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Because the US economy is held up by a specific form of financial magic - world reserve currency. Kinda blows my mind that the US is on a strongly antagonistic

• Workaccount2 1y ago
  The US (well Trump and his supporters) want to make American manufacturing competitive in foreign markets in order to draw more investment into new domestic manufacturing capacity. A huge hurdle for American manufacturers is that their products simply cost too much, all else being equal, because the value of the dollar is too high. So their plan is try and devalue the dollar while also keeping it the reserve currency. To put that another way, he wants countries that have invested in the dollar to take a hit on their investments while also getting their population to buy more American goods. His negotiations will probably center around offering continuation of "America world police" services (people hate it, but governments love it) in exchange for following this path. Whether or not this will work? Who knows, but at least that is the idea they have chosen.
  • maxerickson 1y ago
    Alternatively, Trump is extremely transactional and actually thinks that trade deficits represent other countries taking advantage of the US. For example, tariffs on agricultural products that won't grow in the US do not fit into any sort of rational model.
    • Workaccount2 1y ago
      That isn't alternatively, it's parallel. Trump is an idiot and may or may not understand any of this. But his economic team does have a plan. My comment just outlines that plan.
      • maxerickson 1y ago
        Expecting people that don't exist to take jobs that are lower value than working at McDonalds is not "a plan". Plenty of US manufacturing already pays close to retail wages and these geniuses want to reshore stuff with much lower value add. It's delusional.
  • robocat 1y ago
    Any conversation about trade imbalance is silly if you only look at goods and ignore services. In New Zealand as a purchaser of a lot of US services and few US goods, I can see why countries want to create tariffs against US services.
    • Workaccount2 1y ago
      Services are white collar and goods are blue collar. Trump was elected by blue collar workers and his plan reflects that.
      • seanmcdirmid 1y ago
        His trade deficit calculations also reflects this, and he gets pissed off when someone like Canada or the EU call him out on it. Canada’s digital services tax modeled after Europe, for example, was a non-starter for the Trump admin even though he didn’t bother to include services in his trade deficit calculations.
      • robocat 1y ago
        Fine: just don't write economic arguments if that is what you want to say. Blue Collar workers: ~ 30–35% of working population. Policy that screws your country and the other 2/3rds of the population is bad. I do think a country needs a manufacturing base if it wants to support a military without getting pwned.
    • ponector 1y ago
      World police is also not an argument anymore. Noone has faith into current US administration. They simply can walk away from their allies or even stub into their back.
  • Galanwe 1y ago
    I don't understand why this is downvoted, I think people are thinking you are promoting a view, while you are non-judgmentally guessing. And I do agree with you, I think the current administration is focused on devaluing the dollar, while trying hard to minimize collateral damage such as higher rates. I don't think this is going to work, but I can see a lot of ways in which it could. Future will tell us.
• stephen_g 1y ago
  It’s one ingredient that does help prop up the US, but really similar fiscal means are available to countries that fulfil all these conditions: 1. Have their own central bank and currency, 2. Have flexible currency exchange rates and not peg to a commodity or other currency, and 3. Exclusively issue bonds in their own currency (that their own central bank exclusively issues). Apart from the US several countries meet this threshold, including the UK, Canada, Australia, New Zealand and Japan. On the other hand, the Eurozone countries do not, and this helps some of the member states, but only at the expense of some of the others.
  • robocat 1y ago
    New Zealander here. Our stock market (businesses) are nothing like the US market. It isn't a relative size thing - there really is worse choice here. Last I looked I recall 39% of the US stock market is owned by foreigners. Fair enough since say Apple revenue I'd say 60% from foreign sources.
    • disgruntledphd2 1y ago
      65% of world equity values come from the US, which is a crazy, crazy amount. Like, maybe that's sustainable but it's certainly not sustainable in a world where you're pissing your trading partners off on a daily basis.
  • Havoc 1y ago
    Those criteria you list make for independent monetary policy making. Not at all the same thing as world reserve currency. You don’t see oil markets trading in New Zealand dollars. Or half the world holding large amounts of Aussie dollar in their forex reserves. Or a bunch of Canadian gov bonds. Or benchmark their rates against the US in reporting. If the US prints more half the world carries the pain but US gets all the benefit. Lose reserve currency status and that so called exorbitant privilege goes up in smoke. Along with the financial system built on it
• msgodel 1y ago
  The problem is (whether it's real or not) the majority of the US population feels the economic prosperity is being used against them. You might say it's a PR problem, others might say it's an actual problem. Either way it's going away now.
  • bryanlarsen 1y ago
    The prosperity is going away. The inequality behind the feeling is not going away, it's getting worse.
    • msgodel 1y ago
      Sure. I don't think the inequality was the primary complaint though.
    • RickJWagner 1y ago
      In what way is prosperity going away? Today, nearly everyone has pocket computers, cheap internet, longer lifespans, better healthcare, cars that last decades, homes with plumbing, electricity and climate control, etc. Poverty has been declining for decades. Your life looks much better than your parents, and looks much, much, much better than your grandparents.
      • msgodel 1y ago
        It's well known that in the US people are doing much more poorly than their parents on average. Except having what are essentially televisions in their pocket. That's the one win they get.
        • ponector 1y ago
          When someone says it's well known fact - it usually means there is no data to proof this statement. Doing more poorly? but everyone has all kinds of home appliances, nice reliable cars with tons of features, more people have college degree, bigger houses, etc.
      • 1y ago
• ifyoubuildit 1y ago
  Can you break down the isolationist streak for me? The US government seems to want to intervene in every place it can, and doesn't look anything like say old school China or Japan. It seems like some people see anything short of maximally interventionist as isolationism, and I don't understand it.
  • HDThoreaun 1y ago
    He is talking about financial isolationism, aka protectionism. Tariffs lead to trade wars which will lead to the USD no longer being the world reserve currency.
    • ifyoubuildit 1y ago
      Wouldn't "financial isolationism" just be not trading period, in other words plain old isolationism? Being a little isolated seems like being a little pregnant.