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You can look at it the other way around. At present the rest of the world generates a surplus of real stuff and supplies it to Net deficit countries in return

You can look at it the other way around. At present the rest of the world generates a surplus of real stuff and supplies it to Net deficit countries in return for mere promises. Where else are they going to sell that stuff? If they could get something concrete for it, they wouldn't be supplying it to us in return for promises. There isn't a magical source of untapped demand in the world that can absorb this output - or it would already be being supplied. Therefore the only practical option other than taking dollars and pounds is not to produce that sort of output at all. Which means unemployment in the producing countries, and an abandonment of the 'export led growth' belief. The UK is still the third largest net importer on earth. We lost our reserve currency status nearly a century ago. China is not yet ready to free up its capital account and float its currency. Therefore it cannot supply the promises the world demands.

spacebanana7 3y ago
> At present the rest of the world generates a surplus of real stuff and supplies it to Net deficit countries in return for mere promises. I view the UK/US as exporters of property rights. An entry on the British land registry can confidently assure somebody of a home in 75 years in manner which nothing in the Chinese economy can. Those rights aren't perfect, subject to sanctions etc, but are generally still much stronger than what those investors have at home. A big chunk of the UK's trade deficit goes away if you count overseas purchases of London real estate as exports rather than investments. Which I think makes sense given the low yields, high taxes and concentrated buyer base.
- foverzar 3y ago
  > An entry on the British land registry can confidently assure somebody of a home in 75 years in manner which nothing in the Chinese economy can. Except it can't, as it recently became most evident with Russians. Everyone is now running away from it and towards Dubai. The precedent is set and new risks have to be managed.

spacebanana7 3y ago

> At present the rest of the world generates a surplus of real stuff and supplies it to Net deficit countries in return for mere promises. I view the UK/US as exporters of property rights. An entry on the British land registry can confidently assure somebody of a home in 75 years in manner which nothing in the Chinese economy can. Those rights aren't perfect, subject to sanctions etc, but are generally still much stronger than what those investors have at home. A big chunk of the UK's trade deficit goes away if you count overseas purchases of London real estate as exports rather than investments. Which I think makes sense given the low yields, high taxes and concentrated buyer base.

foverzar 3y ago
> An entry on the British land registry can confidently assure somebody of a home in 75 years in manner which nothing in the Chinese economy can. Except it can't, as it recently became most evident with Russians. Everyone is now running away from it and towards Dubai. The precedent is set and new risks have to be managed.