Has the United States lost value since 9/11?

One of my favorite styles is when humor and truth are combined with sardonic wit, as exemplified by the Onion's Our Dumb Century, with headlines like "LBJ deploys 40,000 body bags to Vietnam". The Onion has long since gone downhill, and my current favorites in this genre are Fake Steve Jobs and Long or Short Capital. The latter recently wrote, in an open letter to the Fed titled "Re: you suck":

You’re lying to yourself if you think we still have real GDP growth in this country.

I challenge you to find one measure of wealth OTHER THAN THE DOLLAR
which shows the US economy as worth more now than in 2001. If I wanted
to buy our country it would cost me 30% fewer euros today than it did
in 2001, it would cost me less bars of gold, less barrels of oil, less
ounces of copper, less btu’s of natural gas, less cubic feet of lumber,
less of almost anything that has intrinsic value. Yet you keep
reporting GDP growth, why? Because your quick fix is to effectively
print more money so that in dollar units everything is getting more
“valuable”. But guess what, to the 95% of the world that doesn’t use
dollars the true value of the US economy has been shrinking, rapidly.

It’s like a company doing a 5 for 4 reverse stock split every year
and claiming to have 20% eps growth, you haven’t changed the earnings
just the units those earnings are measured in. The rest of the world is
telling you our country is worth less by massively selling our currency
and you still naively think we’re growing value - I feel like I’m at a
gathering of the flat earth society or in Zimbabwenomics 101.

I'm curious to know what y'all think about this argument, as I find it unsettling but superficially plausible. I mean, the fact that you could buy the entire US GDP for less of anything with intrinsic value than in 2001 seems pretty telling. Does that actually mean we have produced less value than in 2001? That I find hard to believe. But perhaps it just means that people see less expected future use & value for dollars. In other words, the purchasing power of our country is being written down based on changes in expectations, just like writing down the value of a subprime loan on the books.

Anyway, I've never had very good intuition for macro or currency issues, so I'd like to hear other people's thoughts. How many of you are US residents, but have decided to keep > 50% of your net worth in non-USD-denominated assets?

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I mean, the fact that you

I mean, the fact that you could buy the entire US GDP for less of anything with intrinsic value than in 2001 seems pretty telling.

There's the problem with this logic. Commodities don't have intrinsic value. Just like currencies, their prices are determined by supply and demand. Rising demand has caused the prices of many commodities to double, or triple, or increase sixteenfold (rhodium), but our economy's output isn't measured in raw materials; it's measured in finished goods and services. Fortunately, the prices of finished goods and services haven't risen nearly as quickly as commodity prices. I'd venture to guess that it takes more (or better) cars, computers, and other durable goods to buy the US economy than it did five years ago, and I think that's more significant.

Which is not to say that everything's just peachy, but this argument is bogus. The value of the US economy has fallen by more than 50% as measured in barrels of oil, but it's pretty clear that our standard of living hasn't fallen by 50%.

Also, the decline of the dollar may be due in part to the rise of the Euro as a competitor for the role it has traditionally played as the world's reserve currency. Which is bad, because we lose the benefits of seignorage, and the world won't subsidize our imports anymore. But it's alright--you can't be forever blessed.

If Euro-using people spent a

If Euro-using people spent a large share converted a large share of their income to dollars and then used these dollars to buy products, than we could say that a 30% rise in the value of a Euro was roughly equivalent to a 30% rise in real income. However, this is not the case, and if it were, then it would be self-defeating because the dollar and Euro would quickly stabilize relative to one another. However, they don't, and so the benefits accrue to those who directly purchase American products.. but obviously if this caught on, then American prices would rise due to increased demand and the Euro's advantage would disappear.

This kind of argument embodies the error of implying that price will not change with demand - Europeans can't "buy America" at the current market price because this price is set based on current supply and current demand. Obviously the demand would be somewhat altered if a proposition like this were to actually be made, and price would adjust accordingly, and unfavorably towards the Europeans. So yes, Europeans can theoretically enjoy more American goods at a cheaper price in the same way that I can enjoy a much more luxurious style in a 3rd world country at a cheaper price than what it would cost here, but this option has no bearing on our respective welfare if we don't actually achieve these potential outcomes. And if lots of people did so the outcome would no longer be an option.

US resident but net long

US resident but net long euro/dollar

Non U.S. assets can be

Non U.S. assets can be tricky. Actually, it sucks being a U.S. investor overseas. The following snipet is such an example that keeps individuals from participation in certain buyouts/share buybacks/share dividends. This example here led to a $10 euro/share loss just for being a an non-QIB U.S. investor.

"Due to restrictions under the United States securities laws, the offering is not extended to, or for the account or benefit of, shareholders resident in the United States or to any shareholder otherwise deemed to be a U.S. person, as defined in Regulation S ("U.S. Persons") under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"), other than qualified institutional buyers, as defined in Rule 144A under the U.S. Securities Act ("QIBs"), provided that such QIBs complete and return an investor representation letter. As such, the prospectus and any other materials relating to the offering may not be distributed into the United States, to, or for the account or benefit of, persons resident in the United Sates or to U.S. persons, other than to QIBs. The Rights have not been and will not be registered under the U.S. Securities Act."

In addition, it can be tough just finding places overseas to put your money thanks to the Patriot Act.

Producing value

"Does that actually mean we have produced less value than in 2001?"

If the market price of your house dropped since 2001 does that mean it produced less value for you this year?

Yes, it means I was less

Yes, it means I was less able to go in debt to buy things for example.