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Earlier quoted context omitted.
The US dollar was the global reserve currency in the 1960s but the US was running a trade surplus then.
Nixon broke Bretton Woods by coming off the gold standard, leading to massive expansion of the money supply. Lyn Alden has good analysis of this process https://www.lynalden.com/fraying-petrodollar-system/
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See answer above - the EU is less "debt-fueled". But I also think that EU producers are more competitive. The US has a strong tendency towards local monopolies which are bad for export competitiveness.
"The US has a strong tendency towards local monopolies" also the problem is US is one of the largest market in the world, if you can conquer US market. you can pretty much do that elsewhere essentially monopolize an entire world
It's not like Canadian lumber mills conquered the world.
Ford F-series isn't the highest selling car in the world.
Earlier quoted context omitted.
Or we would have automated assembly faster—the investment in which would’ve been counted in domestic investment offsetting the trade deficit, right? I’m trying to verify my mental model of what’s going on.
the assumption being that the automated assembly is going to be price competitive with the manual assembly. If this is the case, why doesn't it happen with the chinese supply chain? After all, there's no reason not to make it cheaper. The only conclusion you can draw is that the automated assembly will still be more expensive compared to the current manual one.
-american labour is expensive
-because of tariffs (or geopolitics) cheap asian labour unavailable
-investment in automation research
-first Gen automation is expensive
-further research
-2nd Gen automation is price-competitive with american labour
-iterate n times
-Nth Gen automation is price-competitive with asian labour
> why doesn't it happen with the chinese supply chain
The idea is that because asian labour is so cheap, there is no real incentive to invest in automation research, because everyone knows it won't be price-competitive for long.
No idea if that is actually true, but that is the argument.
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If iphones were charged with US labor costs then nobody would buy them
Or we would have automated assembly faster—the investment in which would’ve been counted in domestic investment offsetting the trade deficit, right? I’m trying to verify my mental model of what’s going on.
The factory can go anywhere, in China, in France, in California, in North Dakota.
What benefit is that to the average American citizen?
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It seems great until those imaginary numbers become worthless overnight. Then you might have a bit of an "oh shit" moment as you realize that the industrial ecosystem required to substitute those imports would take a decade and a half to build even if your money were worth something, which it now isnt. Lots of countries collapse due to overreliance on foreign imports. Argentina never recovered from its peak in the 19…
Why would they become worthless? The entire world is forever beholden to Microsoft Windows, Office, AWS, X, iOS, Google Play, whether people like it or not. People have made free or cheaper or local or better alternatives and they have never succeeded at dethroning these
Getting real physical products in exchange for imaginary numbers and services is a good deal? We sell a lot of software?
The US runs a $1T surplus in services.
The total export of services is $1T / $1000B (in 2023):
* https://www.bea.gov/data/intl-trade-investment/international...
It imports $0.7T / $700B worth of services, so the surplus is $300B.
Earlier quoted context omitted.
Or we would have automated assembly faster—the investment in which would’ve been counted in domestic investment offsetting the trade deficit, right? I’m trying to verify my mental model of what’s going on.
OK lets assume the entire chain is automated and you don't need to employ anyone. The factory can go anywhere, in China, in France, in California, in North Dakota. What benefit is that to the average American citizen?
Getting real physical products in exchange for imaginary numbers and services is a good deal? We sell a lot of software?
I really don't think discussion of complex topics should be reductively reduced to snarky xkcd comics that aren't even right. Current account deficit already accounts for both goods & services. From a more formal perspective, deficts aren't neccessairly bad if they're being routed into productive investments at home, as with many developing countries needing to import machinery, but if it's being used to fund consump…
Earlier quoted context omitted.
"The US has a strong tendency towards local monopolies" also the problem is US is one of the largest market in the world, if you can conquer US market. you can pretty much do that elsewhere essentially monopolize an entire world
Isn't that just a software thing (if at all)? It's not like Canadian lumber mills conquered the world. Ford F-series isn't the highest selling car in the world.
Music? Movies? Bleed over from US social media?
There's something to that, I think.
Countries acquire such assets with dollars. They need to get dollars. The acquire dollars by selling things Americans want, typically physical goods as Americans are very good at making the non-physical kind.
Unfortunately this incentivizes the never-ending march towards de-industrialization in the USA, as countries earn dollars by making things. They get more efficient every year, and more skilled, making more things, to acquire dollars.
That is, I would argue, the single biggest issue animating politics today. It is the argument against globalization, one that has not been solved, and the turmoil in politics across the West with gyrating governments is because voters continue to desire change, and solutions, which no party has yet solved.
Arguing that voters are "stupid" is itself stupid. Voters vote the way they vote. It is on elites and politicians to solve the problem of deindustrialization while maintaining the parts of globalization that are beneficial. If you want to wring your hands and blame the voters, that's fine, but in a democracy you should try to win votes and not call people stupid.