You are broadly correct. Saddam Hussein tried to chart a course for Iraq where the Euro rather than the US Dollar was the preferred currency for oil trade and international transactions. "Foreign Exchange: Saddam Turns His Back on Greenbacks" http://content.time.com/time/magazine/article/0,9171,998512,00.html "Iraq nets handsome profit by dumping dollar for euro" http://www.theguardian.com/business/2003/feb/16/iraq.theeuro The Second U.S-Iraq War began just a month after that second article was published. The French government was the primary proponent for Colonel Qaddafi's removal, fearing the erosion of French influence in what Paris sees as "Francophone Africa". Qadaffi proposed gold-backed pan-African Dinar would also challenge the place of a CFA Franc used in a (surprisingly large) stretch of Western and Central Africa.
Very interested to see if Trump will play a hard game of trade wars like China has been playing since they joined the WTO. Let the games begin.
I think Trump has said right from the start that the reason for the trade war - national security. Given the illogical belligerence that China has shown in the South China Sea in recent years, I think it is a valid reason, and one which he can use to convince the congress to back his actions regardless of lobbying by American bankers and corporations. People who say that trade wars will lead to actual war are actually mistaken because there is no free trade to begin with. If there were real free trade, the US won't have such a big deficit. By reducing the US deficit, Trump is actually helping to reduce the likelihood and severity of future wars. China will have less money to fund their military expeditions and build aircraft carriers, and the US will return to making consumer stuff instead of tomahawks and fight planes.
Of course there would be deficits, both large and small. The notion of trade deficits is a fallacy. Every time you buy a silver bar from a bullion dealer for example there is a trade deficit. If you measure wealth in $ there will always be trade deficits even in a world of free-trade.
You can't really use the analogy on a small company that is designed to sell product for currency. You have to look at a complete system. Anyway the main reason America will always have a large trade deficit is due to them being the reserve currency. This is why a single country's currency should not be used as a reserve currency.
Actually the analogy is entirely appropriate. The principles behind the economic behaviour of individuals are equally relevant to the “complete system”. This is because the “complete system” is really the aggregation of the economic behaviour of countless individuals. Trade deficits have always existed, long before the advent of a world reserve currency, even when currencies were pegged to gold. The reason why the US has a high trade deficit is because US individuals have a high demand for the goods and services that other countries produce and can afford to meet that demand. The notion of a trade deficit is a fallacy. Wealth is not measured in $$.
what national security, is just all bullshit China sell TV to US consumers, money did not come back... it got invested in T-Bonds ( all those $$$ that could never be used to buy American so call assets) now there is tariff, so what is this oh it is protection money why in the world would China not do the same, with tariff ??? tariff is just like GST on foreign goods, even US oil and gas get slap with tariff now... who in the hell would want to buy US oil and gas any longer ?? Iranian oil is non tariff purchase wow, load up on this, cancel US oil and gas purchases ... good strategy for stopping Iranian oil to the world market don't forget to return the TV if you do not want to buy this thing call "TARIFF"
I disagree, the main reason the US has a large sustained trade deficit is due to them having a reserve currency which is used to buy oil and other commodities (just because). If the US didn't have the reserve currency that is used to buy oil then most countries would never accept USD in exchange for their goods. So having a reserve currency allows a trade deficit to grow bigger and last longer, without it markets wouldn't allow such a large unbalance. People forget you need to run large trade deficits in order to have a reserve currency.
It seems we might be discussing different things. I'm not saying surplus or deficits are bad, rather the more unique situation the US has which is due to it's reserve currency status. Can i recommend you research the effects of a reserve currency.
We probably are then. My posts were in response to sgbuyer’s statement that a trade deficit would not exist in a free-trade market. I will research the effects of reserve currency status, got any good links?
I can't remember the links i read/watched, but here is a quick link I found which discusses my point. The US can eliminate it's trade deficit or run the world’s dominant currency—but not both
Okay, correct me if I’m wrong, but what they’re arguing is that because the USD is in demand, due partly to its reserve currency status, it drives up the value of US exports in relation to US imports creating an even greater deficit than may well be the case if the USD was not the reserve currency. I can accept that as one of the contributing factors and that probably exacerbates it. Thanks for helping to clarify your point, I’ve learned something new.
This is true, but if there were free trade, can the dollar still be the reserve currency? I believe that Trump is definitely going to solve the trade deficit issue, even if it means diminishing the dollar's role as a reserve currency, he might even relish that if it could weaken the dollar. Nowadays what matters most is jobs, especially with the advent of AI, any country that can't solve the unemployment problem might even see collapse and civil war. Perhaps this is the security risk he is talking about. Let's not forget US citizens are armed to the teeth with 400 million pieces of firearms. Anyway, if the dollar role as reserve currency is diminished it means gold will play a bigger role, which in this case shouldn't it be rewarding for all of us here?
Let's assume it is an issue and why it exists in the first place. a. US citizens have a high demand for goods that other countries produce b. Other countries have a comparative advantage when it comes to producing these goods c. Easy credit enables the immediate satisfaction of more needs than the average worker would ordinarily be able to meet d. And finally as leo argued, the status of the USD as the reserve currency drives demand for the USD which raises the price of the $ in comparison to other currencies, thereby inflating the prices of US manufactured goods and driving down the price of imported goods. Now Trump won't be able to solve this "issue" for two reasons. 1. both (a) and (b) above are a natural outcome of trade, this natural outcome of trading with other countries is beneficial to US citizens (and the countries it trades with) so any attempt to alter this situation will damage the prosperity of the US. 2. it's precisely the meddling by central planners that create the unwanted side-effects of (c) and (d) in the first place. More meddling therefore may create further unwanted side-effects. Trump is incapable of understanding that a trade deficit is irrelevant. As long as prosperity rises, which it is in the US, its citizens can continue to import more goods than it produces. Edit to add: unemployment I would argue has more to do with generous welfare payments and minimum wages than the what China or Mexico or Canada do.
Yes. That's why the US must run a large trade deficit in order to facilitate it's reserve currency. The only way the US can get enough $ out to the world is to buy goods in exchange for dollars. And on the flip side, the only way other countries can acquire dollars is to sell goods to the US. Now if/when America loses it's reserve currency status, they will no longer be able to sustain such a large and long standing deficit.
What about when it monetizes debt ie buys Treasury bonds (including from foreign countries) and mortgage-backed securities and lends this credit to other banks?
It depends what you mean by free trade. Free trade and fair trade can be seen as different things. Yes i think gold will be some part of the next global reserve currency.
