Why doesn't Britain make things any more? (2011) • Hacker News Board

Re: Why doesn't Britain make things any more? (2011)

#111

Post by candiodari » Mon, Aug 19, 2019, 1:36 AM UTC

pjc50 wrote: post #60

neilwilson wrote: post #42

Earlier quoted context omitted.

Largely you are correct. It works like this. If you are a net exporter, you are essentially giving away your own output to a foreign nation in exchange for bits of paper. The reason you can't spend that paper is that it would destroy your exports (your own currency would go sky high as the system tried to eliminate the imbalance) and you'd have to find something else for the people working in exports to do, or you'd…

This is largely nonsense - Botswana is on average net-neutral: https://tradingeconomics.com/botswana/balance-of-trade The poor countries more or less have to spend the dollars because they need to buy fuel and high tech. It's the rare exceptions that stockpile it, China and Norway, and they can afford to do that because they're oil-producing. > The poorer country would be better putting people to work creating domest…

It means you'd have to issue local currency against local infrastructure. Or otherwise anything local. I guess that doesn't make much sense either.

You have to GIVE a currency value. What that means is that you must give people a reason to use that currency. Now internally in a country this is done through taxes and the bank system. Externally however this has to be done differently. It must be "guaranteed" to be exchangeable ... to the global reserve currency (so that anyone can buy what they want with it). How do you guarantee that exchange rate ? By having an instrument that's guaranteed to be exchangeable for the reserve currency. A lot of US treasuries, a little gold, a little EU sovereign bonds, ...

So instead you'd have to issue currency and make it exchangeable for local assets. So you'd loan that to local people to build roads, harbors, bridges, buildings, ... That doesn't work, because sovereignty means that you can't exchange those things for the global reserve currency anywhere near as well as you can US treasuries. Because investors are acutely aware that the government could just immediately impound their money (and there's lot of historical precedent of that actually happening), whether it's local currency or local assets. Investors would have to accept that they can bring money in, but not take it out. And good luck with that one.

Re: Why doesn't Britain make things any more? (2011)

#112

Post by NTDF9 » Mon, Aug 19, 2019, 2:09 AM UTC

pdm55 wrote: post #67

neilwilson wrote: post #42

Earlier quoted context omitted.

Largely you are correct. It works like this. If you are a net exporter, you are essentially giving away your own output to a foreign nation in exchange for bits of paper. The reason you can't spend that paper is that it would destroy your exports (your own currency would go sky high as the system tried to eliminate the imbalance) and you'd have to find something else for the people working in exports to do, or you'd…

Does anyone know where petrodollars fit in this picture? Do they give the US a particular economic advantage?

It gives the US a very big advantage. How?

1. The US never has to produce anything to buy oil. They can just print dollars and import oil. Another country, say Bostwana, has to produce something else, sell it to another country in exchange for USD and then they can buy oil. This is a significant crutch

2. The US will never have a shortage of oil before other countries do

3. The US can import anything it wants, whenever it wants. Say a year with bad weather caused low corn production. That will not take down companies dependent on corn. US can always print USD and buy corn from somewhere. Compare that to Brazil, who would just have to suck it up since they don't have enough USD in reserves to go import corn.

Re: Why doesn't Britain make things any more? (2011)

#113

Post by JanSt » Mon, Aug 19, 2019, 6:56 AM UTC

chewz wrote: post #102

JanSt wrote: post #55

Earlier quoted context omitted.

QE is made for Southern Europe, the North has argued against it for years (especially Jens Weidmann). Draghi is Italian.

QE transfered money to Southern countries with a caveat to use them to pay bondholders - large banks of the North. So in essence it was taking money from Northern taxpayers to give to Northern banks to save them from illiquidity. People in the South and their country budgets haven't seen a cent of these money.

That's not a correct description, but it's true in some way.

1) QE did not transfer money with any caveat to pay bondholders. QE is not like giving cash to a country. The ECB buys up bonds on the open market (thus mostly from banks, which supports your point).

2) The buying up of bonds drastically reduces interest rates, because artifical demand is created.

3) The South can now borrow money for pretty low interest rates on high debt-loads. Italy wouldn't be able to afford high interest rates very long.

4) Northern banks holding higher paying bonds in their portfolio profited because the high-coupon bonds values increase.

Re: Why doesn't Britain make things any more? (2011)

#114

Post by mikhailfranco » Mon, Aug 19, 2019, 1:36 PM UTC

mikhailfranco wrote: post #109

thundergolfer wrote: post #108

Earlier quoted context omitted.

Are you actually suggesting Socialism is the cause of this? Do you think Britain has been a socialist country in the last 50 years?

When you read The Guardian, you know that every question they ask about the current ills of the world, will have the blame directed toward "Thatcher and neoliberalism", except occasionally when it is the fault of "neoliberalism and Thatcher". The Guardian has good journalism, but it is not a useful place to get interesting or insightful discussions of such topics. You are either already in the choir it is preaching t…

TL;DR - Government consumption crowding out private saving that would otherwise support investment and prosperity, see the last two graphs:

https://mises.org/wire/malthusian-trap-keynesian-trap-britis...

Re: Why doesn't Britain make things any more? (2011)

#115

Post by coldtea » Tue, Aug 20, 2019, 8:45 AM UTC

achamayou wrote: post #28

coldtea wrote: post #22

Earlier quoted context omitted.

...if only that currency was controllable by Britain's government according to Britain's needs, instead of being run according to some other country's interests to propel its own economy (using a number of satellite states to vote in its favor) -- and causing the exact same problem the grandparent described in the periphery countries...

Yeah it’d be even better for Britain if it was in control of that currency, you’re definitely right there!

Is this supposed to be a parody of sarcasm?

First, I didn't say it would be better if Britain was in control of Euro. Obviously it would be better if the Euro was controlled to the interests of all the Eurozone, not particular to the interests of some top-dog states. Which might even need a "two/three zone" currency.

Second, if you ask whether it be better for Britain to control its own currency, that's a given. EU aside, that's what any economist will tell you: a country is better off when it controls its own currency. Denying that is as kooky as being an anti-vaxxer.