3 ms·

I don't want to, but I can't stop thinking that DJT might be kind of right on this one. Each of economical blocks in this world such as EU/US, China, or Japan,

I don't want to, but I can't stop thinking that DJT might be kind of right on this one. Each of economical blocks in this world such as EU/US, China, or Japan, don't mutually co-depend enough for any foreign currencies like USD or CNY to be single universal representation of values. The current US administration's weird argument is that the USD values exchanged in inter-national trades must be symmetrical, but if you think about it, the amounts just don't mean anything. Balancing the amount only, like forcing the other party buy tons of American stuffs, won't solve it. The exchanged amounts only fuel philosophical border towns and dependency chains don't penetrate deep into foreign economies. The prices are not manipulated, it's just random. The US has enough of everything to make batteries, you just can't fight something sold at completely arbitrary prices on economical grounds.

LorenPechtel 1y ago
The numbers aren't even relevant as he's obsessing about flows tracked across borders. An awful lot of what the US exports is services and data, not things, and doesn't show up. Look at that research base that got targeted. Imports: what the scientists need. Exports: science. The latter doesn't show up, it looked like it was hugely "out of balance" despite the only inhabitants being penguins. In the real world, something's being exported even if you're not tracking it. If there was a large, continuing imbalance the relative values of the currencies would change.
- corimaith 1y ago
  https://www.imf.org/en/Blogs/Articles/2022/08/04/blog-global-current-account-balances-widen-amid-war-pandemic-080422 https://www.imf.org/en/Blogs/Articles/2022/08/04/blog-global... The US is running a persistent current account deficit (and the largest one at that) for 20 years, which is the more relevant metric that includes services & data. This is an undisputed fact by most economists and institutions. The relative values of currencies aren't changing because the central banks of surplus countries are actively managing capital inflows by buying foreign assets to keep their currency values stable. The Fed is one of the few that don't because they don't have that mandate.
corimaith 1y ago
>The current US administration's weird argument is that the USD values exchanged in inter-national trades must be symmetrical, In Econ 101 going back to Keynes, if you run a persistent current account surplus, the increased demand for your currency to pay for your exports will strengthen your currency, thus reducing the competiveness of your exports, thus reducing your trade surplus. Vice versa for a deficit. Hence persistent trade imabalances should not exist due to self-balancing FX-effects. This isn't happening in reality for a variety of reasons, but it's common knowledge that it's government policies that directly try to prevent that from occuring. Capital Controls, Protectionist Policies, etc, the most explicit mechanism is the controversial currency manipulation, whereby many central banks manage capital inflows by buying US assets to keep their currency stable. But the aggregate result of this is that we have a strange situation today whereby the US dollar is simultaneously strong yet running a massive deficit, while surplus countries have weak currencies. And these imbalances are growing rather than shrinking. Many mainstream economists don't think the situtation is sustainable, but their proposals to fix it are differing. I'd agree that Trump's method of "forcing" other countries to buy more American stuff is just a short-term fix that won't solve the underlying issues, but the real solutions of tariffs, currency revaluations or introducing capital controls will be hard to stomach for everyone, albeit necessary. Although the "correct" solutions like the Bancor will all be much more harmful to surplus countries than the USA.
- Eisenstein 1y ago
  But countries don't pay for imports with the currency of the producing nation and get their own currency for their exports. They use the USD for that. Econ 101 doesn't apply when you are an international reserve currency because demand is not exclusively tied to exports.
  - corimaith 1y ago
    Increasing FX reserves also increases the national currency's strength because the Central Banks has more reserves to prop up it's value. The opposite is what we call a currency crisis when you run out such reserves and the value of your currency falls.

LorenPechtel 1y ago

The numbers aren't even relevant as he's obsessing about flows tracked across borders. An awful lot of what the US exports is services and data, not things, and doesn't show up. Look at that research base that got targeted. Imports: what the scientists need. Exports: science. The latter doesn't show up, it looked like it was hugely "out of balance" despite the only inhabitants being penguins. In the real world, something's being exported even if you're not tracking it. If there was a large, continuing imbalance the relative values of the currencies would change.

corimaith 1y ago
https://www.imf.org/en/Blogs/Articles/2022/08/04/blog-global-current-account-balances-widen-amid-war-pandemic-080422 https://www.imf.org/en/Blogs/Articles/2022/08/04/blog-global... The US is running a persistent current account deficit (and the largest one at that) for 20 years, which is the more relevant metric that includes services & data. This is an undisputed fact by most economists and institutions. The relative values of currencies aren't changing because the central banks of surplus countries are actively managing capital inflows by buying foreign assets to keep their currency values stable. The Fed is one of the few that don't because they don't have that mandate.

corimaith 1y ago

>The current US administration's weird argument is that the USD values exchanged in inter-national trades must be symmetrical, In Econ 101 going back to Keynes, if you run a persistent current account surplus, the increased demand for your currency to pay for your exports will strengthen your currency, thus reducing the competiveness of your exports, thus reducing your trade surplus. Vice versa for a deficit. Hence persistent trade imabalances should not exist due to self-balancing FX-effects. This isn't happening in reality for a variety of reasons, but it's common knowledge that it's government policies that directly try to prevent that from occuring. Capital Controls, Protectionist Policies, etc, the most explicit mechanism is the controversial currency manipulation, whereby many central banks manage capital inflows by buying US assets to keep their currency stable. But the aggregate result of this is that we have a strange situation today whereby the US dollar is simultaneously strong yet running a massive deficit, while surplus countries have weak currencies. And these imbalances are growing rather than shrinking. Many mainstream economists don't think the situtation is sustainable, but their proposals to fix it are differing. I'd agree that Trump's method of "forcing" other countries to buy more American stuff is just a short-term fix that won't solve the underlying issues, but the real solutions of tariffs, currency revaluations or introducing capital controls will be hard to stomach for everyone, albeit necessary. Although the "correct" solutions like the Bancor will all be much more harmful to surplus countries than the USA.

Eisenstein 1y ago
But countries don't pay for imports with the currency of the producing nation and get their own currency for their exports. They use the USD for that. Econ 101 doesn't apply when you are an international reserve currency because demand is not exclusively tied to exports.
- corimaith 1y ago
  Increasing FX reserves also increases the national currency's strength because the Central Banks has more reserves to prop up it's value. The opposite is what we call a currency crisis when you run out such reserves and the value of your currency falls.