starspangled (u/starspangled)

starspangled commented on Why does the U.S. always run a trade deficit? libertystreeteconomics.ne... · Posted by u/jnord

pbhjpbhj · 3 months ago

When Aus print money they devalue the currency, spreading the cost over all Aus dollar holders.

When USA do the same, the non-USA dollar holders also take on the cost, same-same, excepting that is everyone around the World who trades in dollars. Which comes back to USA's military-industrial complex to some extent. It's like having the ability to steal a gram from every gold bar in the World.

starspangled · 3 months ago

> When USA do the same, the non-USA dollar holders also take on the cost

They don't. If they aren't holding USD or something pegged to it then it is not devalued.

starspangled commented on Why does the U.S. always run a trade deficit? libertystreeteconomics.ne... · Posted by u/jnord

jampekka · 3 months ago

USD became the reserve currency in the Bretton Woods, when it was pegged to gold and major currencies were pegged to USD. This was pretty much demanded by US in the Bretton Woods conference.

In 1971 US unilaterally scrapped the Bretton Woods and essentially stole the gold reserves. Other countries protested heavily but could not really do much.

US then transitioned to the petrodollar system where demand for and value of the dollar is/was ensured by dollar monopoly in oil trade. This was done with deals with oil producing countries with varying levels of coercion.

Granted it is in a country's best interest not to piss off the world's largest military. Silver or lead is a decision too.

starspangled · 3 months ago

In other words, what I said was correct.

starspangled commented on Why does the U.S. always run a trade deficit? libertystreeteconomics.ne... · Posted by u/jnord

dns_snek · 3 months ago

> I will one day become infirm and unable to earn money, that does not mean I'm currently living beyond my means.

That is not the same thing because it's real productivity, labor is the only thing in the world that has any real value. You're exchanging your own labor for other people's labor. The US is exchanging something that has no inherent value (USD) for other people's labor.

If I take on all the debt that I can, max out my credit cards, mortgage my house, and spend everything I have on luxuries, am I living beyond my means, or am I living within my means as evidenced by the fact that I'm actually doing it?

starspangled · 3 months ago

> That is not the same thing because it's real productivity, labor is the only thing in the world that has any real value.

Note that I'm strictly discussing this topic using words in the way you'd find them defined in a reputable dictionary or a high school economics book.

starspangled commented on Why does the U.S. always run a trade deficit? libertystreeteconomics.ne... · Posted by u/jnord

vanviegen · 3 months ago

If you're spending $1.9 trillion per year more than you're earning (projected for 2025), accumulating debt, I think it's fair to say you're living well beyond your means.

We're talking about $5600 per inhabitant per year.

starspangled · 3 months ago

I didn't say Americans aren't living beyond their means. Just that on the face of it they aren't living beyond their means due to their currency's status if that status gives them some means to buy more. OP just didn't really provide a rationale as to why it's this currency issue in particular that you can point to to say Americans are living beyond their means.

Lots of countries have a lot of debt, many are in similar boats or worse as USA when you look at various metrics like debt per capita, per gdp, etc. Politicians and their "experts" and economists etc generally insist this is perfectly fine. I also get the feeling they're probably lying about that and many other things, though I don't know enough about the subject to actually know myself.

starspangled commented on Why does the U.S. always run a trade deficit? libertystreeteconomics.ne... · Posted by u/jnord

hakfoo · 3 months ago

I suspect in many cases, the "value add" an American firm provides is an intangible.

In the pre-tariff omnishambles world, I could buy a more or less equivalent widget for $18 branded with a recognizable American brand, for $12 as a KWJIBO non-brand delivered from Amazon, or for $6 more-or-less manufacturer direct from AliExpress.

Amazon added $6 of value by saying "I can get it to you in a timely manner and offer a confidence-reinforcing return policy."

The American brand added another $6 of value for "this can probably be sourced consistently and people won't look at you weird trying to get it Shenzhen Tchang Zu Shrimp Cannery And Electrolytic Capacitor Plant #5 onto the approved vendor list."

They didn't actually improve the widget itself, just logistics around it. That means their value-add is extremely tenuous, and has a limited moat.

starspangled · 3 months ago

The fact remains that the data we have says the value of US manufacturing is about 50% of that of China. You have your own perceptions of value of course, but that's not how value is actually calculated. The same as people who perceive China's manufacturing to be worthless because they produce cheap flimsy junk is also not an indication of any reality other than their own.

starspangled commented on Why does the U.S. always run a trade deficit? libertystreeteconomics.ne... · Posted by u/jnord

mrtksn · 3 months ago

The reserve currency status makes all the difference on how much of all this you can do and under what conditions. That's the difference and that's why US had it so good for so long and now is due for such a large correction. Also, US is blessed with huge natural reserves, didn't actually waste it all on drugs and alcohol but did in fact created some of the best institutions in many areas so maybe it wouldn't be that bad if the politics don't make it bad.

starspangled · 3 months ago

It's not a reserve currency because the US decided it is, it's a reserve currency because everybody else decided it is. They decided that because they decided it was in their own best interest to trade in and maintain reserves of USD.

But whatever difference it makes is still just a matter of degrees. Countries keep reserves of and trade in currencies other than USD. Some get more benefit than others from this, and they all work to benefit from what advantage they can take from their own positions within their means to do so.

starspangled commented on Why does the U.S. always run a trade deficit? libertystreeteconomics.ne... · Posted by u/jnord

mrtksn · 3 months ago

For other countries USD is something they have to work for or sell something to acquire it. If they screw up they may end up in crisis being unable to obtain USD. Borrowing in their own currency will be much more limited and borrowing in USD much more costly.

USA on the other hand can just print it out of thin air and because the global USD liquidity is huge they can do it for much longer without facing the consequences of it. USA is also borrowing in currency they can just print to pay their debts. Very advantageous position for USA and they took advantage of it, imported crazy amount of products and services otherwise they wouldn't have.

starspangled · 3 months ago

Many countries control their currency and can print money to pay debts, and can control their fiscal and monetary policies to best gain advantage for themselves. And they do.

US can do some things more, bigger, longer, etc., for various reasons. Just like Australia can do more, bigger, longer, etc., than Tonga. I don't really see anything profound being said here.

USA might be in some advantageous position now, and it might not always be in such a position, which is a pretty bland observation, but it also does not support the idea that they are living beyond their means today.

starspangled commented on Why does the U.S. always run a trade deficit? libertystreeteconomics.ne... · Posted by u/jnord

dns_snek · 3 months ago

Because at some unspecified point in the future, the rest of world will stop playing the game where the house always wins.

starspangled · 3 months ago

No, the meaning of the phrase "living beyond one's means" doesn't go to the unavoidable fact that circumstances change over time. I will one day become infirm and unable to earn money, that does not mean I'm currently living beyond my means.

US dollars might one day cease to be the global reserve currency in which case Americans will not see such benefits associated with that. This is a true statement. That doesn't mean they are currently living beyond their means either though.

starspangled commented on Why does the U.S. always run a trade deficit? libertystreeteconomics.ne... · Posted by u/jnord

__m · 3 months ago

it's called the “exorbitant privilege”

starspangled · 3 months ago

I'm not asking what it's called, I'm asking why that's claimed to be out of their means when it quite clearly is within their means to have this exorbitant privilege, as evidenced by the fact that they have exorbitant privilege.

starspangled commented on Why does the U.S. always run a trade deficit? libertystreeteconomics.ne... · Posted by u/jnord

xk_id · 3 months ago

> What does this mean really? That is their means.

It means Americans are providing mainly a financial service, by managing the dollar. The value of their currency therefore doesn’t accrue from a real economy, which, by definition, only includes consumer goods and services.

starspangled · 3 months ago

Even if we take what you wrote as fact, that does not answer how it is living beyond their means if their means includes "providing mainly a financial service, by managing the dollar".