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>a country having enough money to import without export? there's no such thing. when you import, you send your currency overseas to pay for the goods. There is
by fsckboy 2y ago
>a country having enough money to import without export?
there's no such thing. when you import, you send your currency overseas to pay for the goods. There is nothing they can do with your currency except send it back to you by buying things from you, lending it to you, or making direct equity investments in your companies. (otherwise there is this huge growing pile of your currency accumulating overseas which drives down your purchasing power since it's in surplus)
not sure if Friedman said that, but he did know more about econ that me, and what I've said is accurate.
- daseiner1 2y agoUSD remains the world’s reserve currency, and the primary currency of global trade. i.e., the exporter, paid in dollars, can also use those dollars to buy goods from other nations beside the US.
- graeme 2y agoWhat the OP said is true. Countries do trade USD with each other, but considered as a group the net effect is that countries can only: >send it back to you by buying things from you, lending it to you, or making direct equity investments in your companies. That's true whether one foreign country exists or 10,000.
- 8note 2y agothats not accurate to how the US trade works coutries trade with the US to get USD, but then trade that USD with each other some countries stack up the USD like saudi arabia, but theyve got a pretty strong partnership with america on defense and foreign investment
- _heimdall 2y agoI would have expected other countries to largely be holding securities. Am I wrong there, are they actually holding primarily USD?
- dcrazy 1y agoBoth. Foreign cash reserves are a thing, and economic actors might choose to transact in USD for price stability or efficiency reasons.
- fsckboy 2y ago>then trade that USD with each other USD has no value other than what it can purchase in the US. Saudi Arabia does not pile up USD, they pile up USD denominated investments. (basic finance that most people don't realize: When you put money in the bank, and the bank gives you interest, that's not your money in the bank, that's the bank's money. What you own is a certificate entitling you to the stream of interest payments. If you ever want your money back from the bank, you need to give them back the entitlement for the interest payments, and the interest payments will stop.) the Saudis don't hold US currency, they hold bonds, et al.
- dcrazy 1y agoPlenty of international trade is settled in USD. Here’s a chart showing that China still settles just under half its international trade in U.S. dollars: https://www.visualcapitalist.com/sp/hf02-start-of-de-dollarization-chinas-gradual-move-away-from-the-usd/ https://www.visualcapitalist.com/sp/hf02-start-of-de-dollari...
- Our_Benefactors 1y ago> USD has no value other than what it can purchase in the US. Tell me you don't know what a Eurodollar is without telling me you don’t know what a Eurodollar is.
- otterley 1y agoIn addition to what others said here, some countries, like Ecuador, use the USD as the official currency. This entire thread smacks of ignorance. I encourage you all to take some basic university level macroeconomics courses before confidently spouting any more falsehoods about how international trade and finance works.
- Teever 1y agoIIRC someone just posted this link on HN a few days ago: https://en.wikipedia.org/wiki/Exorbitant_privilege https://en.wikipedia.org/wiki/Exorbitant_privilege
- nine_k 2y agoA country could mine gold, pay with it for imports, and never have this gold brought back. Currently you can replace gold with oil: say, Saudi Arabia could literally exchange many things it imports to oil, which can be nominated in USD to accommodate for the fluctuating monetary price of oil, but could be nominated in barrels directly, in a barter trade. They won't see this oil back, even e.g. as plastics made out of it, and they're fine with that. The US can (so far) replace the gold and oil with USD, in cash, investment, or even credit purchase form, because there's enough demand for US cash as a store of value and a currency to trade with non-US entities, and enough trust that the US is going to service its debt, so it's an investment. The US may (effectively) never receive much of these USDs it sends abroad back; they are still a good deal in an inflationary fiat-currency economy. This pump continues to work as long as things like Silicon Valley, Wall St, and the US military continue to be world-dominating in their respective areas. (And this is one reason why isolationism is a silly policy for the US, toxic for its economy.)
- fsckboy 2y agoconsider gold to be a commodity (easy to do, because it is), shipping it overseas, you're engaged in trade, exporting gold, importing stuff or foreign currency. But nobody holds currency, because "time value of money", you want to hold something that yields income.
- nine_k 2y agoIndeed! Money is a special kind of a commodity, at least initially. With fiat money, it's more complicated, but still. All trade is barter trade, in a sense. Money, e.g. gold, has a very special quality: it's accepted in exchange for any goods. It's the ultimate "narrow waist" of goods exchange. This gives money a very special status among commodities.
- otterley 1y agoPeople do in fact hold currency in their portfolios. https://www.investopedia.com/articles/forex/11/why-trade-forex.asp https://www.investopedia.com/articles/forex/11/why-trade-for...
- otterley 1y ago> when you import, you send your currency overseas to pay for the goods. As a general rule, this is false. Mexican importers do not pay for U.S. goods in pesos. With few exceptions, importers have to sell their local currency on the market, exchange it for the exporter’s currency, and pay for the goods with that. Some exporters will accept the importer’s currency as an accommodation, but they’ll just sell the currency to exchange it for their own, because they have to pay for everything at home with the local currency. If I were a U.S. exporter, I couldn’t pay for my groceries with Euros.
- fsckboy 1y agoif you look at the net movements of currency, whether the buyer exchanges or the seller, or some third party or central bank, the net movement is the same and what I said is correct. When analyzing math problems you simplify things to be able to see what is happening more clearly; you are introducing complications as if they change what is happening, but they don't.
- otterley 1y agoIt’s not a math problem, and you’re wrong. The importer is not sending his nation’s currency to the exporting country in any sense. If you’re going to argue any more on this subject, please come armed with reputable references.
- fsckboy 1y agoeconomics is not a math problem? have you ever studied it? sounds like you have not. At the better schools, calculus is a prerequisite to study econ.
- otterley 1y agoI minored in Econ at a top tier university. There is indeed math you need to know to understand economics, but economics is not a branch of mathematics. There’s also behavioral understanding as well as practical knowledge. I would advise you to kindly take the L here and please stop trying to weasel your way around being wrong. People make mistakes; it’s how they respond when being confronted with their errors that demonstrates their character.