Decades of socialist propaganda in our schools have led the general public to the belief that ownership of anything outside of this country is an inherent evil. That’s why relatively reasonable postulates about Denmark and the Panama Canal are met with wild disbelief. Hopefully Trump can keep sledge hammering that perception.
Very well put. ... There's a price for being the world's reserve currency. As you say, if you don't produce the goods or services they want, they will opt for your assets instead.
The problem was that since the USD is the GRC, that makes the USD overvalued relative to what it would otherwise be, and that since the USD is overvalued, it makes all of our exports more expensive in other markets than they otherwise would be (i.e. not competitive).
And when our exports are not competitive globally, that industry shrinks in the US and grows ex-US. Which is exactly what has happened.
It's not that "they don't want our stuff", it's that our stuff is very expensive relative to nearly all other producers globally.
you mean till the age of corporate wall street? Where all their failures are shouldered by stock holders and taxpayers?
Time to Reform Wall Street
5% tax on the GROSS Wall Street trades or moving money offshore. Holding stocks or bond for a pico-second or sending it to tax-dodge-countries isn't investing. Make it about investing!
If I buy tractor, I pay sales tax!
Also End Carried Interest Scam! And lastly...NO bonuses in the financial world till EVERY dollar of Federal Reserve Debt, $7 Trillion, is PAID back!
Excellent post. The "Triffin Dilemma" contains an inherent contradiction: to quote late Herbert Stein, if something can't go on forever it will stop. A country consistently running large trade deficits will either run up large debts or lose control over its assets or both (we did both) and its currency will eventually lose the reserve status. The fact that the "we must run deficits" argument is being widely repeated just illustrates corruption of the politicians and much of the economic profession.
Confidence in government is the main driver of everything. That confidence has been waning for decades. America is doomed because the government does nothing to instill a lasting confidence in what they are doing.
Trump, the savior (whom I once voted for), is spinning around like a merry-go-round rolling the dice of disaster betting on the old ways which have long since been crumpled.
Constant wars, inflation (even silly 2% hurts over time), rising deficits now running like a slot machine, the DC Swamp beyond corrupted, the justice system cracking, the constitution in tatters, a completely messed up $5 trillion medical system, millions of citizens struggling to survive, and that is just the tip of the sinking USS Titanic.
I thought the problem was that since the USD is the GRC, that makes the USD overvalued relative to what it would otherwise be, and that since the USD is overvalued, it makes all of our exports more expensive in other markets than they otherwise would be (i.e. not competitive).
And when our exports are not competitive globally, that industry shrinks in the US and grows ex-US. Which is exactly what has happened.
So, you may be right about Triffin's dilemma not "requiring" a trade deficit. But it seems that a massive trade deficit is the nearly-impossible-to-prevent result of this.
Importing more than you export is a problem. It is hard to be the world's reserve currency, when there is no reserve, when you produce little of value to foreign countries. Our republic has been sold out by crooked, self-serving politicians and the Fed. Now, the Fed is the biggest problem. Every time the country needs money (spending more than you're receiving and importing more than you're exporting), the bankers need money (due to making loans with no money on hand), the stock market needs more capital (loans), the Fed obliges by printing money that is backed by zilch (actually loans to be paid back by the taxpayers with interest). The question is how much longer will the dollar be the world's reserve currency. Now, we have Brazil, China, India, Russia and a few more (BRICS) gaining strength to force the dollar out. This cannot end well, Trump tariffs or not. The US is on the top of the financial cliff waiting to fall down to a very painful landing.
In fairness to our dear politicians, it was US Corporations that offshored manufacturing without any policy push. They did so in part for higher margins but primarily for tax reasons. Being offshore allowed them to divert the higher profits into tax haven jurisdictions using mechanisms such as transfer pricing, IP fees etc.
In discussing the "Triffin Paradox" there is also the issue of "Eurodollars" which are created by Banks offshore as journal entries and do not appear in official US "Money supply" data. Eurodollars came into existence largely to address the need for a supply of Dollars offshore beyond what normal trade could supply, in support of the Reserve currency. The Eurodollar has, of course, since taken on a life of its own and is arguably the dominant force in global trade and finance.
"Because there's two ways for, say, Japan to get ahold of dollars. One is sell us more cars. The other is sell us their companies, real estate and family jewels."
Isn't there a third way: I.e They borrow the dollars. Isn't that in fact what Japan does? Like all banks, the US GoverFed creates money by lending it? And the rest of the world uses it as money.
If so, that puts the deficit and the dollar as the world reserve currency into a different perspective. As I've heard it said, the real world economy is this: The rest of the world makes the stuff and the US is the bank.
While reading this it occurred to me, DJT and his economic team might think a lot like you. These might be the very facts that led to his comment about owning Gaza and developing it.
Decades of socialist propaganda in our schools have led the general public to the belief that ownership of anything outside of this country is an inherent evil. That’s why relatively reasonable postulates about Denmark and the Panama Canal are met with wild disbelief. Hopefully Trump can keep sledge hammering that perception.
Very well put. ... There's a price for being the world's reserve currency. As you say, if you don't produce the goods or services they want, they will opt for your assets instead.
The problem was that since the USD is the GRC, that makes the USD overvalued relative to what it would otherwise be, and that since the USD is overvalued, it makes all of our exports more expensive in other markets than they otherwise would be (i.e. not competitive).
And when our exports are not competitive globally, that industry shrinks in the US and grows ex-US. Which is exactly what has happened.
It's not that "they don't want our stuff", it's that our stuff is very expensive relative to nearly all other producers globally.
Well said
you mean till the age of corporate wall street? Where all their failures are shouldered by stock holders and taxpayers?
Time to Reform Wall Street
5% tax on the GROSS Wall Street trades or moving money offshore. Holding stocks or bond for a pico-second or sending it to tax-dodge-countries isn't investing. Make it about investing!
If I buy tractor, I pay sales tax!
Also End Carried Interest Scam! And lastly...NO bonuses in the financial world till EVERY dollar of Federal Reserve Debt, $7 Trillion, is PAID back!
This is a horrible idea. You should be stoned for even suggesting it. Lower taxes are better.
really explain why?
should wall street be about pico-second investing?
Wall Street has been reward with printed Trillions...what have the banks done middle america...other than rip them off!
Thank you. I'm beginning to understand world economics (at last.)
Excellent post. The "Triffin Dilemma" contains an inherent contradiction: to quote late Herbert Stein, if something can't go on forever it will stop. A country consistently running large trade deficits will either run up large debts or lose control over its assets or both (we did both) and its currency will eventually lose the reserve status. The fact that the "we must run deficits" argument is being widely repeated just illustrates corruption of the politicians and much of the economic profession.
Confidence in government is the main driver of everything. That confidence has been waning for decades. America is doomed because the government does nothing to instill a lasting confidence in what they are doing.
Trump, the savior (whom I once voted for), is spinning around like a merry-go-round rolling the dice of disaster betting on the old ways which have long since been crumpled.
Constant wars, inflation (even silly 2% hurts over time), rising deficits now running like a slot machine, the DC Swamp beyond corrupted, the justice system cracking, the constitution in tatters, a completely messed up $5 trillion medical system, millions of citizens struggling to survive, and that is just the tip of the sinking USS Titanic.
I believe Bob Murphy did a podcast episode recently on this topic as well. You two should do a joint interview at some point if you haven’t already.
I thought the problem was that since the USD is the GRC, that makes the USD overvalued relative to what it would otherwise be, and that since the USD is overvalued, it makes all of our exports more expensive in other markets than they otherwise would be (i.e. not competitive).
And when our exports are not competitive globally, that industry shrinks in the US and grows ex-US. Which is exactly what has happened.
So, you may be right about Triffin's dilemma not "requiring" a trade deficit. But it seems that a massive trade deficit is the nearly-impossible-to-prevent result of this.
Isn't that Triffin's dilemma?
Bitcoin fixes this!
DR. Is it just a coincidence that the Trade Deficit is exactly the same amount as the advertised National Debt?
Importing more than you export is a problem. It is hard to be the world's reserve currency, when there is no reserve, when you produce little of value to foreign countries. Our republic has been sold out by crooked, self-serving politicians and the Fed. Now, the Fed is the biggest problem. Every time the country needs money (spending more than you're receiving and importing more than you're exporting), the bankers need money (due to making loans with no money on hand), the stock market needs more capital (loans), the Fed obliges by printing money that is backed by zilch (actually loans to be paid back by the taxpayers with interest). The question is how much longer will the dollar be the world's reserve currency. Now, we have Brazil, China, India, Russia and a few more (BRICS) gaining strength to force the dollar out. This cannot end well, Trump tariffs or not. The US is on the top of the financial cliff waiting to fall down to a very painful landing.
In fairness to our dear politicians, it was US Corporations that offshored manufacturing without any policy push. They did so in part for higher margins but primarily for tax reasons. Being offshore allowed them to divert the higher profits into tax haven jurisdictions using mechanisms such as transfer pricing, IP fees etc.
In discussing the "Triffin Paradox" there is also the issue of "Eurodollars" which are created by Banks offshore as journal entries and do not appear in official US "Money supply" data. Eurodollars came into existence largely to address the need for a supply of Dollars offshore beyond what normal trade could supply, in support of the Reserve currency. The Eurodollar has, of course, since taken on a life of its own and is arguably the dominant force in global trade and finance.
I've been greatly enjoying the videos!
"Because there's two ways for, say, Japan to get ahold of dollars. One is sell us more cars. The other is sell us their companies, real estate and family jewels."
Isn't there a third way: I.e They borrow the dollars. Isn't that in fact what Japan does? Like all banks, the US GoverFed creates money by lending it? And the rest of the world uses it as money.
If so, that puts the deficit and the dollar as the world reserve currency into a different perspective. As I've heard it said, the real world economy is this: The rest of the world makes the stuff and the US is the bank.
While reading this it occurred to me, DJT and his economic team might think a lot like you. These might be the very facts that led to his comment about owning Gaza and developing it.