Whatever happened to made in Mexico?

[Hardartery]

It is a joke about the utility of money, in the absence of stuff for sale.

Okay. That leaves me with more questions, but whatever.

I think most people get trade exactly backwards. Typically it goes something like this: "gosh we sent $650b to China, think what we could have Done With That Money here." But, as I alluded to, the correct answer is "fuck all" because money is pretty useless by itself.

There are two parts to the way I look at this:

Part 1 ) The only reason we sent the $650b to China is because people there are willing to make us toasters and sunglasses and other Stuff(tm) for about a quarter what anybody else would want to be paid. So, they got $650b worth of money and we got a pile of consumption goods that would have cost upwards of $2t if we had it made somewhere labor costs more. That's like getting >$1t worth of free stuff. The question then shouldn't be "what could we have done with the $650b we spent on Stuff(tm)" it should be "what are we going to do with the $1.5t we saved not making it here."

Part 2) The Money doesn't stay in China*. At the end of the day the only reason a Dollar has any value to a foreigner is that you can buy American stuff with it or trade it to somebody who wants American stuff. Chinese people can't put dollars in their gas tanks or their supper dish any more than we can. So they spend the dollars on American stuff... specifically, Airplanes followed by Soybeans according to google. So the correct way of thinking about "Sending $650b to China" is that we are sending them planes and beans in exchange for toasters and sunglasses, but we're sending them HALF the number of planes and beans we would have had to send Mexicans for the same amount of toasters and sunglasses.


*And if it did, that would be even better; we get toasters and sunglasses and they get little pieces of paper. Literally, free stuff. Which is what happens in a currency war.

Your take on the USD is not really correct. It is THE standard currency of the world. I can use it in ANY country that I am in, and I can get it at the ATM in most countries. It is the currency of several countries other than the US as well, Ecuador as an example dropped their sovereign currency and went to using the USD as the national currency some years ago. It is a much more stable currency than many others, and is the mark against which other currencies are valued for longer than any of us has been alive. It is used to buy things from any country, not just the US, and as such is more valuable than other country's currency. The strength of the currency is the perceived strength of the country issuing it. Every dollar is a promise by the US government of repayment in exchange for that dollar and people have faith in that "Promise", if the confidence dissipates so does the value of the currency. Other currencies are also considered stable, but the world economy actually does measure the value of other currencies against the USD, it's in writing in the agreements that gave us such intituions as the World Bank and the IMF.

[Culican]

Your take on the USD is not really correct. It is THE standard currency of the world. I can use it in ANY country that I am in, and I can get it at the ATM in most countries. It is the currency of several countries other than the US as well, Ecuador as an example dropped their sovereign currency and went to using the USD as the national currency some years ago. It is a much more stable currency than many others, and is the mark against which other currencies are valued for longer than any of us has been alive. It is used to buy things from any country, not just the US, and as such is more valuable than other country's currency. The strength of the currency is the perceived strength of the country issuing it. Every dollar is a promise by the US government of repayment in exchange for that dollar and people have faith in that "Promise", if the confidence dissipates so does the value of the currency. Other currencies are also considered stable, but the world economy actually does measure the value of other currencies against the USD, it's in writing in the agreements that gave us such intituions as the World Bank and the IMF.

Repayment in what?

[mikeylikey]

Your take on the USD is not really correct. It is THE standard currency of the world. I can use it in ANY country that I am in, and I can get it at the ATM in most countries. It is the currency of several countries other than the US as well, Ecuador as an example dropped their sovereign currency and went to using the USD as the national currency some years ago. It is a much more stable currency than many others, and is the mark against which other currencies are valued for longer than any of us has been alive. It is used to buy things from any country, not just the US, and as such is more valuable than other country's currency. The strength of the currency is the perceived strength of the country issuing it. Every dollar is a promise by the US government of repayment in exchange for that dollar and people have faith in that "Promise", if the confidence dissipates so does the value of the currency. Other currencies are also considered stable, but the world economy actually does measure the value of other currencies against the USD, it's in writing in the agreements that gave us such intituions as the World Bank and the IMF.

Repayment in what?

A crisp new Dollar.

ETA: That was the smart-ass answer, although, technically, it's true. More seriously:

The US government will not redeem dollars in anything besides More Dollars. On that basis, it has no inherent value as the only thing you are legally guaranteed to be able to trade it for is itself. And they keep printing more of them. And yet the value does not drop to zero, which means for some reason there is demand for this instrument that has no inherent backing beside the fact that for some reason, well, there is demand for it.

Modern Monetary Theory says the demand for dollars ultimately comes from the fact that it is the only form in which the US government accepts tax obligations, and as long as the US is the world's biggest economy and US entities do the plurality of the world's taxable business, there will be plenty of demand for THE instrument with which US tax obilgations are met. MMT is Not Wrong, and this theory does a decent job of describing and predicting a lot of domestic economic phenomena.

Ron Paul says demand for dollars is grounded in the fact that since Nixon (who, very-un-coincidentally, nixed the dollar's redeemability in any tangible thing), the US has had a standing agreement to provide security for Saudi Arabia in exchange for the world's oil markets to be denominated in Dollars. This is also Not Wrong, and does a good job of describing and predicting a lot of US foreign policy.

[Hardartery]

Your take on the USD is not really correct. It is THE standard currency of the world. I can use it in ANY country that I am in, and I can get it at the ATM in most countries. It is the currency of several countries other than the US as well, Ecuador as an example dropped their sovereign currency and went to using the USD as the national currency some years ago. It is a much more stable currency than many others, and is the mark against which other currencies are valued for longer than any of us has been alive. It is used to buy things from any country, not just the US, and as such is more valuable than other country's currency. The strength of the currency is the perceived strength of the country issuing it. Every dollar is a promise by the US government of repayment in exchange for that dollar and people have faith in that "Promise", if the confidence dissipates so does the value of the currency. Other currencies are also considered stable, but the world economy actually does measure the value of other currencies against the USD, it's in writing in the agreements that gave us such intituions as the World Bank and the IMF.

Repayment in what?

Used to be gold, but the gold standard was done away with, so repayment in something of value. The point being, the value of the USD hinges on the general level of belief in the the strength of the US to back that value with something. As in, the ability to exchange it for something else of value. The general value is eroded by things like inflation and the state of the economy. I'm not really interested in conducting an in depth class on the subject, and I don't need to - there are quite a lot of explanations already out there with a Google search. Including some good videos on Youtube. The International monetary system is intentionally complicated, so don't think you can condense it into a simple explanation that ecasulates all of the nuamce involved. To the layman, it's basically based on faith, but in the same way the radio is magic to somebody with no science education.

[Culican]

Modern Monetary Theory says the demand for dollars ultimately comes from the fact that it is the only form in which the US government accepts tax obligations, and as long as the US is the world's biggest economy and US entities do the plurality of the world's taxable business, there will be plenty of demand for THE instrument with which US tax obilgations are met. MMT is Not Wrong, and this theory does a decent job of describing and predicting a lot of domestic economic phenomena.

I haven't heard as much about MMT since price inflation rates started increasing.

Ron Paul says demand for dollars is grounded in the fact that since Nixon (who, very-un-coincidentally, nixed the dollar's redeemability in any tangible thing), the US has had a standing agreement to provide security for Saudi Arabia in exchange for the world's oil markets to be denominated in Dollars. This is also Not Wrong, and does a good job of describing and predicting a lot of US foreign policy.

I remember when Nixon ended the redemption of gold and oil prices increased. There were articles in the newspaper and pieces on the evening news almost daily about how the US was working with the Arab countries to "recycle" the dollars spent on oil. We used to joke among ourselves that Nixon sent Kissinger to tell the Arab countries we'd blow the shit out of them if they didn't take dollars. Might have happened.

Used to be gold, but the gold standard was done away with, so repayment in something of value. The point being, the value of the USD hinges on the general level of belief in the the strength of the US to back that value with something. As in, the ability to exchange it for something else of value. The general value is eroded by things like inflation and the state of the economy. I'm not really interested in conducting an in depth class on the subject, and I don't need to - there are quite a lot of explanations already out there with a Google search. Including some good videos on Youtube. The International monetary system is intentionally complicated, so don't think you can condense it into a simple explanation that ecasulates all of the nuamce involved. To the layman, it's basically based on faith, but in the same way the radio is magic to somebody with no science education.

Don't worry, you don't need to conduct a class. I asked to understand what you meant as there really is no "promise."

"Layman," I probably have had more econ classes than you have. That doesn't mean the theories they expounded in those were correct, there is a lot of bullshit taught.

[mikeylikey]

Your take on the USD is not really correct. It is THE standard currency of the world. I can use it in ANY country that I am in, and I can get it at the ATM in most countries. It is the currency of several countries other than the US as well, Ecuador as an example dropped their sovereign currency and went to using the USD as the national currency some years ago. It is a much more stable currency than many others, and is the mark against which other currencies are valued for longer than any of us has been alive. It is used to buy things from any country, not just the US, and as such is more valuable than other country's currency. The strength of the currency is the perceived strength of the country issuing it. Every dollar is a promise by the US government of repayment in exchange for that dollar and people have faith in that "Promise", if the confidence dissipates so does the value of the currency. Other currencies are also considered stable, but the world economy actually does measure the value of other currencies against the USD, it's in writing in the agreements that gave us such intituions as the World Bank and the IMF.

Repayment in what?

Used to be gold, but the gold standard was done away with, so repayment in something of value.

This is simply unequivocally and absolutely false. Neither the US government nor any other entity on earth is obligated to give you any thing of value in exchange for a dollar. I wonder if you are confusing the idea of 'legal tender' with some notion of redeemability. They're not the same thing.

But I got no beef with the rest of what you said.

[Culican]

Come on, we can all get along. Let's just assume we have a can opener.

[Hardartery]

Don't worry, you don't need to conduct a class. I asked to understand what you meant as there really is no "promise."

"Layman," I probably have had more econ classes than you have. That doesn't mean the theories they expounded in those were correct, there is a lot of bullshit taught.

The "Promise" is implied. I was not trying to be condescending, just pre-empting someone jumping in (Not necessarily you) asking for someone to do the research for them. And I guarantee that you have taken more econ clsses than me, that would require all of one. I didn't learn it in school, I learned by reading on my own time because I thought it might be useful to understand how it is supposed to work and why, and I am sure there was an inordinate amount of bullshit taught. There usually is. And the students are usually required to buy the textbook because that professor wrote it and wants to make the money, and my wife edited a lot of them.

[mikeylikey]

I haven't heard as much about MMT since price inflation rates started increasing.

I think a lot of what we heard about MMT the last however many years was coming, not from the creators/serious proponents of MMT, but from people who fancy themselves smart because they read that "The government is not a household" which was sort of the MMT slogan, and then without really understanding the rest of it started declaring "I follow MMT and MMT gives us a free lunch to print money till the cows come home." Which was not what MMT actually said. The real MMT guys, the academics who worked out the theory for the most part said "This is *not* a get out of jail free card for inflation, we're describing mechanisms here, please don't use this theory beyond its intent."

I find a lot to like about MMT but the casual fans of it are insufferable. The Dave Matthews Band of economic ideas, if you will.

[Hardartery]

Your take on the USD is not really correct. It is THE standard currency of the world. I can use it in ANY country that I am in, and I can get it at the ATM in most countries. It is the currency of several countries other than the US as well, Ecuador as an example dropped their sovereign currency and went to using the USD as the national currency some years ago. It is a much more stable currency than many others, and is the mark against which other currencies are valued for longer than any of us has been alive. It is used to buy things from any country, not just the US, and as such is more valuable than other country's currency. The strength of the currency is the perceived strength of the country issuing it. Every dollar is a promise by the US government of repayment in exchange for that dollar and people have faith in that "Promise", if the confidence dissipates so does the value of the currency. Other currencies are also considered stable, but the world economy actually does measure the value of other currencies against the USD, it's in writing in the agreements that gave us such intituions as the World Bank and the IMF.

Repayment in what?

Used to be gold, but the gold standard was done away with, so repayment in something of value.

This is simply unequivocally and absolutely false. Neither the US government nor any other entity on earth is obligated to give you any thing of value in exchange for a dollar. I wonder if you are confusing the idea of 'legal tender' with some notion of redeemability. They're not the same thing.

But I got no beef with the rest of what you said.

The government obligates itself by issuing the currency. That's how it works. Countries that don't, or are seen as a risk regarding their ability to do so, suffer a steadily declining exchange rate which can cripple their ability to import things and trigger massive inflation. See Venezuela for a recent example. The US government is obligating itself by issuning the currency, every dollar that you have is technically a tiny fraction of the government's value. All currency is actually government debt in the form of a type of promissory note. That's why just printing more to pay debts doesn't work, it simply dilutes the value of each dollar because it is a share of the whole.

[aurelius]

The government obligates itself by issuing the currency. That's how it works. Countries that don't, or are seen as a risk regarding their ability to do so, suffer a steadily declining exchange rate which can cripple their ability to import things and trigger massive inflation. See Venezuela for a recent example. The US government is obligating itself by issuning the currency, every dollar that you have is technically a tiny fraction of the government's value. All currency is actually government debt in the form of a type of promissory note. That's why just printing more to pay debts doesn't work, it simply dilutes the value of each dollar because it is a share of the whole.

Probably just a quibble. I think of it like this:

Currency was backed by a specific item of value. Classically gold or other precious metals. This had problems. Many economists believe the Gold standard exacerbated and even caused the Great Depression. Fast forward to today. Fiat currency is backed by the entire 'basket of goods' that an economy produces. Which is how different currencies 'create' value against other currencies.

The US dollar is backed by the strength of the US economy. For the last 60 years the US economy has been the best and safest bet. Everyone wants to trade with the US. This has led to the US dollar becoming the world's reserve currency. Which has allowed the US to print more money that it 'should' be able to without experiencing inflation. Unfortunately what was meant to be a extraordinary short-term survive the global economic collapse has now become standard operating procedure for the US government.

Having a highly valued currency is not always a good thing. As China's economy has strengthened, they have engaged in currency manipulation to keep the value of their currency down. They do this to make Chinese exports more competitive globally.

[Hardartery]

The government obligates itself by issuing the currency. That's how it works. Countries that don't, or are seen as a risk regarding their ability to do so, suffer a steadily declining exchange rate which can cripple their ability to import things and trigger massive inflation. See Venezuela for a recent example. The US government is obligating itself by issuning the currency, every dollar that you have is technically a tiny fraction of the government's value. All currency is actually government debt in the form of a type of promissory note. That's why just printing more to pay debts doesn't work, it simply dilutes the value of each dollar because it is a share of the whole.

Probably just a quibble. I think of it like this:

Currency was backed by a specific item of value. Classically gold or other precious metals. This had problems. Many economists believe the Gold standard exacerbated and even caused the Great Depression. Fast forward to today. Fiat currency is backed by the entire 'basket of goods' that an economy produces. Which is how different currencies 'create' value against other currencies.

The US dollar is backed by the strength of the US economy. For the last 60 years the US economy has been the best and safest bet. Everyone wants to trade with the US. This has led to the US dollar becoming the world's reserve currency. Which has allowed the US to print more money that it 'should' be able to without experiencing inflation. Unfortunately what was meant to be a extraordinary short-term survive the global economic collapse has now become standard operating procedure for the US government.

Having a highly valued currency is not always a good thing. As China's economy has strengthened, they have engaged in currency manipulation to keep the value of their currency down. They do this to make Chinese exports more competitive globally.

Oviously there are nuances, no argument. Canada's dollar being usually about 75% of the US currency (With fluctuations up to par at times, but generally 75 cents on the dollar give or take) allowed for manufacturing to grow in Canada and provide export to the US for specific goods at a cost efficient price for the US and a high level of pay to Canadian workers. I am discussing a fairly narrow channel of products that either require certain skill or involve fear of design theft by certain countries. Not manipulations, but an example of nuance. Cuba would be rivalling China if they had open trade with the US, and would engage in exactly the same manipulation by means of their dual currencies (Like China).