211–220 of 814 posts
Is this better?
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US doesn't just get political influence. It gets massive amounts of products and services enabling the US residents live well beyond their means. China for example, sends huge number of electronics and all kind of other consumer goods that Chinese produce by sweating in 12 hours shifts in 6 day work weeks in exchange for imaginary numbers. US is definitely not the victim here. There's the risk of this system stop wor…
Even more sad that the US chose NOT to invest this surplus, for instance in infrastructure, education and a sensible health system.
Also, in the US, infrastructure, education, and healthcare is primarily the responsibility of individual States, so it really needs to be measured on a per State basis. For some of these things, some States deliver high quality at low cost and other States deliver low quality with an order of magnitude higher spending for the same thing. The correlation between spending and results is surprisingly weak. Competency and focus seems to play a greater role.
Using a national currency as the de facto global reserve guarantees a trade deficit for that country. No one else can manufacture USD's, so other countries have to acquire them by shaping their economies to supply goods and services demanded by the US. They can then use these earned dollars to transact with other countries, as the US itself insists they do. For the US, this is a simple trade off - gain massive politi…
Adam Smith already pointed out that a trade deficit is not really interesting, so I do not understand the American obsession about it ;) Also, the often-mentioned US-EU trade deficit is not that big if you count in services. Which I think should be done in the 21st century. Large parts of the US economy are focused on digital high-value services, and they are "exported" worldwide.
This is why, in case of reciprocal tarriffs on physical goods, the US ends up the big winner - they don't apply to digital services, which are a huge part of US exports.
Now the world had slowly been catching onto this fact that they'd been getting absolutely rinsed by the FAANGs who have gotten their populace addicted to their opium and made trillions off of them without contributing anything meaningful back. For the first time, we were seeing digital services taxes - a decade overdue. Brazil now has one in place - great on them. The EU was also planning one, but then the tarriffs came, and suddenly voices are saying they might abandon it. If the current US gov was any other US gov, the obvious conclusion would be that they're using tarriffs as a pawn to prevent the rise of digital service taxes.
Obviously, in the current timeline this wasn't the main reason. But there's no way Mark, Satya, Jeff and Tim haven't been whispering into big leader's ear just how "unfair" these DSTs are.
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Automation was reducing the number of manufacturing jobs. But "free trade" has taken away a lot of the manufacturing itself. The US as a whole can no longer make the TVs and iPhones that it consumes so many of.
There's more manufacturing than there ever has been in the United States. It doesn't make low value-added goods like TVs, it doesn't employ a lot of people, and it's not growing as fast as other sectors, but we still manufacture more than ever before. The “crumbling” sensation is because fewer people are employed by it and more people are employed (and earning more) in other sectors.
Yes, aerospace and military tech are the biggest manufacturing industries in USA... Quite profitable these days with all these conflicts...
Nationalism I'm surprised to not see nationalism talked about. The topic of trade deficit seems to be less about economic reasons and more about a political movement towards nationalism. This can be seen in Europe right now, as well as India and Brazil - where those respective governments have taken actions that strongly favor local/in-country based companies over foreign. And it appears the current US administration…
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> The real wealth is not dollars or pounds or whatever, the real wealth is goods and services. You missed one that is arguably more important: ownership of assets that provide security, shelter, and productivity.
In a simplified sense, all assets start their lives as goods, either tradable goods, goods that are used to build more goods, future goods, or things that represent ownership or an interest in any of them. Land is a bit more complicated. But even land value is conditional in what you can use it for.
In a more general sense it can also be systems of law (and consistency of adherence and enforcement) that provide the stability and infrastructure for the trade of goods and services. There is a reason that famines are associated with wars: trade in food collapses when stability disappears.
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> However, it's arguably a better export that commoditized goods, from a margin standpoint. Importantly, this is the same dynamic that causes economies to move away from manufacturing towards service-oriented economies. Capitalism is going to chase higher margins, but there should be guardrails that mitigate the negative externalities of such behavior. Else we are left with an eroded middle class, lack of supply chai…
No. The US will win the next world war by replying on its advanced capabilities in restaurant work and business consulting.
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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/
Imagine having to tell the economy it can only grow as fast as a specific rare metal is mined for money to continue to make sense. The gold standard was a system breaking up by its inherent contradictions, as another poster has phrased it, when Nixon went off it.
It makes intuitive sense that the gold standard would have limited economic activity, but did it actually do? If the gold standard had been constricting economic activity, one would expect GDP growth to have accelerated after the gold standard was eliminated, but as far as I can tell that didn't happen.
I believe that most services are also excluded, but they may have changed that.
Transfer pricing screws up the numbers as well.
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The US isn’t forcing anyone else to use USD. People around the world use USD because they are confident it will help them buy products and services they want in the future.
> The US isn’t forcing anyone else to use USD. I disagree. The petrodollar is a thing.
Are Canada and Russia and Iran only accept USD for their oil sales?
https://www.investopedia.com/articles/company-insights/08231...