There’s one more step to that, which the chapter covers.
When Americans traded their dollars for stuff, the foreigners take those dollars and buy a larger share of our companies from us. We gradually trade away parts of appreciating capital assets for depreciating goods. They keep selling us depreciating goods and own a gradually larger share of our appreciating assets.
Exactly we aren't trade our Dollars for goods, we're trading our country's productive assets for depreciating goods.
The dollars are just the medium of exchange.
and your country‘s productive assets are appreciating because foreigners bet their dollars on them
Maybe in the grand scheme, that's what's happening. Most of "we" are not trading productive assets for foreign goods, though. We're trading our dollars for foreign goods and we aren't accepting foreign currency for our products. That's the discrepancy in currency demand from one being the reserve and the others not.
It's the next step where holders of dollars (foreign or domestic) invest in dollar denominated assets. The first imbalance leads to the next.
Exactly, it is the first imbalance leading to this one, which is why it is important the first imbalance is addressed.
But to be clear, any time you buy foreign goods you're feeding the continuation of this trade pattern.
