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"They didn't, because to get out you require a bunch of other investors putting their money into America, otherwise there would be no exchange in the first plac

by argsnd 1y ago

"They didn't, because to get out you require a bunch of other investors putting their money into America, otherwise there would be no exchange in the first place." And when those other investors bought those dollars they did so for a lower price in another currency than they previously would have, which results in the overall value of the total dollars to fall. This alone does not signify capital flight, but the combination with rising yields does. There's simply less demand both for US dollars and all dollar-denominated assets.

neilwilson 1y ago
It doesn’t cause the value of dollars to fall in dollar terms. Again you’re implying a fixed exchange and there isn’t one. The exchange rate of barrels to tomatoes hasn’t altered since that is a matter of productivity This is why “devaluations” in the fixed exchange rate period didn’t work
- JumpCrisscross 1y ago
  > exchange rate of barrels to tomatoes hasn’t altered since that is a matter of productivity Of course it has. We are one of the world’s largest importers of tomatoes [1]. The dollar devaluing makes them more expensive. That, in turn, means the internal price of tomatoes goes up. We’re a net oil exporter, on the other hand. So yeah—the “exchange rate of barrels [of oil] to tomatoes” has been altered. In part because the productive benefits of comparative advantage are being slashed. In part because trade frictions are being introduced that reduce our economy’s productivity. [1] https://www.worldstopexports.com/international-markets-for-imported-tomatoes-by-country/ https://www.worldstopexports.com/international-markets-for-i...
  - neilwilson 1y ago
    How does it make them more expensive. Where else are they going to sell the already produced tomatoes? There is no untapped source of demand at that price is there. We already know from history that devaluations don’t work. What has changed that suggests they have suddenly started working?
    - JumpCrisscross 1y ago
      > How does it make them more expensive. Where else are they going to sell the already produced tomatoes? It’s currently cheaper for me to take a vacation to Canada to buy next year’s skis than it is to buy them domestically. That’s demand transfer. On the other hand, car factories that used to export to America are being idled in Canada and Mexico. That’s supply contraction. More pointedly, if you have an unreliable trading partner, it makes sense to offer discounts to other buyers who will make up for the price cut in the long term. (Either with increased quantities demanded or a less-volatile trading relationship.) > We already know from history that devaluations don’t work. What has changed that suggests they have suddenly started working? We’re not in a controlled devaluation. This is America facing its first semblance of a currency crisis. Far from fully blown. But if a large foreign holder of Treasuries started dumping them, for example, and were to co-ordinate it with our erstwhile allies, that could create problems.
      - neilwilson 1y ago
        "That’s supply contraction." What's the policy response to supply contraction causing people to lose their jobs? What does that tend to do to exchange rates? " it makes sense to offer discounts to other buyers" If they are offering discounts to other buyers, then won't those buyers then take the advantage and re-export to the US? There's an arbitrage opportunity right there - as we've seen with Russian oil. Why won't that happen? Plus why go through the problem of trying to obtain new customers for less money, when you could just pay the 10% tariff and get the same amount of less money for less effort? "But if a large foreign holder of Treasuries started dumping them, for example, and were to co-ordinate it with our erstwhile allies, that could create problems." How would it create problems? Run through it precisely at the transaction level please. Then you'll find it doesn't. To 'dump' Treasuries somebody else has to buy them - so no fewer Treasuries. To 'dump' US dollars somebody else has to buy them - so no fewer dollars. Same number of dollars chasing the same number of Treasuries? The somebody that took on the dollars and the Treasuries wanted to buy them or the transaction would never have happened. Why did they want to buy them? So where's the problem?
        1y ago

by argsnd 1y ago

neilwilson 1y ago

It doesn’t cause the value of dollars to fall in dollar terms. Again you’re implying a fixed exchange and there isn’t one. The exchange rate of barrels to tomatoes hasn’t altered since that is a matter of productivity This is why “devaluations” in the fixed exchange rate period didn’t work

JumpCrisscross 1y ago
> exchange rate of barrels to tomatoes hasn’t altered since that is a matter of productivity Of course it has. We are one of the world’s largest importers of tomatoes [1]. The dollar devaluing makes them more expensive. That, in turn, means the internal price of tomatoes goes up. We’re a net oil exporter, on the other hand. So yeah—the “exchange rate of barrels [of oil] to tomatoes” has been altered. In part because the productive benefits of comparative advantage are being slashed. In part because trade frictions are being introduced that reduce our economy’s productivity. [1] https://www.worldstopexports.com/international-markets-for-imported-tomatoes-by-country/ https://www.worldstopexports.com/international-markets-for-i...
- neilwilson 1y ago
  How does it make them more expensive. Where else are they going to sell the already produced tomatoes? There is no untapped source of demand at that price is there. We already know from history that devaluations don’t work. What has changed that suggests they have suddenly started working?
  - JumpCrisscross 1y ago
    > How does it make them more expensive. Where else are they going to sell the already produced tomatoes? It’s currently cheaper for me to take a vacation to Canada to buy next year’s skis than it is to buy them domestically. That’s demand transfer. On the other hand, car factories that used to export to America are being idled in Canada and Mexico. That’s supply contraction. More pointedly, if you have an unreliable trading partner, it makes sense to offer discounts to other buyers who will make up for the price cut in the long term. (Either with increased quantities demanded or a less-volatile trading relationship.) > We already know from history that devaluations don’t work. What has changed that suggests they have suddenly started working? We’re not in a controlled devaluation. This is America facing its first semblance of a currency crisis. Far from fully blown. But if a large foreign holder of Treasuries started dumping them, for example, and were to co-ordinate it with our erstwhile allies, that could create problems.
    - neilwilson 1y ago
      "That’s supply contraction." What's the policy response to supply contraction causing people to lose their jobs? What does that tend to do to exchange rates? " it makes sense to offer discounts to other buyers" If they are offering discounts to other buyers, then won't those buyers then take the advantage and re-export to the US? There's an arbitrage opportunity right there - as we've seen with Russian oil. Why won't that happen? Plus why go through the problem of trying to obtain new customers for less money, when you could just pay the 10% tariff and get the same amount of less money for less effort? "But if a large foreign holder of Treasuries started dumping them, for example, and were to co-ordinate it with our erstwhile allies, that could create problems." How would it create problems? Run through it precisely at the transaction level please. Then you'll find it doesn't. To 'dump' Treasuries somebody else has to buy them - so no fewer Treasuries. To 'dump' US dollars somebody else has to buy them - so no fewer dollars. Same number of dollars chasing the same number of Treasuries? The somebody that took on the dollars and the Treasuries wanted to buy them or the transaction would never have happened. Why did they want to buy them? So where's the problem?
      - 1y ago