The trade opening was a perfect example of ceteris non paribus. Large fiscal deficits led to over valuation of the dollar and large trade deficits, especially of manufactured goods especially concentrated in the Midwest!
"Free Trade" (no such thing) also greatly reduced and degraded the nation's scientific ecosystem (it did that along with industry concentrations and few other things that significantly reduced the number of firms across most industries while moving the nation away from competitive market structures) and all the knock on effects from that (and they are likely legion)
Interesting take, I would assume that if fiscal deficits did play a role, it would be a much smaller one. But it, in my personal opinion, it would still be the same because in my view they go hand, we can only run (fund) the persistent fiscal deficits without inflation/sell the necessary gov bonds for it because of our status as the world's reserve currency which in turn is intrinsically linked to the global economic which requires to run those trade deficits (if I said that right, I'm blasting the keys right cuz I'm working, if it didnt make sense let me know an I'll think better later). Oh and also, lets not forget the "free trade" domestically, the de facto elimination of the capital flow inhibitors between states begining in the ate 1970s (with fully and de jure done in 90s) and the other regulatory and political (which to some extent would also be social) behavioral changes at each level of US gov that facilitated (and in some cases, I've recently learned, possibly illegally contrived via the use of state power) things like hub and spoke systems being set within the us domestic economy (which in turn also fed the offshoring due to decision making concentrations and logistical entablements) which also led to large reductions in the number of firms (and associated R&Ds, and R&D ideas) and competition (AND COMPETITION, despite capital "G" Globalism claiming it increases competition, it actually reduces it) and thus the competition related incentives (as well as the reduction in actioned new ideas which inspire other ideas) to innovate.
Anyways, thanks for the interesting reply. I hope your having a nice night.
I think the demand for US securities as reserves hardly reduces the interest rate which the Fed must set to achieve any given inflations target. The dollar could remain a reserve currency even it the US were as net exporter.
The USA's ability to run persistent fiscal deficits without triggering big inflation and its capacity to sell the necessary go bonds are both super intertwined with the dollar's status as the world's reserve currency. This status is intrinsically linked to the global econ system, which necessitates the US running trade deficits. Global demand for dollar denominated assets, including but not limited to Treasuries, keeps US interest rates relatively low. If the dollar were not the reserve currency, this demand would decrease, which would lead to higher interest rates. And US trade deficits help supply the global economy with dollars, used for int. trade and as reserves by other countries. If the US were a net exporter, it would not supply as many dollars to the global market, which would undermine the ability of the dollar to be the primary reserve currency. This demand for US securities as reserves plays a big role in the interest rates the US government has to pay; if global demand for the securities were to decline, the US would have to offer higher yields to get buyers, which would in turn lead to higher interest rates. The Feds policies and interest rate settings are super duper infleunced by these dynamics. And by running trade deficits the USA is effectively exporting some of its inflation, lowering domestic inflation rates which also allows for lower interest rates. The trade deficit makes the dollar very available around the world and is one the main reasons countries around the world are plugged into the US economy, countries being plugged into the us economy are key for the $ being the WRC, as is there being dollars available around the world which the trade deficit is a big parts of. The Dollar demand around the world in turn makes treasury bonds in high demand around the world which makes it so the treasury can sell bonds at much lower interest rates which in turn is one of the big enablers of us being able to run persistent fiscal deficits. Both the ability to run persistent trade deficits and persistent budget deficits without inflation are enabled by the same paradigm and that paradigm requires both to occur. In my opinion.
Sorry, the rest of the arg was related to the initial point about scientific ecosystem decline, we also did a version of capital "G" Globalism here at home (domestic empire) which, among other things, contrived concentrated markets and replaced competitive market structures which private sector semi-central planning.
The trade opening was a perfect example of ceteris non paribus. Large fiscal deficits led to over valuation of the dollar and large trade deficits, especially of manufactured goods especially concentrated in the Midwest!
"Free Trade" (no such thing) also greatly reduced and degraded the nation's scientific ecosystem (it did that along with industry concentrations and few other things that significantly reduced the number of firms across most industries while moving the nation away from competitive market structures) and all the knock on effects from that (and they are likely legion)
If it did are you sure that was not the rather the effect of the export dampening caused by fiscal deficits?
Interesting take, I would assume that if fiscal deficits did play a role, it would be a much smaller one. But it, in my personal opinion, it would still be the same because in my view they go hand, we can only run (fund) the persistent fiscal deficits without inflation/sell the necessary gov bonds for it because of our status as the world's reserve currency which in turn is intrinsically linked to the global economic which requires to run those trade deficits (if I said that right, I'm blasting the keys right cuz I'm working, if it didnt make sense let me know an I'll think better later). Oh and also, lets not forget the "free trade" domestically, the de facto elimination of the capital flow inhibitors between states begining in the ate 1970s (with fully and de jure done in 90s) and the other regulatory and political (which to some extent would also be social) behavioral changes at each level of US gov that facilitated (and in some cases, I've recently learned, possibly illegally contrived via the use of state power) things like hub and spoke systems being set within the us domestic economy (which in turn also fed the offshoring due to decision making concentrations and logistical entablements) which also led to large reductions in the number of firms (and associated R&Ds, and R&D ideas) and competition (AND COMPETITION, despite capital "G" Globalism claiming it increases competition, it actually reduces it) and thus the competition related incentives (as well as the reduction in actioned new ideas which inspire other ideas) to innovate.
Anyways, thanks for the interesting reply. I hope your having a nice night.
---Mike
I think the demand for US securities as reserves hardly reduces the interest rate which the Fed must set to achieve any given inflations target. The dollar could remain a reserve currency even it the US were as net exporter.
I cu not follow the remainder of your argument.
The USA's ability to run persistent fiscal deficits without triggering big inflation and its capacity to sell the necessary go bonds are both super intertwined with the dollar's status as the world's reserve currency. This status is intrinsically linked to the global econ system, which necessitates the US running trade deficits. Global demand for dollar denominated assets, including but not limited to Treasuries, keeps US interest rates relatively low. If the dollar were not the reserve currency, this demand would decrease, which would lead to higher interest rates. And US trade deficits help supply the global economy with dollars, used for int. trade and as reserves by other countries. If the US were a net exporter, it would not supply as many dollars to the global market, which would undermine the ability of the dollar to be the primary reserve currency. This demand for US securities as reserves plays a big role in the interest rates the US government has to pay; if global demand for the securities were to decline, the US would have to offer higher yields to get buyers, which would in turn lead to higher interest rates. The Feds policies and interest rate settings are super duper infleunced by these dynamics. And by running trade deficits the USA is effectively exporting some of its inflation, lowering domestic inflation rates which also allows for lower interest rates. The trade deficit makes the dollar very available around the world and is one the main reasons countries around the world are plugged into the US economy, countries being plugged into the us economy are key for the $ being the WRC, as is there being dollars available around the world which the trade deficit is a big parts of. The Dollar demand around the world in turn makes treasury bonds in high demand around the world which makes it so the treasury can sell bonds at much lower interest rates which in turn is one of the big enablers of us being able to run persistent fiscal deficits. Both the ability to run persistent trade deficits and persistent budget deficits without inflation are enabled by the same paradigm and that paradigm requires both to occur. In my opinion.
Sorry, the rest of the arg was related to the initial point about scientific ecosystem decline, we also did a version of capital "G" Globalism here at home (domestic empire) which, among other things, contrived concentrated markets and replaced competitive market structures which private sector semi-central planning.
But thats just my opinion.
I hope your having a good start to the weekend!
---Mike