- 08 Jul 2018 07:54
#14931019
On another site this question was asked. This was my reply with brainstorming ideas.
This is just a 1st list. I don't know if any of them are real problems.
1] The US now has a fiat dollar and this makes a huge difference.
2] Back before Nixon took the US off the gold standard, the US like all nations, had to protect its gold or dollar reserves by keeping its trade balanced or in a surplus. If it didn't foreigners could and would suck gold out of the nation. This was a very bad thing for any nation. All nations had to avoid this IIRC.
3] Now of course we have the fiat dollar. MMT says that deficit spending is a good thing because it allows all the public to save at the same time. Dollars created by banks when they make loans do not allow this because somebody went into debt to create those dollars. MMT says that as long as the deficit dollars stay in the US all is cool.
4] However, what happens when there is a trade deficit and so the dollars are leaving the US? I have not read anything by a professional MMTer on this point, except that one pointed out that the trade deficit means that the US is buying real stuff from China [say] and giving China dollars in exchange which China uses to buy a US Bond from someone or directly from the US Treasury. This means we got stuff and China got what some people have called a "worthless piece of paper" [but they were talking about US Bonds being held by the Soc. Sec. Trust Fund].
5] So, the question is basically --- Is it still bad [like it was with the gold standard] for a nation to allow its fiat currency to pile up in foreign hands? Can or will foreigners use those dollars to damage the US in some way at some time? I do not know. What do you think?
I'm just a layman and no expert. So, can only think out loud here.
a] Foreigners could hurt the US by buying stuff to create shortages in the US.
b] Foreigners could hurt the US by buying stock in companies to run up the price and then sell the stoc before it drops, making the price plunge. This would create an unstable stock market.
c] Foreigners could hurt the US by selling their bonds at a loss to make it harder for the US Treasury to sell bonds. Creating an unstable bond market.
d] Foreigners could hurt the US by buying farm land and not planting anything on it. Reducing the harvest and raising food prices in the uS.
e] Foreigners could hurt the US by buying companies and ordering them to dump a lot of pollution into American rivers and lakes to poison the water of America.
What do you-all think?
This is just a 1st list. I don't know if any of them are real problems.
1] The US now has a fiat dollar and this makes a huge difference.
2] Back before Nixon took the US off the gold standard, the US like all nations, had to protect its gold or dollar reserves by keeping its trade balanced or in a surplus. If it didn't foreigners could and would suck gold out of the nation. This was a very bad thing for any nation. All nations had to avoid this IIRC.
3] Now of course we have the fiat dollar. MMT says that deficit spending is a good thing because it allows all the public to save at the same time. Dollars created by banks when they make loans do not allow this because somebody went into debt to create those dollars. MMT says that as long as the deficit dollars stay in the US all is cool.
4] However, what happens when there is a trade deficit and so the dollars are leaving the US? I have not read anything by a professional MMTer on this point, except that one pointed out that the trade deficit means that the US is buying real stuff from China [say] and giving China dollars in exchange which China uses to buy a US Bond from someone or directly from the US Treasury. This means we got stuff and China got what some people have called a "worthless piece of paper" [but they were talking about US Bonds being held by the Soc. Sec. Trust Fund].
5] So, the question is basically --- Is it still bad [like it was with the gold standard] for a nation to allow its fiat currency to pile up in foreign hands? Can or will foreigners use those dollars to damage the US in some way at some time? I do not know. What do you think?
I'm just a layman and no expert. So, can only think out loud here.
a] Foreigners could hurt the US by buying stuff to create shortages in the US.
b] Foreigners could hurt the US by buying stock in companies to run up the price and then sell the stoc before it drops, making the price plunge. This would create an unstable stock market.
c] Foreigners could hurt the US by selling their bonds at a loss to make it harder for the US Treasury to sell bonds. Creating an unstable bond market.
d] Foreigners could hurt the US by buying farm land and not planting anything on it. Reducing the harvest and raising food prices in the uS.
e] Foreigners could hurt the US by buying companies and ordering them to dump a lot of pollution into American rivers and lakes to poison the water of America.
What do you-all think?