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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.

Kurt 8mo ago 💬 2

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.

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Hoshi 8mo ago 💬 1

and your country‘s productive assets are appreciating because foreigners bet their dollars on them

Kurt 8mo ago 💬 1

I bet they are enjoying those gains

Hoshi 8mo ago 💬 1

as much as you are

Kurt 8mo ago 💬 1

Important to remember 90% of Americans only hold something like 10-7% of the US equities.

Hoshi 8mo ago

which is more than people in other countries who also tend to have a higher percentage of non-us stocks than Americans

Undisciplined 8mo ago 💬 1

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.

Kurt 8mo ago

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.