Comment by ArtTimeInvestor
5 hours ago
The dangerous situation we are in is that entities outside of the USA hold significantly more US assets than US entities own assets outside the USA.
So if the USA declares "ownership be damned", it would be a net win for the USA.
Or in simpler terms: The USA has been giving out IOUs for real goods for decades. It is now tempting to default on those IOUs. The USA did this before. Up until 1971, a dollar certified a claim to gold. Then the USA simply canceled that promise.
The current ramp up to AI dominance might be what holds the USA back from breaking more ties with the world. It is a race that must be won. And investments from abroad help. But when the whole world is operated by US AI factories things might look different. When every task around the world is performed by intelligence generated in the USA, just like every computer is run by US software now - there might be little incentive left to "pay the rent" for the rest of the world that now sits around idle, fiddling their thumbs.
> The dangerous situation we are in is that entities outside of the USA hold way more US assets than US entities own assets outside the USA.
The dangerous situation we are in is that the US is berating and betraying its closest historical allies, eroding its credibility and soft power, and weakening its leverage at a time when threats to the Western order that has existed since the end of WW2 are growing rapidly.
Incidentally, the orange man in charge loves to tout "deals" in which foreign countries agree to invest substantial sums in the US, so any actions that lead foreign countries to believe their investments might be nationalized banana republic-style won't help the administration's efforts to attract investment and onshoring.
If the US did something so economically hostile it would tank its own stock market just from the world cutting off a bunch of trade.
> cutting off a bunch of trade
Given the last 19 months of tariff chaos while Republicans control all branches of government, I don't see any reason to think they're concerned about that.
Plus the whole "assassinate the Iranian president in the middle of negotiations to start a war across a major global trade-route" thing.
I dont know. Stock market claps and absorb everything these do happily.
It's not going to be a net win for anyone. A country that needs to keep borrowing to stay afloat is not going to improve its position by effectively defaulting on its debt, regardless of the exact method or type of assets involved.
The USA might hold a majority of the worlds value generation in a few decades. If AI generated in the USA powers everything. Then the USA does not need to borrow anymore.
That outcome seems unlikely. Both that AI will remain dominated by USA for a few decades, and that they will use newfound profits to eliminate budget deficit.
And why would they want to default on their debts in this hypothetical future where they've "made it", raking in AI profits from everyone. They would work hard to preserve that world order and not shake things up unnecessarily.
Well, they could, but the moment Donald defaults on those bonds, he can say goodbye to those stock market highs and watch new unprecedented lows.
"If you owe the bank a million, you have a problem; if you owe the bank a billion..." etc.
And the US owes trillions.
That cuts both ways. US entities own huge amounts of overseas assets including debt.
A more appropriate saying would be cutting off your foot to spite your leg.
Thankfully no one has done that yet.
yes. but most of it is not to other countries. Most government debt (over 80% globally) is privately owned through sovereign debt instruments like bonds.
And who owns the bonds?
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> So if the USA declares "ownership be damned", it would be a net win for the USA.
This opinion is very naive. The moment the US declares "ownership be damned", the US dolar stops being the currency used in things like the oil market and it's value tanks. The world will scramble to use an alternative currency, which will end up being either the euro or the yuan. This effectively marks the end of US as a world power.
Or Bitcoin. Of which almost half is already under US control.
Anyhow, much of the new currency will flow to the USA if the USA becomes the worlds source of (artificial) intelligence.