An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
No, in the case of the US, the exporters are NOT being had since they can buy real assets in the US such as land, apartment buildings, toll roads, etc. That represents foreign ownership of US property and should be forbidden by law.
Not only that, but foreigners can use US dollars to buy inherently risk-free US sovereign debt at positive yields and thus obtain welfare proportional to account balance.
So the fault for the US trade deficit is the US selling its real assets for consumer goods and providing welfare proportional to account balance to foreigners.
Otherwise, foreigners would have no incentive to export to the US except to purchase US exports.
"Exporters' exports are financed by importers' net spending and credit."
It's the same thing from the other side of the fence. An export nation has to provide liquidity in its own currency otherwise the people that work to produce the exports cannot ultimately be paid. Creating and managing that liquidity is what the finance system gets paid to do.
More than happy to hear which of the transactions I've got wrong.
Words are not good at describing what is going on here because it depends which side of the fence you are describing at the time.
Ultimately cross border everybody pays with the currency they hold, and gets paid in the currency they need. If the finance system can't sort that out then the deal never happens in the first place.
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No, in the case of the US, the exporters are NOT being had since they can buy real assets in the US such as land, apartment buildings, toll roads, etc. That represents foreign ownership of US property and should be forbidden by law.
Not only that, but foreigners can use US dollars to buy inherently risk-free US sovereign debt at positive yields and thus obtain welfare proportional to account balance.
So the fault for the US trade deficit is the US selling its real assets for consumer goods and providing welfare proportional to account balance to foreigners.
Otherwise, foreigners would have no incentive to export to the US except to purchase US exports.
"Export-led nations have to constantly provide liquidity into the rest of the world to allow others to buy their goods."
The exact opposite is true. Exporters' exports are financed by importers' net spending and credit.
"Exporters' exports are financed by importers' net spending and credit."
It's the same thing from the other side of the fence. An export nation has to provide liquidity in its own currency otherwise the people that work to produce the exports cannot ultimately be paid. Creating and managing that liquidity is what the finance system gets paid to do.
I explain that in detail in a blog on the FX process
More than happy to hear which of the transactions I've got wrong.
Words are not good at describing what is going on here because it depends which side of the fence you are describing at the time.
Ultimately cross border everybody pays with the currency they hold, and gets paid in the currency they need. If the finance system can't sort that out then the deal never happens in the first place.
“ Words are not good at describing what is going on here”
That’s why we use diagrams in STEM….
Diagrams aren't good either. Too static. Too two dimensional.
Magic mushrooms and a VR headset should do the trick.
“ Diagrams aren't good either. “
Well that’s how everything gets done so….
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