4 ms·

The value of a country's currency = How much stuff it produces / How much money it prints. Both, Japan and the US are increasing their monetary base by what, 1

The value of a country's currency = How much stuff it produces / How much money it prints. Both, Japan and the US are increasing their monetary base by what, 10% per year? Don't know about the productivity of Japan, but the US still seems on top of its game. Software and datacenters are the most important resource of the future. And so far the US is leading the way. Microsoft, Apple, Google, Amazon, Meta, Nvidia ... all in the US. The US is also the world's leading country when it comes to Bitcoin mining.

FpUser 2y ago
>"Software and datacenters are the most important resource of the future." I think food and shelter are primal. Anything bad happens and software along with datacenters matter no more.
- ArtTimeInvestor 2y ago
  Primal does not mean valuable. You personally can value the bakery next door higher than Microsoft, because "Hey, I can eat bread but I can't eat software". But the market will not agree with you.
  - throwaway290 2y ago
    Only the market in a relatively stable world.
    - ArtTimeInvestor 2y ago
      In this world. The world we live in.
      - throwaway290 2y ago
        While there is a power interested in this stability stronger than powers that would like to undermine it, sure
- JumpCrisscross 2y ago
  > think food and shelter are primal America is the world's largest agricultural exporter [1]. [1] https://www.investopedia.com/financial-edge/0712/top-agricultural-producing-countries.aspx https://www.investopedia.com/financial-edge/0712/top-agricul...
  - onecommentman 2y ago
    The US produces 15 Billion bushels of corn/maize a year. Bushel = 56 pounds. About 8 bushels provide the calorie requirement for an adult for a year. The US has about 350 Million people. The US produces roughly 4 Billion bushels of soybeans a year. Bushel = 60 pound. About 6 bushels of soy (yielding 60ish pounds total protein) meet the protein requirements for an adult for a year. Provides additional total calories to boot. Just corn and beans. The US will do just fine…as will the rest of the Americas, since Brazil is outproducing the US in soybeans and producing 5 Billion bushels of corn a year.
throwaway4good 2y ago
Money printing works differently in the US compared to Japan because of the USD's status as defacto trade and reserve currency.
- ArtTimeInvestor 2y ago
  Different how? When the US doubles the supply of the Dollar, its value halves. It takes a while and the effect spreads in chaotic waves. But there is no escape from this effect. No matter how widely used the currency is.
  - pkulak 2y ago
    But it takes way more to double usd.
  - throwaway4good 2y ago
    It is the exorbitant privilege. It is a bit hard to find good discussions of the mechanism because it gets political very quickly. But in essence if the US prints the whole world absorbs it, if Japan prints it stays in Japan.
    - ArtTimeInvestor 2y ago
      What you say is that there is more demand for the Dollar. That does not change the fact that the price halves when the supply doubles. Price = demand/supply.
      - CorrectHorseBat 2y ago
        Demand can be a function of supply, so no it's not that simple.
      - kurthr 2y ago
        You somehow think that the demand/supply curve is linear. Why? It would be quite odd. Certainly Japan has generated far more currency and debt over the last 35 years while inflation stayed low (and the relative value of Yen stayed high). I don't see any explanation for that here any more than the yearly gyrations of other currencies crypto or fiat.
mo_42 2y ago
> The value of a country's currency = How much stuff it produces / How much money it prints. The value of a currency is how much people are willing to pay to have the other currency. For example, if Japan is importing many goods and services, they need to pay them in USD and so they have to buy USD on the market. > Both, Japan and the US are increasing their monetary base by what, 10% per year? The monetary base is not strictly connected to the money in the economy. Most of the money is created by commercial banks when they hand out loans. So the entire money in the economy can shrink (people paying back more loans than they), while at the same time the central bank increases currency. For reference: https://www.bundesbank.de/resource/blob/654284/df66c4444d065a7f519e2ab0c476df58/mL/2017-04-money-creation-process-data.pdf https://www.bundesbank.de/resource/blob/654284/df66c4444d065... https://www.bis.org/review/r180118c.pdf https://www.bis.org/review/r180118c.pdf
- lotsofpulp 2y ago
  >if Japan is importing many goods and services, they need to pay them in USD and so they have to buy USD on the market. Why does Japan need to pay them in USD?Because, as ArtTimeInvestor wrote, > but the US still seems on top of its game. Whatever the US sells, whether it be purely business/technology or even commingled with military resources, a lot of people in the world are interested in buying it.
- ArtTimeInvestor 2y ago
  if Japan is importing many goods and services, they need to pay them in USD Yes, and for this purpose, the Dollar is among the "stuff" the US produces: A currency accepted in many places. Most of the money is created by commercial banks Say there is a new bank which has no central bank money, no deposits, nothing. First customer walks in and gets a credit of $100. Now the customer wants to pay these $100 to someone who uses a different bank. What happens?
  - JumpCrisscross 2y ago
    > First customer walks in and gets a credit of $100. Now the customer wants to pay these $100 to someone who uses a different bank. What happens? The first bank credits the account the different bank has with it in the amount of a hundred dollars. This involves updating a spreadsheet. "Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money" [1]. [1] https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
gjjydfhgd 2y ago
US datacenters are built with computing hardware produced in other countries. Labor too, TSMC had to bring welders from Taiwan for it's US fabs.
mrtksn 2y ago
The thing is, stuff might not be priced correctly. The US is a superpower in many areas but in a lot of cases the productivity is beancounters magic. Maybe US has the superior beancounters and not necessarily the superior production. For example, an appendicitis creates an economic activity of at least $7000 dollars in US and much much less elsewhere even if the work done on the human body is the same. Similar situation for the software, for some reason writing a for loop in SV is at least 3 times more valuable than writing it in London. So I would argue that the forumula of country's currency = How much stuff it produces / How much money it prints doesn't necessarily be working the same everywhere. Why? IMHO it's for 2 reasons: barriers on people moving and the US being de facto reserve currency. There are too many artificial barriers on the free market around the globe, the capital flows much more freely than the labor around the globe and this creates artificial valuations of properties and economic activities.
- JumpCrisscross 2y ago
  > for some reason writing a for loop in SV is at least 3 times more valuable than writing it in London I mean, yes, writing the same line of code at Google, Uber or OpenAI is more valuable than doing so at a British neobank. You're correct in productivity being a nefarious beast to measure. But the examples given--extending the life of a high-GDP-per-capita person or doing identical work in dramatically different contexts--aren't making your point.
  - bmoxb 2y ago
    The multiplier is roughly the same even if the dev in London is working at the exact same company as the one in SV.
    - JumpCrisscross 2y ago
      > multiplier is roughly the same even if the dev in London is working at the exact same company as the one in SV Sure. Because they’re doing different work, in proximity to different people and different resources, within different economic contexts. A developer in Silicon Valley is fundamentally more productive than one in London, in part solely by virtue of being in Silicon Valley. (Not true at the individual level, of course. But statistically, of course.)

FpUser 2y ago

>"Software and datacenters are the most important resource of the future." I think food and shelter are primal. Anything bad happens and software along with datacenters matter no more.

ArtTimeInvestor 2y ago
Primal does not mean valuable. You personally can value the bakery next door higher than Microsoft, because "Hey, I can eat bread but I can't eat software". But the market will not agree with you.
- throwaway290 2y ago
  Only the market in a relatively stable world.
  - ArtTimeInvestor 2y ago
    In this world. The world we live in.
    - throwaway290 2y ago
      While there is a power interested in this stability stronger than powers that would like to undermine it, sure
JumpCrisscross 2y ago
> think food and shelter are primal America is the world's largest agricultural exporter [1]. [1] https://www.investopedia.com/financial-edge/0712/top-agricultural-producing-countries.aspx https://www.investopedia.com/financial-edge/0712/top-agricul...
- onecommentman 2y ago
  The US produces 15 Billion bushels of corn/maize a year. Bushel = 56 pounds. About 8 bushels provide the calorie requirement for an adult for a year. The US has about 350 Million people. The US produces roughly 4 Billion bushels of soybeans a year. Bushel = 60 pound. About 6 bushels of soy (yielding 60ish pounds total protein) meet the protein requirements for an adult for a year. Provides additional total calories to boot. Just corn and beans. The US will do just fine…as will the rest of the Americas, since Brazil is outproducing the US in soybeans and producing 5 Billion bushels of corn a year.

throwaway4good 2y ago

Money printing works differently in the US compared to Japan because of the USD's status as defacto trade and reserve currency.

ArtTimeInvestor 2y ago
Different how? When the US doubles the supply of the Dollar, its value halves. It takes a while and the effect spreads in chaotic waves. But there is no escape from this effect. No matter how widely used the currency is.
- pkulak 2y ago
  But it takes way more to double usd.
- throwaway4good 2y ago
  It is the exorbitant privilege. It is a bit hard to find good discussions of the mechanism because it gets political very quickly. But in essence if the US prints the whole world absorbs it, if Japan prints it stays in Japan.
  - ArtTimeInvestor 2y ago
    What you say is that there is more demand for the Dollar. That does not change the fact that the price halves when the supply doubles. Price = demand/supply.
    - CorrectHorseBat 2y ago
      Demand can be a function of supply, so no it's not that simple.
    - kurthr 2y ago
      You somehow think that the demand/supply curve is linear. Why? It would be quite odd. Certainly Japan has generated far more currency and debt over the last 35 years while inflation stayed low (and the relative value of Yen stayed high). I don't see any explanation for that here any more than the yearly gyrations of other currencies crypto or fiat.

mo_42 2y ago

> The value of a country's currency = How much stuff it produces / How much money it prints. The value of a currency is how much people are willing to pay to have the other currency. For example, if Japan is importing many goods and services, they need to pay them in USD and so they have to buy USD on the market. > Both, Japan and the US are increasing their monetary base by what, 10% per year? The monetary base is not strictly connected to the money in the economy. Most of the money is created by commercial banks when they hand out loans. So the entire money in the economy can shrink (people paying back more loans than they), while at the same time the central bank increases currency. For reference: https://www.bundesbank.de/resource/blob/654284/df66c4444d065a7f519e2ab0c476df58/mL/2017-04-money-creation-process-data.pdf https://www.bundesbank.de/resource/blob/654284/df66c4444d065... https://www.bis.org/review/r180118c.pdf https://www.bis.org/review/r180118c.pdf

lotsofpulp 2y ago
>if Japan is importing many goods and services, they need to pay them in USD and so they have to buy USD on the market. Why does Japan need to pay them in USD?Because, as ArtTimeInvestor wrote, > but the US still seems on top of its game. Whatever the US sells, whether it be purely business/technology or even commingled with military resources, a lot of people in the world are interested in buying it.
ArtTimeInvestor 2y ago
if Japan is importing many goods and services, they need to pay them in USD Yes, and for this purpose, the Dollar is among the "stuff" the US produces: A currency accepted in many places. Most of the money is created by commercial banks Say there is a new bank which has no central bank money, no deposits, nothing. First customer walks in and gets a credit of $100. Now the customer wants to pay these $100 to someone who uses a different bank. What happens?
- JumpCrisscross 2y ago
  > First customer walks in and gets a credit of $100. Now the customer wants to pay these $100 to someone who uses a different bank. What happens? The first bank credits the account the different bank has with it in the amount of a hundred dollars. This involves updating a spreadsheet. "Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money" [1]. [1] https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

gjjydfhgd 2y ago

US datacenters are built with computing hardware produced in other countries. Labor too, TSMC had to bring welders from Taiwan for it's US fabs.

mrtksn 2y ago

The thing is, stuff might not be priced correctly. The US is a superpower in many areas but in a lot of cases the productivity is beancounters magic. Maybe US has the superior beancounters and not necessarily the superior production. For example, an appendicitis creates an economic activity of at least $7000 dollars in US and much much less elsewhere even if the work done on the human body is the same. Similar situation for the software, for some reason writing a for loop in SV is at least 3 times more valuable than writing it in London. So I would argue that the forumula of country's currency = How much stuff it produces / How much money it prints doesn't necessarily be working the same everywhere. Why? IMHO it's for 2 reasons: barriers on people moving and the US being de facto reserve currency. There are too many artificial barriers on the free market around the globe, the capital flows much more freely than the labor around the globe and this creates artificial valuations of properties and economic activities.

JumpCrisscross 2y ago
> for some reason writing a for loop in SV is at least 3 times more valuable than writing it in London I mean, yes, writing the same line of code at Google, Uber or OpenAI is more valuable than doing so at a British neobank. You're correct in productivity being a nefarious beast to measure. But the examples given--extending the life of a high-GDP-per-capita person or doing identical work in dramatically different contexts--aren't making your point.
- bmoxb 2y ago
  The multiplier is roughly the same even if the dev in London is working at the exact same company as the one in SV.
  - JumpCrisscross 2y ago
    > multiplier is roughly the same even if the dev in London is working at the exact same company as the one in SV Sure. Because they’re doing different work, in proximity to different people and different resources, within different economic contexts. A developer in Silicon Valley is fundamentally more productive than one in London, in part solely by virtue of being in Silicon Valley. (Not true at the individual level, of course. But statistically, of course.)