The Fed was “printing” trillions of dollars.
Interest rates have never been this low before.
It was a captivating narrative if I had gotten stuck in the negative feedback loop of the biggest economic crash since the Great Depression.
In recent years, it has been the crypto maximalists who have begun to predict the end of the dollar’s global reserve currency status.
Unfortunately, the US dollar is stronger than ever. Here it is against the other major currencies of developed countries this year (via the WSJ):
It’s not just this year. The dollar has skyrocketed for years now:
It is now important to remember that currencies, in general, are cyclical.
You can see that the dollar has pretty much gone nowhere relative to a basket of other developed market economy currencies over the past 5 decades or so:
Put another way, a basket of other market economy currencies developed over the last 5 decades or so have gone nowhere against the dollar.
But the main starting point here is that any prediction of an impending US dollar crash has been a terrible bet.
Could the dollar be overtaken one day by some other currency or digital equivalent?
But a total collapse of the US dollar?
This seems unlikely to me in the short term.
Well, this country has an abundance of natural advantages over the rest of the world that help us give us global reserve currency status.
Let’s count the ways:
There are no natural heirs to the throne. In the 1980s it was Japan that would overtake the United States as a global power.
It didn’t happen.
Now China is hot on our heels.
China has seen immense economic growth over the past few decades and has more than a billion people.
But look at China’s demographic prospects:
Economic growth is fundamentally a function of population growth and productivity.
China could be in trouble in the coming decades.
Geography. European countries are two steps away from a crazy dictator who went to war for no reason.
We have a great ocean to the east, a great ocean to the west, and friendly neighbors to the north and south.
We dominate consumer technology. The internet and the smartphone are two of the biggest innovations of the last 50 years or so, and American companies dominate these technologies.
We have Apple, Amazon, Facebook, Microsoft, Google, Nvidia and more.
And that’s not to mention how a company like Tesla forced the entire auto industry to change its entire business model moving forward.
Energy independence. Europe is grappling with one of the worst energy crises it has ever faced. European citizens are faced with extraordinarily high energy bills at a time when there aren’t many great solutions.
The United States is not immune to rising energy prices, but we are in much better shape than our neighbors across the pond. We have an abundance of oil, natural gas and coal.
Nobody likes higher gas prices, but we’re in much better shape than the rest of the developed world when it comes to an energy crisis.
We still have the global reserve currency backed by the most powerful military in the world. Currencies are strange when you consider that they are more or less backed by faith and not much else.
But the US dollar is also backed by a huge tax base along with the most powerful military on Earth.
Maybe this doesn’t mean as much as it once did if we don’t have a world war, but it doesn’t hurt to have military strength that keeps your currency strong.
People still want to live here. Our immigration policies aren’t perfect at the moment, but people from all over the world still want to live here.
Immigrants have founded more than half of all start-ups valued at $ 1 billion or more. Almost 80% of these start-ups have an immigrant founder or immigrant in a key C-suite role.
As long as we don’t mess things up too much in the years to come, people from other countries will still want to live here and start a business.
The United States rules pop culture. The world is getting flatter when it comes to entertainment, but America remains the largest exporter of wonderful TV shows, movies, celebrities, music, and professional sports.
The US doesn’t set all the trends in the world, but we have a solid track record of producing the best content bar.
(OK, this probably doesn’t belong on our resume but it’s the icing on the cake.)
We have the largest and most dynamic economy in the world. The United States is not dependent on any single sector or commodity like many other developed and emerging economies.
We have the largest and most diversified stock market in the world. The United States has been around for a few hundred years now, but we have only been a real power for less than 100 years.
Just look at the relative size of global stock markets in 1900 and the change since then:
The UK has fallen into hard times in recent years, but it has ruled the world for hundreds and hundreds of years.
I’m not sure many people would have predicted that the United States would dominate the 20th century like we did.
Is the fall of Rome possible here? Yes of course.
But it’s not like our kingdom has been going on for centuries.
American economic dominance only really began after World War II, so we’re talking maybe 70 years or so.
Being bullish on America doesn’t mean I’m bearish on the rest of the world.
On the contrary, I think technology has leveled the playing field and offers people from other countries far more opportunities than ever before.
They are a long-term global bull as people in other countries will surely wake up every day with a desire to improve their position in life.
But I wouldn’t want to bet against the United States, even if we don’t dominate the 21st century as we dominated the second half of the 20th century.
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