5 ms·

If the USD was such a good currency, why does the US operate at a deficit?

JumpCrisscross 2y ago
> If the USD was such a good currency, why does the US operate at a deficit? If the U.S. needed a bailout, the dollar would become a trash currency.
Arainach 2y ago
A deficit is not a loan. The USD and the historical strength and faith on the US allowed the US to offer its own securities, not ones pwned by and with terms dictated by external entities.
- 2030ai 2y ago
  It smells, looks and quacks like a loan.
  - __MatrixMan__ 2y ago
    Smells more like a tokenomics scheme than a loan to me.
- whimsicalism 2y ago
  the US borrows money. sure it can monetize its own debt at any time but that would have its own set of very high costs
fsckboy 2y ago
>why does the US operate at a deficit? are you talking about a trade deficit (the US operated at a trade deficit virtually the entire time it grew from 13 former colonies to the post WWII economic colossus. Lending money to a growing economy so it can turn around and purchase the equipment you are selling which it will use to be more productive is the secret sauce of a growing economy) or are you talking about a budget deficit? many countries around the world operate with budget deficits; "socialist" governments generally have higher deficits as they spend to maintain living standards whether the economy justifies it or not. The size of the deficit (they will grow all the time) does not matter, what matters is "as a %age of GDP". none of this, btw, has much to do with monetary policy, the maintenance of the currency. "strong" or "weak" currency really makes no difference. The strength/weakness of the currency how the books are balanced after the fact of what has happened in the actual economy. A country with a strong currency will find imports inexpensive, and will have trouble selling its goods, and citizens will be incented to buy imports. A country with a weak currency will have difficulty importing goods, but will have less trouble exporting. It's the currency that balances these books.
- ToValueFunfetti 2y ago
  This is essentially my point, I guess too briefly put- a country getting a loan is not an indictment of that country's currency; that is a huge leap to conclusions as evidenced by the world's best currency being maintained by a country that is borrowing 5% of its GDP each year.
adgjlsfhk1 2y ago
If you can get a 10 year loan at 2% interest rates (below inflation), you would be an idiot not to take it.
sudosysgen 2y ago
The USD, being the world reserve currency and currency of trade, must operate at a deficit. It's only through a USD deficit that other countries can grow their reserves commensurately with economic growth, which is how the USD stays the reserve currency. The USD operates at a deficit because it's such a good currency.

> If the USD was such a good currency, why does the US operate at a deficit? If the U.S. needed a bailout, the dollar would become a trash currency.

Arainach 2y ago

A deficit is not a loan. The USD and the historical strength and faith on the US allowed the US to offer its own securities, not ones pwned by and with terms dictated by external entities.

2030ai 2y ago
It smells, looks and quacks like a loan.
- __MatrixMan__ 2y ago
  Smells more like a tokenomics scheme than a loan to me.
whimsicalism 2y ago
the US borrows money. sure it can monetize its own debt at any time but that would have its own set of very high costs

fsckboy 2y ago

>why does the US operate at a deficit? are you talking about a trade deficit (the US operated at a trade deficit virtually the entire time it grew from 13 former colonies to the post WWII economic colossus. Lending money to a growing economy so it can turn around and purchase the equipment you are selling which it will use to be more productive is the secret sauce of a growing economy) or are you talking about a budget deficit? many countries around the world operate with budget deficits; "socialist" governments generally have higher deficits as they spend to maintain living standards whether the economy justifies it or not. The size of the deficit (they will grow all the time) does not matter, what matters is "as a %age of GDP". none of this, btw, has much to do with monetary policy, the maintenance of the currency. "strong" or "weak" currency really makes no difference. The strength/weakness of the currency how the books are balanced after the fact of what has happened in the actual economy. A country with a strong currency will find imports inexpensive, and will have trouble selling its goods, and citizens will be incented to buy imports. A country with a weak currency will have difficulty importing goods, but will have less trouble exporting. It's the currency that balances these books.

ToValueFunfetti 2y ago
This is essentially my point, I guess too briefly put- a country getting a loan is not an indictment of that country's currency; that is a huge leap to conclusions as evidenced by the world's best currency being maintained by a country that is borrowing 5% of its GDP each year.

adgjlsfhk1 2y ago

If you can get a 10 year loan at 2% interest rates (below inflation), you would be an idiot not to take it.

sudosysgen 2y ago

The USD, being the world reserve currency and currency of trade, must operate at a deficit. It's only through a USD deficit that other countries can grow their reserves commensurately with economic growth, which is how the USD stays the reserve currency. The USD operates at a deficit because it's such a good currency.