numerous competing currencies, has been an abject failure from the onset.

I propose that the only possible way that the world can achieve any kind of meaningful improvement upon this deplorable history we have witnessed, way beyond Nixon, is to look towards a future in which [at the very least] we all share the same currency and [thus] all share the same economic prospects.

If we could achieve that, centrally, with one unbiased global government, great. But let's face it, humanity is so divisive in its views and morality that only a decentralised global currency is really an option.
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Re: Consequences of a World with only one currency of exchange

#49  Postby Spearthrower » Nov 22, 2022 3:32 am

jamest wrote:
THWOTH wrote:What I'm suggesting is we have to look at the system as a whole. Focusing on a single feature or aspect of the system, like currency or inflation, has little power to explain the system as a whole.

Well, for sure I'm not an economist and until about 4 years ago I knew nothing about the space, so feel free to educate me on relevant matters. Whatever others think about me here, I'm very open to becoming educated.


http://www.rationalskepticism.org/topic ... l#p2793010

Inflation isn't the result of the interaction of multiple currencies, but of intrinsic financial and economic forces and purely chance events. Labour shortages here make goods more expensive there, regardless of the unit of currency or how widely used that currency is. Depending on the main produce of an area, even a bit too much, a bit too little, a bit too early, or a bit too late rain can result in inflation as supply cannot meet demand.

Friedman-esque: inflation is a result of money supply
Keynsian-esque: inflation is a result of market demand
Austrian: inflation is a result of imbalances in money supply and need for money for goods


You might start by either looking those up for yourself, or asking me to supply citations supporting this if you are genuinely interested in learning.

Money supply, market demand, and imbalances between supply and demand for goods would all still be present in a single currency scenario; so according to the three main schools of economic analysis, inflation would still exist as it's not the result of currency exchange.
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Re: Consequences of a World with only one currency of exchange

#50  Postby Thommo » Nov 22, 2022 9:39 am

jamest wrote:...with the national debt at about 130% of GDP and generally trending higher, combined with a current treasury/bond (debt) market sell-off and high inflation with nothing but a recession on the cards, that catastrophe looks very probable to me.


It depends what you mean by catastrophe. The next few years look pretty grim, and the UK is in for a particularly bad ride (if you compare to western europe, the G7 or a similar collection of countries) and I don't think that's in dispute. What probably is in dispute is the scale of that "catastrophe". Based on your previous comments you're probably exaggerating by a scale factor of a hundred or so.

In pointing out that exaggeration I don't want to be unclear: I agree with the consensus that Britain has a serious financial black hole (deficit, not debt) and that the coming cuts (and to a lesser extent tax rises) are going to hit at a bad time. If you agree with the Keynesian view, that will lead to further stagnation yet to come. Brexit effects do finally seem to have actually become a significant and visibile factor in the UK's underperformance and the often overstated case against Brexit does finally seem to be gaining meaningful traction.

As far as national debt goes, the good news is that the biggest way to reduce this (in real terms) is to have high inflation, which is somewhat ironic in this thread where it goes decidedly across the grain of the supposed thesis. The continued lack of productivity growth which is at the heart of British woes continues to fail to be addressed by much of public debate, which seems to centre on immigration, which will undoubtedly affect growth, just not productivity or growth per capita.
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