If social benefits were rolled back, what would be the recourse for those who have paid in but may not see the benefits?
Feels like a really difficult challenge to deal with because once folks start collecting these benefits, they aren’t going to want to see them go away.
As Gen Z / Gen Alpha’s, we’ve enjoyed the tax free retirement accounts to their fullest (Roth Ira 1997 & HSA 2003).
The oldest Gen Z is only 29 (still 6 years short of the minimum to be US President of 35).
Even if we were in power, we’d still wanna design public policy under John Rawl’s veil of ignorance - basically not knowing what situation we’d born into, so probably best not to pull social benefits right away.
There’s power in signaling. Perhaps by the Social Security Administraion signaling the possibility of tapering off benefits, we can see how that impacts savings rate data among the older (and younger) generations, then make decision from there
i do think that when we’re older, we’ll have to have aggressively reformed social benefits - just not sure how yet, but that’s why we’re discussing :)
"Which means that it’s fully backed by full trust in our country — and more accurately, the strength of our military."
This is one thing that's not fully explained here in the article - how does our military exactly support our currency? The relationship certainly doesn't seem direct
I’d say that initially after ww2 with the bretton woods agreeemnent in 1944, yes, the US dollar’s reserve currency status was dependent on our military strength (specifically winning ww2).
Now its complicated. im biased but i think we have the strongest military in the world. and yet, de-dollarization is still happening.
needless to say, i need to think through this, and make updates. thanks for the feedback!
We got some pushback on Boyd's 14 ground truths piece on this point as well. Here was part of my reply to the pushback:
The structural fact is that US security guarantees, the alliance system, and the open trade order they sustain make dollar invoicing and dollar reserves the rational default for allies. And the empirics on this are sharper than we let on in the piece.
Eichengreen et al's "Mars or Mercury?" (2019) finds that military alliances raise a currency's reserve share in an ally's holdings by about 30% controlling for size, credibility, and trade depth. The Fed's own IFDP work finds that roughly 3/4ths of foreign government holdings of safe US assets are by countries with some military tie to the US. During COVID, US military allies were nearly 50% more likely to get a Fed swap line than non-allies — dollar liquidity itself is rationed along security lines. The 2022 Russia case made it operational in real time, crossing the security line cost Russia its dollar holdings.
Ken Rogoff also puts it crisply in his recent book: "the dollar and the military are inseparably linked — military power underpins trust in the currency, while the dollar's privileges make it easier to finance that power."
If social benefits were rolled back, what would be the recourse for those who have paid in but may not see the benefits?
Feels like a really difficult challenge to deal with because once folks start collecting these benefits, they aren’t going to want to see them go away.
As Gen Z / Gen Alpha’s, we’ve enjoyed the tax free retirement accounts to their fullest (Roth Ira 1997 & HSA 2003).
The oldest Gen Z is only 29 (still 6 years short of the minimum to be US President of 35).
Even if we were in power, we’d still wanna design public policy under John Rawl’s veil of ignorance - basically not knowing what situation we’d born into, so probably best not to pull social benefits right away.
There’s power in signaling. Perhaps by the Social Security Administraion signaling the possibility of tapering off benefits, we can see how that impacts savings rate data among the older (and younger) generations, then make decision from there
i do think that when we’re older, we’ll have to have aggressively reformed social benefits - just not sure how yet, but that’s why we’re discussing :)
"Which means that it’s fully backed by full trust in our country — and more accurately, the strength of our military."
This is one thing that's not fully explained here in the article - how does our military exactly support our currency? The relationship certainly doesn't seem direct
👀 fantastic call out.
I’d say that initially after ww2 with the bretton woods agreeemnent in 1944, yes, the US dollar’s reserve currency status was dependent on our military strength (specifically winning ww2).
Now its complicated. im biased but i think we have the strongest military in the world. and yet, de-dollarization is still happening.
needless to say, i need to think through this, and make updates. thanks for the feedback!
We got some pushback on Boyd's 14 ground truths piece on this point as well. Here was part of my reply to the pushback:
The structural fact is that US security guarantees, the alliance system, and the open trade order they sustain make dollar invoicing and dollar reserves the rational default for allies. And the empirics on this are sharper than we let on in the piece.
Eichengreen et al's "Mars or Mercury?" (2019) finds that military alliances raise a currency's reserve share in an ally's holdings by about 30% controlling for size, credibility, and trade depth. The Fed's own IFDP work finds that roughly 3/4ths of foreign government holdings of safe US assets are by countries with some military tie to the US. During COVID, US military allies were nearly 50% more likely to get a Fed swap line than non-allies — dollar liquidity itself is rationed along security lines. The 2022 Russia case made it operational in real time, crossing the security line cost Russia its dollar holdings.
Ken Rogoff also puts it crisply in his recent book: "the dollar and the military are inseparably linked — military power underpins trust in the currency, while the dollar's privileges make it easier to finance that power."