Discussion I had with ChatGPT.
Me.
Whenever I ask you what is the benefit of the reserve status of the dollar to the US, I get lower borrowing costs. However, for the the individual who works and earns the dollar in the US, the benefits are immense as that person can take the dollar he earned and act like a King abroad.
ChatGpt.
A strong dollar and its reserve status provide multiple benefits to individual Americans, not just the government. While lower borrowing costs are a primary macroeconomic advantage, the effects on daily life and personal finance are significant.
1. Increased Purchasing Power Abroad 👑.
A strong dollar gives USA Citizens more buying power when they travel or live overseas. This is the most direct and tangible benefit for individuals. Your observation that a dollar-earning individual can "act like a king abroad" is often true because the exchange rate favors the USA Dollar, making everything from accommodation and dining to tours and shopping cheaper in foreign currency terms. This effect also applies to USA Expatriates who are paid in dollars, as their cost of living in another country is reduced.
2. Lower Prices for Imported Goods 🛍65039;.
The strong dollar makes imported products, from cars and electronics to clothing and food, cheaper for USA Consumers. Since a large portion of the goods we consume are imported, a stronger dollar helps keep prices down, combating inflation and increasing the purchasing power of every dollar earned at home. This is a subtle but pervasive benefit that affects nearly every American.
3. Investment and Financial Stability 📈.
The dollar's reserve status is a vote of confidence in the USA Economy and its financial markets. This stability attracts foreign investment, which fuels American companies and innovation. For an individual, this means:
Stronger Investments: A stable financial system and a constant inflow of foreign capital can lead to stronger performance in the stock market and other investments, benefiting personal portfolios and retirement funds.
Safe-Haven Status: During times of global uncertainty, the dollar is seen as a "safe haven" currency. This means that even when a global crisis hits, the dollar often holds its value or strengthens, protecting the financial assets of Americans.
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Me
what can the US do to improve the status of the dollar around the world, or should it protect this status at all
ChatGPT
The US can take several actions to improve the status of the dollar around the world, primarily by reinforcing the key factors that made it the leading reserve currency in the first place. These factors are a stable economy, transparent governance, deep financial markets, and the rule of law. While there are some arguments that the US should not actively protect this status, the consensus among economists and policymakers is that it is of critical national interest.
Actions to Strengthen the Dollar's Status 🏛️
Reduce the Fiscal Deficit and National Debt: The most impactful long-term step the U.S. can take is to address its rising national debt. Large, persistent deficits erode confidence in the dollar's long-term stability and could lead to a loss of investor trust. A credible plan to manage government spending and revenues would be a powerful signal to the world that the US is committed to fiscal discipline.
Avoid "Weaponizing" the Dollar: The increased use of financial sanctions to achieve foreign policy goals, while effective in the short term, has prompted other nations to seek alternatives to the dollar for trade and reserves. Limiting the use of these sanctions to a more multilateral framework, rather than unilateral impositions, could reduce the incentive for "de-dollarization."
Maintain an Independent Federal Reserve: The credibility and independence of the Federal Reserve (the Fed) are cornerstones of the dollar's strength. The Fed's ability to make monetary policy decisions free from political influence is crucial for controlling inflation and maintaining financial stability. Political pressure on the Fed could undermine this confidence.
Promote Open and Stable Trade Policies: Sudden changes in trade policy, such as the imposition of tariffs, can disrupt global supply chains and financial flows. This unpredictability makes other countries more hesitant to rely on the dollar. Stable, transparent, and rules-based trade policies would improve the dollar's appeal.
Strengthen Financial Market Liquidity: The unparalleled liquidity of the U.S. Treasury market is a core reason the dollar is a reserve currency. Policies that ensure this market remains the world's safest and most liquid will continue to reinforce the dollar's status.
Should the U.S. Protect this Status?
The overwhelming consensus is that the US should protect the dollar's status. The "exorbitant privilege" of the dollar's reserve status brings numerous benefits:
Lower Borrowing Costs: High global demand for dollar-denominated assets, particularly U.S. Treasury bonds, allows the U.S. government and American consumers to borrow at lower interest rates.
Economic Influence: It gives the U.S. significant leverage in international affairs and a unique ability to impose financial sanctions that are effective on a global scale.
Global Stability: The dollar acts as a safe-haven currency during times of global crisis. The US, through the Federal Reserve, can provide dollar liquidity to other central banks, which helps stabilize the global financial system.
Reduced Currency Risk: The US does not face the same currency risk as other nations, as it can issue debt in its own currency.
While some argue that a strong dollar can harm U.S. exporters by making their goods more expensive abroad, this cost is widely considered to be outweighed by the significant benefits to the U.S. economy and its geopolitical standing. A sudden or rapid loss of the dollar's status would likely lead to higher interest rates, a weakened financial system, and a loss of global influence for the United States.
Trip report / notes from this weekend
Miscellaneous notes from a quick trip to Tijuana this past weekend:
-In San Ysidro noticed two ATMs next to the McDonald's that weren't there the last time I was in Tijuana back in April. Generic ATMs that replaced the Citibank ATM that was removed at some point last year.
-When crossing into Mexico this past Friday it was the first time in maybe a couple years or so they didn't bother to search my luggage.
-Noticed some major road construction on Revolucion in Zona Centro, in front of Hotel Caesars and extending a block or two down Revolucion. Businesses on those blocks are still open but with the construction no car traffic and a hassle even for pedestrian traffic to get through Is this the same sewer-related construction work they were doing for some roads in Zona Norte several months ago? Asked a couple of chicas and they didn't know.
-Out of curiosity walked over to Hotel Korea to see if the bar had reopened. The hotel worker said no but also said "dos meses", so seemed to believe the bar would be reopening there in two months. We'll see. Probably wouldn't believe it based on the numerous re-opening dates I've been given for Adelitas over the past couple of years.
-Late Saturday night checked out some of the dive strip clubs in the Alley for the first time I a long while. The first was La Carreta. Upon entering the first thing I noticed was what I think were a couple of trans dancers (was drunk so could be wrong but that's what it looked like) amongst a mix of unattractive chicas. Dipped from the club pretty quickly after that. Then checked out Gold Palace. Nothing even close to attractive there either, though I did briefly chat with a chica from Chile, which was interesting as I'd never met a chica from that country before. But don't think I'll ever be going back in those bars again.
-In general noticed a decrease in quality of chicas at HK this past Friday and Saturday night (supposed prime times). Not sure why that was or if maybe this trip was an aberration for some reason.
-At Chicago met a younger, beautiful chica from Aguascalientes (small state in Mexico) who I ended up hooking up with OTC in my room at Cascadas. Her story was an interesting one. She lived in Santa Barbara, CA (LA area) for about a year before getting picked up by ICE for driving without a license and was recently deported back to MX. She says she doesn't like the job but is working mainly to save up $15 K to (illegally) get back into the USA Seemed like a really sweet girl so am thinking about trying to talk her out of that as I don't know if spending that kind of money to sneak back into the US will go well for her. While a bit broken, her English is semi-decent for having learned only through the year she spent in the US.
-First trip to Tijuana not using taxi or an Uber. Have learned to get around using the taxi de ruta system fairly well. There's an app you can use to pay bus fare at a discounted rate that I'll have to learn more about.
-Nearly always get my cash from an ATM in the US but had to get a small amount of cash in Tijuana this past Saturday. Used the HSBC ATM at the Soriana's on Revolucion. The ATM charged 92 pesos on top of a "10.5 percent exchange rate surcharge" that I don't recall getting charged the last time I used the ATM (which admittedly was a very long time ago). It was a small amount of money and my bank will reimburse the 92 peso ATM fee but, as someone very frugal, the 10.5 percent exchange rate still irked me. Anyone have recommendations on a better ATM in Tijuana in case I need to use one in the future?
