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You are giving the dollars to foreigners, in exchange of goods. Nobody is forcing you to do that. If you feel those products are not worth your dollars, do not

You are giving the dollars to foreigners, in exchange of goods. Nobody is forcing you to do that. If you feel those products are not worth your dollars, do not buy them.

rsj_hn 8y ago
Nobody is forcing you, but the forex rate adjusts so that the appropriate amount of goods is bought voluntarily. If country A bans foreign capital inflows and purchases $10 of foreign assets, then that forces a trade surplus of $10. Yes, that $10 transaction will be voluntary because it's currency will adjust so that the transaction is made. But from the macro point of view, the foreign capital flows drive the "voluntary" transactions.
- gonvaled 8y ago
  Well, that is how much the dollars are worth then.
  - rsj_hn 8y ago
    The dollars are worth whatever the relative foreign policies set. If China has a policy to depreciate against the dollar, by printing Yuan and buying dollars with them (what happens now) then the dollars end up being "worth" more, but the underlying capacity to produce of the U.S. hasn't increased, indeed it starts to decrease as people start to buy cheaper foreign output. So it's a bit disingenuous to say "well, people like these cheap goods" -- I mean, of course they do, but the story here is the foreign capital inflows which create an excessively expensive currency leading to a preference for certain types of goods. The whole ground is moving underneath you as a result of international policies and you don't see it, you just see people "choosing" to act.
    - gonvaled 8y ago
      The US manipulates the currency market in other, more powerful and more fundamental ways, by controlling the global currency. You do not need to hold foreign reserves, you do not need to pay exchange commissions, you are not blocked to do business with third parties by having capital flows stopped ...
      - rsj_hn 8y ago
        I don't think you understand what you are saying here. Yes, the U.S. has the world's reserve currency _because_ it allows unrestricted foreign capital inflows and has a long respect for property rights and rule of law. Try, as a foreigner, buying a house in China. It's illegal. Try, as a foreigner, to buy a house in the U.S. -- no problem. The U.S. opens it's markets to the rest of the world to purchase American assets while the rest of the world closes its markets. If you are a foreigner, you can buy all the corporate and government bonds you want. You can repatriate money out of the U.S. in unlimited amounts. In China, this is illegal. They don't even allow their own citizens to move more than a small amount of money out of their country. There is a great black market of people smuggling money into and out of china because the government restricts cross border capital flows -- like hiding money in your socks or trick suitcases, bribing border guards to let you through stuff. This is why the U.S. is the reserve currency, and it is also why we have a trade deficit, because as the rest of the world's capital pours into the U.S., that forces our currency to be overvalued enough to have an equal sized trade deficit on the way out. Whereas you seem to think that that the U.S. "manipulating" it's currency by making U.S. currency more attractive to hold for foreigners -- is somehow a counter or offsets what China is doing, which is making its currency less attractive to hold. But it's not, these two work together to cause the same distortion and large trade deficits.
        gonvaled 8y ago
        Your whole argument comes down to "the dollar is overvalued". What does this mean? Bad things and good things for the US. You are not going to mention the good things, so I will. For starters, you are using worthless (overvalued) papers to acquire real goods. The American consumer is getting a bargain. You are also able to buy foreign assets at firesale prices (yes, for all your grandstanding, the US is not the only economy allowing direct foreign investment) Having the world reserve currency (something the US has allowed / promoted to happen, out of interest) gives the US unfair operative advantages, already mentioned above. The appetite for the dollar allows the US to be largely independent from the financial markets. It also allows the US to get favourable credit ratings, and financing terms which are unthinkable for other economies. This has been happening for decades, and is continuing until we reach a certain breaking point Incidentally, it is possible that this trade conflict is motivated by that breaking point getting closer. To summarize: the US has enjoyed unfair, enourmous trade advantages for decades. It has been indulgent with its finances because the market has allowed it to be overspend. And now it wants the world to increase its already existing advantages, by claiming for "fair trade". It is not going to happen.
- rsj_hn 8y ago
  This is what a lot of people don't understand. They say thinks like "Country A has nothing that country B wants". Suppose we are in a world with only 2 countries, and country A has only apples to trade and country B has beautiful cars. It may well be that B doesn't want goods from A and A wants goods from B, nevertheless no trade deficit will occur unless there are foreign capital inflows. And if neither side allows foreign capital flows, then either A and B wont trade, or A and B will trade so that goods flow in both directions with no deficit. So, we have to tease apart the question of "do I want to buy this good" with the question of "why do people on one border consistently buy more goods than those on another". The former is up to individual preferences, but the latter -- the trade deficit -- is really just a matter of policy.

You are giving the dollars to foreigners, in exchange of goods. Nobody is forcing you to do that. If you feel those products are not worth your dollars, do not buy them.

rsj_hn 8y ago

Nobody is forcing you, but the forex rate adjusts so that the appropriate amount of goods is bought voluntarily. If country A bans foreign capital inflows and purchases $10 of foreign assets, then that forces a trade surplus of $10. Yes, that $10 transaction will be voluntary because it's currency will adjust so that the transaction is made. But from the macro point of view, the foreign capital flows drive the "voluntary" transactions.

gonvaled 8y ago
Well, that is how much the dollars are worth then.
- rsj_hn 8y ago
  The dollars are worth whatever the relative foreign policies set. If China has a policy to depreciate against the dollar, by printing Yuan and buying dollars with them (what happens now) then the dollars end up being "worth" more, but the underlying capacity to produce of the U.S. hasn't increased, indeed it starts to decrease as people start to buy cheaper foreign output. So it's a bit disingenuous to say "well, people like these cheap goods" -- I mean, of course they do, but the story here is the foreign capital inflows which create an excessively expensive currency leading to a preference for certain types of goods. The whole ground is moving underneath you as a result of international policies and you don't see it, you just see people "choosing" to act.
  - gonvaled 8y ago
    The US manipulates the currency market in other, more powerful and more fundamental ways, by controlling the global currency. You do not need to hold foreign reserves, you do not need to pay exchange commissions, you are not blocked to do business with third parties by having capital flows stopped ...
    - rsj_hn 8y ago
      I don't think you understand what you are saying here. Yes, the U.S. has the world's reserve currency _because_ it allows unrestricted foreign capital inflows and has a long respect for property rights and rule of law. Try, as a foreigner, buying a house in China. It's illegal. Try, as a foreigner, to buy a house in the U.S. -- no problem. The U.S. opens it's markets to the rest of the world to purchase American assets while the rest of the world closes its markets. If you are a foreigner, you can buy all the corporate and government bonds you want. You can repatriate money out of the U.S. in unlimited amounts. In China, this is illegal. They don't even allow their own citizens to move more than a small amount of money out of their country. There is a great black market of people smuggling money into and out of china because the government restricts cross border capital flows -- like hiding money in your socks or trick suitcases, bribing border guards to let you through stuff. This is why the U.S. is the reserve currency, and it is also why we have a trade deficit, because as the rest of the world's capital pours into the U.S., that forces our currency to be overvalued enough to have an equal sized trade deficit on the way out. Whereas you seem to think that that the U.S. "manipulating" it's currency by making U.S. currency more attractive to hold for foreigners -- is somehow a counter or offsets what China is doing, which is making its currency less attractive to hold. But it's not, these two work together to cause the same distortion and large trade deficits.
      - gonvaled 8y ago
        Your whole argument comes down to "the dollar is overvalued". What does this mean? Bad things and good things for the US. You are not going to mention the good things, so I will. For starters, you are using worthless (overvalued) papers to acquire real goods. The American consumer is getting a bargain. You are also able to buy foreign assets at firesale prices (yes, for all your grandstanding, the US is not the only economy allowing direct foreign investment) Having the world reserve currency (something the US has allowed / promoted to happen, out of interest) gives the US unfair operative advantages, already mentioned above. The appetite for the dollar allows the US to be largely independent from the financial markets. It also allows the US to get favourable credit ratings, and financing terms which are unthinkable for other economies. This has been happening for decades, and is continuing until we reach a certain breaking point Incidentally, it is possible that this trade conflict is motivated by that breaking point getting closer. To summarize: the US has enjoyed unfair, enourmous trade advantages for decades. It has been indulgent with its finances because the market has allowed it to be overspend. And now it wants the world to increase its already existing advantages, by claiming for "fair trade". It is not going to happen.
rsj_hn 8y ago
This is what a lot of people don't understand. They say thinks like "Country A has nothing that country B wants". Suppose we are in a world with only 2 countries, and country A has only apples to trade and country B has beautiful cars. It may well be that B doesn't want goods from A and A wants goods from B, nevertheless no trade deficit will occur unless there are foreign capital inflows. And if neither side allows foreign capital flows, then either A and B wont trade, or A and B will trade so that goods flow in both directions with no deficit. So, we have to tease apart the question of "do I want to buy this good" with the question of "why do people on one border consistently buy more goods than those on another". The former is up to individual preferences, but the latter -- the trade deficit -- is really just a matter of policy.