> war it's bad for business (in most cases, anyway).
Most wars are great for business actually, even world wars! Let's not forget that WW2 was mostly responsible for dragging the US out of the great depression.
2) Central government bails out bad loans by selling a portion of their $3T in foreign reserves, including $1T of US government debt. Chinese creditors, investors and citizens are made whole. Foreign bond prices fall and interest rates rise, causing recession and financial crisis in the US.
Selling treasuries is a double edged sword. Driving up borrowing costs for the US also lowers bond prices, wiping out the Chinese government's portfolio value, right when they need the funds for a bailout. Dumping a lot of dollars on the market will drive the dollar down relative to the yuan, hurting Chinese exporters right when their economy needs it most. China has really twisted itself into a knot on this one.
> Euro could easily become the new reserve currency.
Surely you cannot be serious here. Europe is one (insert name)-exit away from total implosion. The Euro project was doomed from the very beginning: you cannot have a joint monetary policy without a unified fiscal policy (which never materialized through European consent - after failure of conquest i.e WW2)
And yet despite all the hemming and hawing the squabbling Euro area has de facto better fiscal policy than a United States firmly under the control of a single party.
The Euro area had a 2017 deficit of 0.9% of GDP, as compared to the U.S.'s 3.5%. And this is during a boom in the U.S.
The Euro isn't a better vehicle than the USD today, but it could easily become one. Not because the Euro improves but because USD will become less stable and attractive and the only realistic alternative is the Euro. Or maybe we end up with a more diversified system. Either way USD loses.
> The Euro isn't a better vehicle than the USD today, but it could easily become one.
Get back to me when Saudi Arabia starts selling oil exclusively in Euros, or better yet, once European union surpasses the US in the number of aircraft carrier strike groups. You don't seem to understand the concept of a "foreign reserve currency" if you think Euro has a chance against USD. There is more chance of physical gold replacing USD as an inter-nation trade/reserve rather than Euro!
Russia is the greatest producer of oil, or at least neck-and-neck with Saudi Arabia. Plenty of other top producers wouldn't mind switching away from a USD-denominated market, including Iran and China. Exclude the U.S. from the list of top producers and you may even have a majority of producers who would prefer a different system.
The U.S. is the world's reserve currency because everybody trades with the U.S. and the U.S. has run a current account deficit consistently since 1950, and with most of the world. That means everybody is holding USD and thus you can sell something to anybody else without needing sufficient imports from that buyer to cover the transaction. (Countries can't just buy USD willy-nilly; they need to find someone willing to trade USD for their local currency, which requires exporting some good or service.)
But that can change. Indeed, politicians are hell bent on changing it. And the global economy is exploding, meaning the U.S. won't be able to remain the center of the global commercial universe even if it wanted to.
The problem is we haven't seen a 4% drop for years, from a predictive of recent decades, many who wasn't in the Stock market during 2008, a 4% drop is a mini crash.
Of coz for those of us who are in it for multiple decades.... 4% drop doesn't surprise us.
As an engineering with an accounting degree, it is rare that I get to point out that this is fairly well understood by the bean counters. I'm not saying that you are wrong, but I think that we can simplify it. Once you get a handle on what accountants do (although I think many people just assume they hide stuff!), the parable becomes a non-problem.
If you take first year accounting in school, you'll find out that balance sheets are simply a static representation of your asset, liabilities, and retained earnings. Retained earnings is basically the difference in what you owe vs what somebody owes you.
In very, very simple language, balance sheets add everything to show your wealth. I think this is a bit simpler than "store of value," but basically says the same thing. Or, as my accounting professor, and probably every accounting professor likes to say, "they are snapshots."
Now you can say "but money can be used as a medium of exchange," but I think this really adds complexity. In accounting 101, we simply say income statements show the path by how those quarterly balance sheet snapshots change. If you balance sheet change, it is because some activity happened. Now we don't normally say "medium of exchange" for income statements.
Instead, we simply write the steps of making money, which is as follows:
Revenue = What you sell
-COGS = What it cost you
-----
=GM =The results in after the sell
-SGA&RDA =What you paid your employees
------
=Net Income = What you made
You then add that profit to the balance sheet (less taxes and one time events). Your income statement bottom line perfectly shows up as a change in your retained earnings. So they are perfectly tied together.
The "classic" parable that you linked simply misses the point of accounting 101. In the parable, they talk about the "debt" that mysteriously goes away because a stranger comes into town and basically lends a $100.
This mystery is not new, and is well understood in accounting, and this is why we have "double entry" bookkeeping. This "paradox" was noticed by various cultures around 800-900 AD. However, the written rules was done by Luca Pacioli, a friar, in 1000 AD. To make it clear what actually happens, Pacioli pointed out that every transaction is both a lending and obligation to payback. Therefore, Pacioli said that all financial transactions have to be recorded twice. So, all of his ledgers recorded transactions on the left side of the T-ledger and on the right side of the T-ledger. Double entry bookkeeping was invented, and a thousand CPAs found lifetime security.
Thus all transactions generated a "owed something" and it was recorded on the left side of the ledger, which was something owed or latin debitum, or what we call "debits" today. Each debit entry must be also recorded on the right side with an offsetting entry of the same amount, or what you believed would be paid back or creditum (trust) at the same time. Both sides need to equal zero.
Thus if you were a bicycle store, and if you had a $800 bicycle (price you paid) on your balance sheet, and if you sold it for $1000, you would debit your cash by $1000 (add it), you would credit your bike inventory by $800 (remove it), and you would add the $200 profit to your retained earnings. (Well sort of. In your bicycle store, you probably had to pay employees, which would have been taken from the $200 profit, but I'm simplifying.)
In the "brain teaser" that you linked, they only do single side entry, which makes it look like everybody is in debt and was down $100. This is not true. Everybody in town both had "owed something" but also an offsetting "trust of being paid back." These two sides equaled zero. Before the $100 was circulated, everybody had a net worth of zero, and afterwards everybody had a net worth of zero.
With double entry, everybody in town would have recognized that everybody ...
Thanks a lot for that explanation. I already knew about modern accounting (with a left and a right side), but it never occured to me how it was used to solve the scenario mentioned in the brain teaser of the parent post.
yes, but functionaly it's the same thing. "Ownership" in other countries is just a legal construct. It's not like you can do whatever you want with it. There are countless rules and regulations you must follow - you can't build on it or touch in anyway without getting permits and your "property" can be confiscated if you don't pay taxes on it. So, I would argue no property rights with 0 property taxes is more like true ownership.
19 comments
[ 3.0 ms ] story [ 51.0 ms ] threadFirst Past The Post Voting- https://www.youtube.com/watch?v=s7tWHJfhiyo
Range Voting- https://www.youtube.com/watch?v=e3GFG0sXIig
Single Transferable Vote - https://www.youtube.com/watch?v=l8XOZJkozfI
Alternative Vote - https://www.youtube.com/watch?v=3Y3jE3B8HsE
Mixed-Member Proportional Representation -https://www.youtube.com/watch?v=QT0I-sdoSXU
I had assumed (without evidence) it was the US. A plunge protection team of sorts.
ZH suggest the buyer was China.
https://www.zerohedge.com/news/2015-05-18/revealing-identity...
Priorities.
Most wars are great for business actually, even world wars! Let's not forget that WW2 was mostly responsible for dragging the US out of the great depression.
Selling treasuries is a double edged sword. Driving up borrowing costs for the US also lowers bond prices, wiping out the Chinese government's portfolio value, right when they need the funds for a bailout. Dumping a lot of dollars on the market will drive the dollar down relative to the yuan, hurting Chinese exporters right when their economy needs it most. China has really twisted itself into a knot on this one.
Surely you cannot be serious here. Europe is one (insert name)-exit away from total implosion. The Euro project was doomed from the very beginning: you cannot have a joint monetary policy without a unified fiscal policy (which never materialized through European consent - after failure of conquest i.e WW2)
The Euro area had a 2017 deficit of 0.9% of GDP, as compared to the U.S.'s 3.5%. And this is during a boom in the U.S.
https://ec.europa.eu/eurostat/documents/2995521/8824490/2-23...
The Euro isn't a better vehicle than the USD today, but it could easily become one. Not because the Euro improves but because USD will become less stable and attractive and the only realistic alternative is the Euro. Or maybe we end up with a more diversified system. Either way USD loses.
Get back to me when Saudi Arabia starts selling oil exclusively in Euros, or better yet, once European union surpasses the US in the number of aircraft carrier strike groups. You don't seem to understand the concept of a "foreign reserve currency" if you think Euro has a chance against USD. There is more chance of physical gold replacing USD as an inter-nation trade/reserve rather than Euro!
The U.S. is the world's reserve currency because everybody trades with the U.S. and the U.S. has run a current account deficit consistently since 1950, and with most of the world. That means everybody is holding USD and thus you can sell something to anybody else without needing sufficient imports from that buyer to cover the transaction. (Countries can't just buy USD willy-nilly; they need to find someone willing to trade USD for their local currency, which requires exporting some good or service.)
But that can change. Indeed, politicians are hell bent on changing it. And the global economy is exploding, meaning the U.S. won't be able to remain the center of the global commercial universe even if it wanted to.
Of coz for those of us who are in it for multiple decades.... 4% drop doesn't surprise us.
No one cares about investors who only got into the stock market after 2008. They don't have enough capital to really impact anything.
If you take first year accounting in school, you'll find out that balance sheets are simply a static representation of your asset, liabilities, and retained earnings. Retained earnings is basically the difference in what you owe vs what somebody owes you.
In very, very simple language, balance sheets add everything to show your wealth. I think this is a bit simpler than "store of value," but basically says the same thing. Or, as my accounting professor, and probably every accounting professor likes to say, "they are snapshots."
Now you can say "but money can be used as a medium of exchange," but I think this really adds complexity. In accounting 101, we simply say income statements show the path by how those quarterly balance sheet snapshots change. If you balance sheet change, it is because some activity happened. Now we don't normally say "medium of exchange" for income statements.
Instead, we simply write the steps of making money, which is as follows:
Revenue = What you sell -COGS = What it cost you ----- =GM =The results in after the sell -SGA&RDA =What you paid your employees ------ =Net Income = What you made
You then add that profit to the balance sheet (less taxes and one time events). Your income statement bottom line perfectly shows up as a change in your retained earnings. So they are perfectly tied together.
The "classic" parable that you linked simply misses the point of accounting 101. In the parable, they talk about the "debt" that mysteriously goes away because a stranger comes into town and basically lends a $100.
This mystery is not new, and is well understood in accounting, and this is why we have "double entry" bookkeeping. This "paradox" was noticed by various cultures around 800-900 AD. However, the written rules was done by Luca Pacioli, a friar, in 1000 AD. To make it clear what actually happens, Pacioli pointed out that every transaction is both a lending and obligation to payback. Therefore, Pacioli said that all financial transactions have to be recorded twice. So, all of his ledgers recorded transactions on the left side of the T-ledger and on the right side of the T-ledger. Double entry bookkeeping was invented, and a thousand CPAs found lifetime security.
Thus all transactions generated a "owed something" and it was recorded on the left side of the ledger, which was something owed or latin debitum, or what we call "debits" today. Each debit entry must be also recorded on the right side with an offsetting entry of the same amount, or what you believed would be paid back or creditum (trust) at the same time. Both sides need to equal zero.
Thus if you were a bicycle store, and if you had a $800 bicycle (price you paid) on your balance sheet, and if you sold it for $1000, you would debit your cash by $1000 (add it), you would credit your bike inventory by $800 (remove it), and you would add the $200 profit to your retained earnings. (Well sort of. In your bicycle store, you probably had to pay employees, which would have been taken from the $200 profit, but I'm simplifying.)
In the "brain teaser" that you linked, they only do single side entry, which makes it look like everybody is in debt and was down $100. This is not true. Everybody in town both had "owed something" but also an offsetting "trust of being paid back." These two sides equaled zero. Before the $100 was circulated, everybody had a net worth of zero, and afterwards everybody had a net worth of zero.
With double entry, everybody in town would have recognized that everybody ...