Unfortunately this article begins by poisoning the well with the Greek example, and I kept reading hoping the author would either explain why despite the major difference between the Greece and US situations there are still lessons to be learnt, but the article doesn’t even mention the difference.

The #1 difference, which at the very least has to be explained if you don’t even consider it relevant, is that Greece couldn’t print Euros whereas the U.S. does print dollars.

The fact that they could write the entire article without even mentioning this difference frankly makes it suspect to say the least.

But there are so many other issues.

- The author keeps treating currency as debt. And while it’s true at some level, currency is not debt. Because currency can be created. Borrowing in your own currency means you can simply print more currency if you need to.

This isn’t a good thing, because your currency would plummet in value and you wouldn’t be able to buy anything from abroad, but that’s what these tariffs are trying to do anyways! The tariffs are realizing the possible but not likely worst case scenario from the future now, in the most obnoxious way that alienates allies and makes the country immediately poorer for no good reason.

- China is buying assets. Trillions of dollars worth. And yet we don’t see those trillions of dollars worth of property and U.S. assets owned by the Chinese government? Why is that? Where is the massive purchase of U.S. assets by foreign governments the author threatens will happen?

There isn’t any such thing because the assets the Chinese are buying is the US dollar. This is where reserve currency status comes in. The author links to an article about the reserve currency supposedly not being all it’s cracked up to be (and one can have that discussion), but never even addresses what it means to be the reserve currency.

What it means is that perceived U.S. governmental and financial stability and the belief that the U.S. would honor its debts, makes the U.S. dollar valuable in and of itself.

China and India, under normal circumstances, are much more likely to trade with each other in USD than they are either in Rupees or Yuan. That’s what it means to be the reserve currency.

But neither of them can print USD so they have to buy USD, which has an intrinsic utility value in itself. This is what funds American “consumption” (we will get back to this as well). The assets China is buying is quite literally the U.S. dollar and not a future promise to buy assets in the future.

The problem, however, is that recent U.S. govt actions are destroying that trust and stability underlying the intrinsic value of the USD, at which point it will indeed become an IOU. But that is a decision the current U.S. government is making that no other country wants them to make. Destroying this will lead to a real destruction of trillions of dollars worth of actual U.S. assets, because that trust has real value.

- The author insists the U.S. is using the products flowing into it for “consumption” not “investment”. And yet the U.S. GDP, which represents productive output, keeps increasing faster than most other western and developed nations. How is all this consumption translating into actual productive growth? US productivity growth has also far outpaced other similar nations, even those that we supposedly consider “investment” nations such as Germany.

The reality is that the U.S. is just “consuming” is romantic nonsense which somehow ignores non physical production (ie services) even though arguably this is even more important today. Think about the latest exemption that the U.S. just applied on electronics. That’s over 20% of Chinese exports to the U.S. It basically falls under “consumption”, but smartphones and laptops are the basis of trillions of dollars of productive output. Without this “consumption” the US would have a GDP that would be a fraction of the size it is today.

But we can go even further. How about household appliances? The fact that nearly every US home has a dishwasher and washing machine and dryer means far more Americans are able to work further increasing productive US output than without this “consumption”.

The idea that “investment” is somehow superior to “consumption” is suspect to say the least. Both investment and consumption can be bad. The famous Alaskan “bridge to nowhere” was investment, but it was worth far less than a parent buying a cheap Chinese produced toy for their child, and the positive impact that had on the parents and kids.

The whole point of free market capitalism is that individuals can usually make better choices than an overbearing government for what is and isn’t a better use of their money.

This can be corrupted. So Americans spend way too much money on eating junk food, meat, dairy, consuming drugs, etc. but all of those are largely homegrown goods and a result of “investment” creating huge industries pushing these products on Americans.

There is bad consumption and bad investment and good consumption and good investment (defined purely in terms of productivity).

I can go on with other issues with the article, but this is already way too long, and I actually don’t disagree with the end. The U.S. government needs to reduce its massive deficits not because it means it will have to sell assets in the future. Unless this administration completely destroys the U.S. governments credibility this won’t be a problem. No, the problem is the distortionary effects of that deficit domestically. And we can see that with the concentration of wealth it’s leading to causing American industries to compete not by selling better products or being more productive, but by buying the U.S. government to cut their taxes, to redirect government spending towards themselves, and to keep out competitors.

Fortunately solving this problem will help with the deficit as well. Go back to the tax levels before the trillion dollar tax cuts on the wealthiest and to reduce the deficit with barely any impact on actual productive activity.