4 ms·

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.
    - logicchains 2y ago
      Economics 101: the supply curve is not a linear relationship. https://en.wikipedia.org/wiki/Supply_and_demand https://en.wikipedia.org/wiki/Supply_and_demand
    - throwaway4good 2y ago
      When a central bank expands the money supply (by changing their interest rate or doing QE) it doesn't spread linearly in the economy. There is a much more complex pattern. And the dynamics of the dominant currency which has all other curencies subordinate to it are completely different from that of a mostly local currency. But as I wrote. This is a controversial subject. And there are economists out there who will tell you that the special status of the US dollar makes no difference at all and this de Gaulle guy just was upset about losing some colonies.
- hiddencost 2y ago
  Other currencies devalue more and the USD devalues less, because of the function of the USD as a reserve currency.
- JumpCrisscross 2y ago
  > When the US doubles the supply of the Dollar, its value halves This linear model isn't predictive of purchasing power. (The missing variable is velocity, which is itself a multi-dimensional beast.)
- whatever1 2y ago
  Nope, you print more dollar we keep buying more dollar. No other currency has the backing of the US military. Your container is in danger from Houthis? SBF is not coming for help, neither the Chinese. The US navy comes. You wanna operate you business in a failed state? Guess what, the CIA is there for you. So yes, the value of US dollar is infinite.
  - ein0p 2y ago
    The US navy has failed miserably against the Houtnis though.
    - JumpCrisscross 2y ago
      > US navy has failed miserably against the Houtnis With the benefit of hindsight it was a damned clear success. At the time it looked limited. But strikes have subsided [1]. And the Houthis’ situational awareness is so poor they’re potting the Russians [2]. [1] https://en.m.wikipedia.org/wiki/Red_Sea_crisis https://en.m.wikipedia.org/wiki/Red_Sea_crisis [2] https://maritime-executive.com/article/houthi-missile-damages-shadow-tanker-carrying-russian-oil https://maritime-executive.com/article/houthi-missile-damage...
      - somenameforme 2y ago
        As per your link, they've struck 3 ships in the past week and targeted but missed another, and the US is now trying to achieve a diplomatic solution with them.
        JumpCrisscross 2y ago
        > they've struck 3 ships in the past week The article says they struck one, the one carrying Russian oil, and targeted (but did not strike) two others. No strikes the U.S. would care about. It looks like the U.S. is pursuing a counterbattery strategy in Yemen. Keep assets remote. Watch for enemy fire. Use their revealing their locations by firing to counterstrike. It's a safe, effective but slow strategy. I was premature to call it a success--the Red Sea hasn't re-opened. But the risk to global trade has been sidelined to the extent that the entire debacle is a negigible sideshow.
- somenameforme 2y ago
  The term you're looking for here is 'exporting inflation' - a quick web search will give about a million hits. This takes many forms, but here are a couple of the most impactful ways we do it: #1 - Being the largest consumer economy. The economy of many countries depends on exporting stuff to the US. Now imagine the US prints a lot of money so its currency becomes weaker, relative to yours. This is a real problem because it means Americans aren't able to afford as much of your country's stuff. And if there are other countries whose currency has not strengthened as much (relative to the dollar), then their stuff becomes even more desirable, relative to yours. But there's actually a simple and happy solution - print money. Devaluing your own currency not only fixes this problem by 'importing' US inflation, but it also gives you lots of money to spend as well. The only problem is ever-mounting debt, but hey - if modern economics is about anything, it's about kicking the can to the next generation! #2 - Being the global reserve currency. Until extremely recently, if China and Russia were going to go trade some goods between each other, they'd have settled the balance in USD! And nearly all oil was sold in USD. As the USD weakens, this obligates these countries to start increasing their reserves of it to continue ensuring the same level of real liquidity. But this also has the side effect of taking more USD out of general circulation which drives the price of the USD up, which also simultaneously makes your own reserves worth even more! ---- It's also for these sort of reasons that, for instance, China is accused of being a currency manipulator for weakening their currency. We kind of intuit "strong = good" but in international economics, that's definitely not the case. It depends on the exact composition of your economy, and your role in global trade. China thrives because of a weak currency. But for Japan this is not the case. They are, amongst other things, the world's largest single importer of both natural gas and food. So their currency weakening is likely to be very damaging for a country that's already been suffering economically for decades, and is only getting worse due to an increasing demographic collapse.
  - maxglute 2y ago
    >very damaging for a country Depends on if it offsets their exports, which has increased last few years due to weak yen despite switching to "premium" energy pricing. Might also make a lot of their ASEAN/foreign infra tenders more competitive. I think there's gains for JP with weak yen, but can't happen faster than businesses can adjust.
VelesDude 2y ago
Years back I remember Trump saying something like "Amount of money and debt doesn't matter so long as folks still buy oil is US dollars". And I can't really disagree with him on that. The issue is when that golden goose flys then it will be all hell as the system balances back out.

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.
  - logicchains 2y ago
    Economics 101: the supply curve is not a linear relationship. https://en.wikipedia.org/wiki/Supply_and_demand https://en.wikipedia.org/wiki/Supply_and_demand
  - throwaway4good 2y ago
    When a central bank expands the money supply (by changing their interest rate or doing QE) it doesn't spread linearly in the economy. There is a much more complex pattern. And the dynamics of the dominant currency which has all other curencies subordinate to it are completely different from that of a mostly local currency. But as I wrote. This is a controversial subject. And there are economists out there who will tell you that the special status of the US dollar makes no difference at all and this de Gaulle guy just was upset about losing some colonies.
hiddencost 2y ago
Other currencies devalue more and the USD devalues less, because of the function of the USD as a reserve currency.
JumpCrisscross 2y ago
> When the US doubles the supply of the Dollar, its value halves This linear model isn't predictive of purchasing power. (The missing variable is velocity, which is itself a multi-dimensional beast.)
whatever1 2y ago
Nope, you print more dollar we keep buying more dollar. No other currency has the backing of the US military. Your container is in danger from Houthis? SBF is not coming for help, neither the Chinese. The US navy comes. You wanna operate you business in a failed state? Guess what, the CIA is there for you. So yes, the value of US dollar is infinite.
- ein0p 2y ago
  The US navy has failed miserably against the Houtnis though.
  - JumpCrisscross 2y ago
    > US navy has failed miserably against the Houtnis With the benefit of hindsight it was a damned clear success. At the time it looked limited. But strikes have subsided [1]. And the Houthis’ situational awareness is so poor they’re potting the Russians [2]. [1] https://en.m.wikipedia.org/wiki/Red_Sea_crisis https://en.m.wikipedia.org/wiki/Red_Sea_crisis [2] https://maritime-executive.com/article/houthi-missile-damages-shadow-tanker-carrying-russian-oil https://maritime-executive.com/article/houthi-missile-damage...
    - somenameforme 2y ago
      As per your link, they've struck 3 ships in the past week and targeted but missed another, and the US is now trying to achieve a diplomatic solution with them.
      - JumpCrisscross 2y ago
        > they've struck 3 ships in the past week The article says they struck one, the one carrying Russian oil, and targeted (but did not strike) two others. No strikes the U.S. would care about. It looks like the U.S. is pursuing a counterbattery strategy in Yemen. Keep assets remote. Watch for enemy fire. Use their revealing their locations by firing to counterstrike. It's a safe, effective but slow strategy. I was premature to call it a success--the Red Sea hasn't re-opened. But the risk to global trade has been sidelined to the extent that the entire debacle is a negigible sideshow.
somenameforme 2y ago
The term you're looking for here is 'exporting inflation' - a quick web search will give about a million hits. This takes many forms, but here are a couple of the most impactful ways we do it: #1 - Being the largest consumer economy. The economy of many countries depends on exporting stuff to the US. Now imagine the US prints a lot of money so its currency becomes weaker, relative to yours. This is a real problem because it means Americans aren't able to afford as much of your country's stuff. And if there are other countries whose currency has not strengthened as much (relative to the dollar), then their stuff becomes even more desirable, relative to yours. But there's actually a simple and happy solution - print money. Devaluing your own currency not only fixes this problem by 'importing' US inflation, but it also gives you lots of money to spend as well. The only problem is ever-mounting debt, but hey - if modern economics is about anything, it's about kicking the can to the next generation! #2 - Being the global reserve currency. Until extremely recently, if China and Russia were going to go trade some goods between each other, they'd have settled the balance in USD! And nearly all oil was sold in USD. As the USD weakens, this obligates these countries to start increasing their reserves of it to continue ensuring the same level of real liquidity. But this also has the side effect of taking more USD out of general circulation which drives the price of the USD up, which also simultaneously makes your own reserves worth even more! ---- It's also for these sort of reasons that, for instance, China is accused of being a currency manipulator for weakening their currency. We kind of intuit "strong = good" but in international economics, that's definitely not the case. It depends on the exact composition of your economy, and your role in global trade. China thrives because of a weak currency. But for Japan this is not the case. They are, amongst other things, the world's largest single importer of both natural gas and food. So their currency weakening is likely to be very damaging for a country that's already been suffering economically for decades, and is only getting worse due to an increasing demographic collapse.
- maxglute 2y ago
  >very damaging for a country Depends on if it offsets their exports, which has increased last few years due to weak yen despite switching to "premium" energy pricing. Might also make a lot of their ASEAN/foreign infra tenders more competitive. I think there's gains for JP with weak yen, but can't happen faster than businesses can adjust.

VelesDude 2y ago

Years back I remember Trump saying something like "Amount of money and debt doesn't matter so long as folks still buy oil is US dollars". And I can't really disagree with him on that. The issue is when that golden goose flys then it will be all hell as the system balances back out.