DEDOLLARIZATION → REINDUSTRIALIZATION?
In theory, dedollarization enables reindustrialization. Because if you can export dollars, why build anything else? You make 99.99+ cents on the dollar for a new dollar. It's a very high margin good, made with zero effort and zero pollution. Why make screws or bolts or planes or trains if you can literally print money? Let someone do that overseas.
That was the logic of the ~1971-2021 era. But the problem arises when people at home and abroad start realizing they're getting diluted to prop up the dollar. Or when you're in a military standoff with China, and fiat currencies are suddenly less valuable than actual factories.
In that case, if you want to build things in America, you need to stop printing things in America. And that's why everyone from sober financial analysts like @LukeGromen to Biden advisors like Jared Bernstein have talked about dethroning the dollar, as per the gif below.
The problem is that it's much easier to launch currencies than to build factories. China spent the last 45 years shaping their economy into an industrial powerhouse, while the US spent those decades de-industrializing, regulating, and offshoring. Like the US, China does have a high-tech culture, but they also have a low-tech and medium-tech culture — a culture of skilled laborers and factory workers.
It is very nontrivial to bring that back to the US. The best case outcome might actually be to leapfrog with robotics. So you better pray for @elonmusk and @adcock_brett and @kvogt to get humanoid robots working. Of course, Washington DC has fought AI and self-driving every step of the way, so they'll probably fight robots too.
And if that doesn't happen — if the robotic leapfrog hits a roadblock, such as the fact that many pieces of the robotics supply chain are still made in China — we're headed for a tough situation.
It's one where DC loses first its physical power and then its financial might, maybe overnight. Because you don't just instantly get back the factories when the world dethrones the reserve currency.
In theory, dedollarization enables reindustrialization. Because if you can export dollars, why build anything else? You make 99.99+ cents on the dollar for a new dollar. It's a very high margin good, made with zero effort and zero pollution. Why make screws or bolts or planes or trains if you can literally print money? Let someone do that overseas.
That was the logic of the ~1971-2021 era. But the problem arises when people at home and abroad start realizing they're getting diluted to prop up the dollar. Or when you're in a military standoff with China, and fiat currencies are suddenly less valuable than actual factories.
In that case, if you want to build things in America, you need to stop printing things in America. And that's why everyone from sober financial analysts like @LukeGromen to Biden advisors like Jared Bernstein have talked about dethroning the dollar, as per the gif below.
The problem is that it's much easier to launch currencies than to build factories. China spent the last 45 years shaping their economy into an industrial powerhouse, while the US spent those decades de-industrializing, regulating, and offshoring. Like the US, China does have a high-tech culture, but they also have a low-tech and medium-tech culture — a culture of skilled laborers and factory workers.
It is very nontrivial to bring that back to the US. The best case outcome might actually be to leapfrog with robotics. So you better pray for @elonmusk and @adcock_brett and @kvogt to get humanoid robots working. Of course, Washington DC has fought AI and self-driving every step of the way, so they'll probably fight robots too.
And if that doesn't happen — if the robotic leapfrog hits a roadblock, such as the fact that many pieces of the robotics supply chain are still made in China — we're headed for a tough situation.
It's one where DC loses first its physical power and then its financial might, maybe overnight. Because you don't just instantly get back the factories when the world dethrones the reserve currency.
To be clear, I'm sympathetic to the dedollarization-enables-reindustrialization camp like @nic__carter and @LukeGromen. It may end up being the only way. But right now it's not going to be a smooth transition. It may be like Russia in the 90s.
https://twitter.com/nic__carter/status/1792373604488761730
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