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Yes, read into the balance of payments: http://www.investopedia.com/articles/03/060403.asp#axzz1rYFTbCfM http://www.investopedia.com/articles/03/060403.asp#axzz

Yes, read into the balance of payments: http://www.investopedia.com/articles/03/060403.asp#axzz1rYFTbCfM http://www.investopedia.com/articles/03/060403.asp#axzz1rYFT... It's basically: Stuff+Investments sent = Stuff+Investments received Think about it this way: China sends the US an iPhone, and the US sends dollars (paper / numbers on a screen) in return. China put a lot of work into the iPhones... what did they get? They got the opportunity to buy stuff in America with dollars! What do they want to buy? They could buy stuff, like airplanes and software, or they can buy factories. And yes, when they buy American investment products, they will (or hope to) receive more back in the future. When you buy a productive asset, or save money, you expect to receive more back in the future. So when you sell that productive asset, you give up that future benefit for a smaller benefit today.

mistermann 9y ago
> China sends the US an iPhone, and the US sends dollars (paper / numbers on a screen) in return. China put a lot of work into the iPhones... what did they get? They got the opportunity to buy stuff in America with dollars! This makes it sound like every dollar from the US finds it's way "back home". China has been doing a lot of investing in other places like Africa, and China. Where does that money come from? Not Africa and China I suspect.
- chii 9y ago
  ultimately, only place you can ultimately spend american dollars is in america. Some spent indirectly do find its way back to america, some stay out and circulate for a very long time, but imagine a scenario where america collapses (suddenly for an unknown reason). Will countries that used to take american dollars as a form of payment continue to accept it? I'd say no. Therefore, money spent by china in africa in the form of american dollars will ulimately be re-used to purchase american goods.
  - firethief 9y ago
    That would be more true if currencies could not be exchanged.
  - gozur88 9y ago
    Not necessarily. There are a lot of countries in which merchants are perfectly happy to take dollars over the local currency. Over the years there are countries that completely abandoned their local currency in favor of the US dollar (e.g. Ecuador) until they could get their own currency sorted.
- stephen_g 9y ago
  True, it partially breaks down as the US dollar is a de facto international reserve currency. Since so many countries will accept US dollars for their exports, a portion of that cash can keep circulating around outside the US.
- whack 9y ago
  You've got your order reversed. China uses it's currency to buy investments in Africa. The Africans now have a bunch of Chinese currency, and clearly, they are going to do something with it. Most likely they will use it to buy consumer goods made in China. Thus creating a trade deficit that's exactly equal to the investment surplus. There's nothing mysterious or sinister about the balance of payments. It's a mathematical and accounting tautology. I suggest spending some time reading about it from a good source, if you're still skeptical.
  - mistermann 9y ago
    Of course the net exchange of money within the global economy must net to zero, but that's a very different thing than saying that the $ the US sends to China in exchange for manufactured goods must either be used to purchase US goods or invest in the US, as was the initial claim.

mistermann 9y ago

> China sends the US an iPhone, and the US sends dollars (paper / numbers on a screen) in return. China put a lot of work into the iPhones... what did they get? They got the opportunity to buy stuff in America with dollars! This makes it sound like every dollar from the US finds it's way "back home". China has been doing a lot of investing in other places like Africa, and China. Where does that money come from? Not Africa and China I suspect.

chii 9y ago
ultimately, only place you can ultimately spend american dollars is in america. Some spent indirectly do find its way back to america, some stay out and circulate for a very long time, but imagine a scenario where america collapses (suddenly for an unknown reason). Will countries that used to take american dollars as a form of payment continue to accept it? I'd say no. Therefore, money spent by china in africa in the form of american dollars will ulimately be re-used to purchase american goods.
- firethief 9y ago
  That would be more true if currencies could not be exchanged.
- gozur88 9y ago
  Not necessarily. There are a lot of countries in which merchants are perfectly happy to take dollars over the local currency. Over the years there are countries that completely abandoned their local currency in favor of the US dollar (e.g. Ecuador) until they could get their own currency sorted.
stephen_g 9y ago
True, it partially breaks down as the US dollar is a de facto international reserve currency. Since so many countries will accept US dollars for their exports, a portion of that cash can keep circulating around outside the US.
whack 9y ago
You've got your order reversed. China uses it's currency to buy investments in Africa. The Africans now have a bunch of Chinese currency, and clearly, they are going to do something with it. Most likely they will use it to buy consumer goods made in China. Thus creating a trade deficit that's exactly equal to the investment surplus. There's nothing mysterious or sinister about the balance of payments. It's a mathematical and accounting tautology. I suggest spending some time reading about it from a good source, if you're still skeptical.
- mistermann 9y ago
  Of course the net exchange of money within the global economy must net to zero, but that's a very different thing than saying that the $ the US sends to China in exchange for manufactured goods must either be used to purchase US goods or invest in the US, as was the initial claim.