Relevant and even prescient commentary on news, politics and the economy.

Mars Descending? U.S. Security Alliances and the International Status of the Dollar

by Joseph Joyce

Mars Descending? U.S. Security Alliances and the International Status of the Dollar

A decade after the global financial crisis, the dollar continues to maintain its status as the chief international currency. Possible alternatives such as the euro or renminbi lack the broad financial markets that the U.S. possesses, and in the case of China the financial openness that allows foreign investors to enter and exit at will. Any change in the dollar’s predominance, therefore, will likely occur in response to geopolitical factors.

Linda S. Goldberg and Robert Lerman of the Federal Reserve Bank of New York provide an update on the dollar’s various roles. The dollar remains the dominant reserve currency, with a 63% share of global foreign exchange reserves, and serves as the anchor currency for about 65% of those countries with fixed exchange rates. The dollar is also widely utilized for private international transactions. It is used for the invoicing of 40% of the imports of countries other than the U.S., and about half of all cross-border bank claims are denominated in dollars.

This wide use of the dollar gives the U.S. government the ability to fund an increasing debt burden at relatively low interest rates. Moreover, as pointed out by the New York Times, the Trump administration can enforce its sanctions on countries such as Iran and Venezuela because global banks cannot function without access to dollars. While European leaders resent this dependence, they have yet to evolve a financial system that could serve as a viable alternative.

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The Eighth Way to Think Like a 21st-Century Economist

by Steve Roth

The Eighth Way to Think Like a 21st-Century Economist

 February 22nd, 2019

The teams at Rethinking Economics and Doughnut Economics have launched a contest for entries, asking “What’s the 8th Way to Think Like a 21st Century Economist?” It builds on Kate Raworth’s seven ways, here.

Here’s my entry:

8. Widespread prosperity both causes and is greater prosperity: From false tradeoffs to collective well-being.

“Okun’s Tradeoff” — the idea that inequality is necessary for economic prosperity and growth — is baked into 20th-century economic thinking. It probably carries some significant truth in a generally egalitarian economy. But in the 21st century, with wealth and income concentrations beyond even what we saw in the 1920s, with that era’s disastrous denouement, it just doesn’t hold water.

Today’s extreme concentrations cause us all, collectively — especially our children — to have less. (Excepting those few who are lucky enough to extract, hoard, and benefit from multigenerational dynastic wealth along the way.)

Broadly dispersed wealth and income offer up opportunity, prosperity, economic security, well-being, and a springboard for success to hundreds of millions, billions of people and families. And it uses less of our earth’s limited resources in distorted production markets delivering low-value, absurdly priced luxury goods and services demanded by those with astronomical wealth and income. With the same amount of wealth, broadly dispersed — and the increased spending that broader prosperity delivers (spending on higher-value goods) — we can enjoy a vastly better life for ourselves. And we can deliver likewise to those who come after us.

At least today, the equality-vs-growth tradeoff is wrong by 180 degrees. The choice is not a difficult one. In fact it’s not even a choice we have to make. Widespread prosperity both causes and is greater prosperity.

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Weekly Indicators for February 18 – 22 at Seeking Alpha

 by New Deal democrat

Weekly Indicators for February 18 – 22 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

The short leading indicators have sunk to a level that is consistent with an oncoming recession in the next 3 – 8 months.  But the recent government shutdown may still be skewing some of the data.

As always, not only is clicking and reading hopefully informative for you, but it also helps reward me a little bit for the effort I put in to this work.

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The 2017 GOP tax scam may hurt the economy this spring

 by New Deal democrat

The 2017 GOP tax scam may hurt the economy this spring

It turns out that part of the GOP tax scam of 2017 might hurt the economy this year. That’s because the total decline in the amount of tax refunds going to tax filers this looks like it is going to be enough to affect consumer spending significantly this spring.

This post is up at Seeking Alpha.

Special bonus: a few RW commenters there really don’t seem to like it!

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