Two arguments that are plausible but wrong

Periodically, and by periodically I mean almost daily, one is reminded that the mainstream media is paid based on panic, not based on the purveyance of accurate news.  

With the newly implemented sanctions regime on Russia over its invasion of Ukraine, I have seen numerous headlines and articles to the effect that The US, by supporting and leading such sanctions, has put the US Dollar as a reserve currency at immediate risk.  There are many benefits (and burdensome obligations) which go with being the global reserve currency so there is always a legitimate argument to be had whether the US Dollar as the global reserve currency is, net, a good or bad thing for individual Americans and for the American economy at large.  

I am pretty strongly inclined towards the positive net benefit camp, but acknowledge the legitimacy of the argument.

But the idea that global sanctions against Russia are likely to threaten the US Dollar reserve currency status in the near term is near absurd.  Even the longer term threat seems, on balance, vestigial.  But that doesn't stop all the panicky headlines worried about that possible outcome.

This reminds me of the argument advanced in, what, the New York Times?, a few months ago that increasing inflation was not a bad thing because increasing inflation would lead to rising salaries.

An argument so bad it isn't even wrong (Pauli).  When efforts like this are advanced in the mainstream media as viable arguments, those who actually understand the topic are left in a dilemma.  With an argument so bad it's not even wrong, you can't simply expose the logical fallacy or provide the refuting empirical data.  You have to educate on the fundamental and reframe the argument so that it comports with logic and empirical reality.  That's a lot of work for an argument that is not even wrong.

In the case of the arguments about the US Dollar reserve currency status, it is very easy to come up with imaginary argument for why everyone should panic and laborious to refute it.  Consequently, the mainstream media has a lot of panic porn and much less actual empirical and logical arguments.

A situation which has fueled the boom at Substack.  

In this instance, the first strong refutation I have seen is from Sanctions on Russia Won't End the Dollar's Reserve Currency Status by Joseph Politano.  The subheading is The Dollar is the Center of the Global Economy, and Will Remain that Way.  His is a strong argument.  I would hedge a little more and be a little less categorical but I think he is right.

In general, the arguments that sanctions will end or seriously damage the dollar’s reserve currency status fall into one of two camps. The first camp is what I would call the “institutional trust” argument, and the second camp is what I would call the “commodity money” argument.

I think there is a third camp, the "complex systems" argument.  Any complex system (large, many loosely coupled systems, dynamic, evolving, subject to log effects, etc.) under stress is subject to unpredictable cascade events.  It is inherent.  Any shock to the system has the capacity to subvert the system owing to unknown and unpredictable interactions, but there is little that can be done about that other than to make it as resilient and adaptive as possible.

That is neither here nor there, though.  Politano lays out the historical and empirical case why neither the "institutional trust" nor the "commodity money" carry much weight.  

The regrettable thing is the mainstream media is carrying all the hysteria arguments to create panic and the reasoned and informed refutations occur in the much harder to find corners of blogs, and substack, and individual Twitter accounts.  

Read the whole thing.