China Buys -> US Treasury Bonds
US Treasury Pays -> Welfare to Americans
Trump Rednecks Buy -> Walmart Goods
Walmart Buys -> Chinese Stuff
The trade deficit is the Chinese literally giving the US items, in return for IOUs. It’s not being “ripped off”.
And if you cut them off from collecting those IOUs, then they’ll cash out sooner,
I realize it's a minor point, as your circle is correct, but your starting point is wrong.
The US buys goods from China is actually the starting point. The excess dollars created by the US buying their products causes them to buy us land, equities, energy, us goods, and of course treasuries.
China doesn't just have a bunch of dollars randomly to buy treasuries they can't create them out of thin air like the fed does.
yes you're right. but their decision to do so is what keeps the circle going.
I need to correct myself:
The US floods the globe with dollars. Some to China, some to others. Everyone trades with each other and ends up with dollars. China and others buy treasuries
Who's decision? Congress?
China's decision to buy treasuries
They don't have a choice, really. They aren't going to hold billion and billions in US dollars that depreciates. They want to invest.
on some sense, you're right. but it could be investing in other things (that aren't restricted). They can also buy commodities priced in dollars. or just convert it back. even if they want to keep their own currency low and avoid the conversion, they can buy gold or literally anything
True. And they have been. Over the past decade, they have been met sellers rather than net buyers.
But currently that relatively 'safw' 4% on billions is a great return. And leverage.
And do you think that this system can persist forever? China will never aspire to anything greater than providing for "Trump rednecks"?
I argue the goal of any society should NOT be to manufacture low level stuff, it should be to create the highest possible level of services that others can’t do better. High brain power stuff.
Therefore, it’s good to have the Chinese (or any other country) do low level sweatshops, so Americans can enjoy a high standard of living.
And so, you’re correct the Chinese won’t keep doing this circle forever. What breaks it should NOT be violent taxes from Trump, but their own population becomes more skilled, and they “outgrow” it.
Great illustration!!!
Your recent fiat podcast was fire Bro!!!! The anecdote at the beginning set it off nicely. Did that actually happen - the convo?
Things getting weirder and weirder as we approach the "dollar endgame" - (rhetorical) you think people have any idea how all of the pieces are connected? How each new dollar steals from the future. How all of this debt-based system is the equivalent of a "black hole" eventually going: "poof"...
