'As long as we have the world's reserve currency'

Posted on: May 6, 2025 at 14:18:36 CT

"If that is lost, then a shift would need to happen, and firms would make that switch voluntarily because they don't want to lose their competitive edge."

The problem with this is the vulnerability in the short run and in the longer term, the dependence that can develop as skills, education, self discipline, not to mention supply chains atrophy isn't easily or quickly switched on and off.

I see it as similar to the admonition "Do not feed the animals." because they can become dependent upon human handouts and lose the life skills that they had possessed previously.

For instance, I remember reading of sailors who used to toss food out to seagulls following their ships. It provided them enjoyment watching them dive for or catch the food, and it made them feel good. The problem was that when missions changed or whatever it was, they no longer sailed the same route and many of those seagulls who had become dependent upon those handouts starved to death.

There are similar stories where feeding the animals seemed to benefit them in the short term, but actually brought them harm in the long term.

Similar things seem to be happening in the US. A lot of people are feasting off of the short term benefits of the US having the world reserve currency status, but "the country" can slack off and no real corrections are needed in the short run, or at least they aren't as urgent & can more easily be neglected.

A lot of kids can get a mediocre education and can still get jobs with adequate pay for survival. Many can take things easy and still at least get along fine, and a more easy going attitude towards life can be passed along to kids and grandkids. The government also gets fat and happy. It's much easier to get tax revenue and run deficits to pay for ever expanding government programs, whether they benefit farmers, bankers, welfare families, immigrants, legal or illegal and so on. In fact, it is most beneficial for politicians to push for ever more government handouts and government spending as it benefits their constituents in the short run and gets them elected or reelected more easily.

But when the punch bowl is taken away and the country is tens of trillions of dollars in debt and the skillsets, education levels and motivation of the citizens have all atrophied things cannot be turned around easily.

Then there is the short term danger of losing critical supplies from other nations, whether due to war, epidemic, natural catastrophes or trade wars or whatever.

We saw that play out when we suddenly lost critical parts needed for auto production when China shut down factories because of covid. We're seeing that with computer chips which were made in Taiwan. Yes, we could start making them here, but it takes years to build the factories, hire the engineers, and other critically important employees to start cranking out state of the art components that were previously provided elsewhere.

What happens if war breaks out and an adversary brings us to our knees by withholding critical components for maintenance of our planes or drones or ships or tanks or even our automobiles? What about when critical medical supplies are withheld? -- It can take a while to hire educators & train new students to start researching and designing and manufacturing the things that are needed.