[starspangled]

> It gets massive amounts of products and services enabling the US residents live well beyond their means.

What does this mean really? That is their means.

For a somewhat topical example, people of Australia get access to cheap medications (in part because they pay to subsidize the cost of them but also because) their government negotiates with pharmaceutical corporations to pay lower prices. This kind of negotiation would be completely out of reach of any private Australian person, but they are not living outside their means. Their means includes the means to elect governments to run the country for the benefit of its own people including doing things like securing lower prices for medications.

> China for example, sends huge number of electronics and all kind of other consumer goods that Chinese produce by sweating in 12 hours shifts in 6 day work weeks in exchange for imaginary numbers.

Until 1990, Kenya had a higher GDP per capia than China. It is absolutely not "imaginary". Work produces real value, just because you can represent or trade that for allegedly "imaginary" currency does not mean that the value created was imaginary.

> US is definitely not the victim here. There's the risk of this system stop working and that's when the US might have hard times due to being forced to live by its means and have no ability to kickstart its own production when that time comes.

US manufacturing output is double that of China's on a per-capita basis.

> It makes sense to be worried for such an eventuality but US is definitely not being taken advantage here.

Seems like that's the popular assertion but I don't see much solid reasoning behind it in this thread (not picking on you specifically), just handwaving about how USD's status as a global currency somehow makes trade deficits inevitable despite simple facts available that US had a surplus trade balance 50 years ago, when the USD has been considered the global / reserve currency for over 60 years.

[mrtksn]

For other countries USD is something they have to work for or sell something to acquire it. If they screw up they may end up in crisis being unable to obtain USD. Borrowing in their own currency will be much more limited and borrowing in USD much more costly.

USA on the other hand can just print it out of thin air and because the global USD liquidity is huge they can do it for much longer without facing the consequences of it. USA is also borrowing in currency they can just print to pay their debts. Very advantageous position for USA and they took advantage of it, imported crazy amount of products and services otherwise they wouldn't have.

[avidphantasm]

Thank you for elucidating the fact that US “borrows” in its own currency and so as long as we have monetary sovereignty (which we do to a great degree due to USD being the global reserve currency) we have no deficit problems (as long as we keep inflation in check).

I implore everyone reading this thread to read up on Modern Monetary Theory (MMT). Stephanie Kelton’s “The Deficit Myth” is a good place to start. Until more people have a better understanding for how the system works, they’ll continue to be confused and easily led astray by politicians who don’t have the best interests of most people in mind, but instead wish to rob us blind in a vain attempt to eliminate trade/budget deficits.

(Note: I’m very much for restoring domestic manufacturing as much as possible, including the use of highly targeted tariffs, industrial policy, R&D, workforce development, etc. but this is not what the current administration is doing, not even close).

[starspangled]

Many countries control their currency and can print money to pay debts, and can control their fiscal and monetary policies to best gain advantage for themselves. And they do.

US can do some things more, bigger, longer, etc., for various reasons. Just like Australia can do more, bigger, longer, etc., than Tonga. I don't really see anything profound being said here.

USA might be in some advantageous position now, and it might not always be in such a position, which is a pretty bland observation, but it also does not support the idea that they are living beyond their means today.

[nisegami]

>For other countries USD is something they have to work for or sell something to acquire it. If they screw up they may end up in crisis being unable to obtain USD.

Right on the mark. This is happening to my country and it's an existential threat to my country's continued existence tbqh.

[chabska]

> US manufacturing output is double that of China's on a per-capita basis.

Only on a dollar value basis. And that's heavily skewed on how an item's value is calculated. When you use $50 of parts (all made in China) to assemble a machine that you sold at $500 , $50 of GDP value is attributed to China while $450 of GDP value is attributed to the US. But who did more "manufacturing"?

[AnIrishDuck]

What other system of value are you using here? Bottle caps? Nostalgia?

While the dollar remains the global reserve currency, this is just a wild theory of trade. If the $450 of value was so easy to extract, why wouldn't China simply assemble it in their own country and take the whole pie?

(they clearly already do this everywhere they can)

[seanmcdirmid]

The IP is important. Not only did you use $50 in parts, but the design, software, and marketing were done in the states. One critical flaw in MAGA thinking is that these inputs are worthless: the full value of an iPhone comes from China because that’s where it was assembled even if most of the value was actually added in the USA. China wants to be on the other side of the value chain as well and really don’t mind swapping places with the US (and it looks like that will happen long term now due to Trumpism).

[starspangled]

> Only on a dollar value basis.

Uh, yes.

> And that's heavily skewed on how an item's value is calculated.

An item's value is calculated according to what it is bought and sold for. That's how value is determined. What would you rather it "skew" towards?

> When you use $50 of parts (all made in China) to assemble a machine that you sold at $500 , $50 of GDP value is attributed to China while $450 of GDP value is attributed to the US. But who did more "manufacturing"?

If an American company can design and develop and sell a product that requires $50 of parts and people are willing to pay $500 for it, then clearly that company created an enormous amount of value, didn't it? By definition almost. Manufacturing output or value is not a function of the number of beads of sweat or drops of blood or hours in a factory to make something. It is how much value (i.e., what others are willing to pay for) the things you create.

[friendzis]

> > It gets massive amounts of products and services enabling the US residents live well beyond their means.

> What does this mean really? That is their means.

The argument presented here is that economic growth (more specifically trade volume increase) outside USofA forces USD acquisition transactions with USofA. This means that there is constant surplus of goods flowing into USofA without accompanying surplus of circulating money supply, leading to artificial deflation.

In other words, the cumulative productivity, measured in USD, of USofA is lower than cumulative outside-USofA-fair-market value of goods transacted in USofA. This effect increases gross value on supply side without balancing out gross value on demand side, allowing domestic players larger transaction volumes than their total productivity, with deficit covered by the central bank.

[michaelt]

> US manufacturing output is double that of China's on a per-capita basis.

If you're going around quoting those figures, you should be aware they're kinda sketchy.

Headline manufacturing output figures measure "real" output, rather than $ of output, as the latter would just be a graph of inflation and exchange rate. And when measuring "real" output, if a factory making 1TB SSDs switches to producing 2TB SSDs it has increased its output, despite the fact they're shipping the same number of boxes as they were yesterday.

Sure, the numbers say real output per worker has risen a lot since 1980. But most of the "rising efficiency" comes from the folks making 33MHz 1-core CPUs now making 5GHz 24-core CPUs. Cut out that sector and you'll discover why the US has an entire region known as the "rust belt".

[xk_id]

> What does this mean really? That is their means.

It means Americans are providing mainly a financial service, by managing the dollar. The value of their currency therefore doesn’t accrue from a real economy, which, by definition, only includes consumer goods and services.

[starspangled]

Even if we take what you wrote as fact, that does not answer how it is living beyond their means if their means includes "providing mainly a financial service, by managing the dollar".

[alexey-salmin]

> What does this mean really? That is their means.

Kind of, yes. Also if you take away other's people assets by force you can say you live by your means because you produce violence.

That's a matter of terminology, the real thing to be considered is the sustainability of this system.

If this setup can be sustained perpetually then yes, it's sort of within your means. If gradually deplete some reserves (gold or trust or domestic stability due to rising inequality) then it can be argued that you live beyond your means.

[jampekka]

> just handwaving about how USD's status as a global currency somehow makes trade deficits inevitable despite simple facts available that US had a surplus trade balance 50 years ago, when the USD has been considered the global / reserve currency for over 60 years.

US has had two trade surplus years since the USD essentially replaced gold as the reserve asset: 1973 and 1975. The reserve currency status is the primary reason for the practically constant deficit. During the Bretton Woods era US ran consistent surplus.

https://www.stlouisfed.org/publications/regional-economist/t...

[formerly_proven]

> Seems like that's the popular assertion but I don't see much solid reasoning behind it in this thread (not picking on you specifically), just handwaving about how USD's status as a global currency somehow makes trade deficits inevitable despite simple facts available that US had a surplus trade balance 50 years ago, when the USD has been considered the global / reserve currency for over 60 years.

Prior to 1971 the Dollar was tied to Gold and exchange rates were fixed by agreement.

[nis251413]

> What does this mean really? That is their means.

The "means" is being able to print trillions of imaginary dollars with value that magically pops into existence, merely backed by the fact that other nations do not want USD to lose value because they invest in it.

US did not care about trade deficits because they were able to just print dollars without having dollar itself devalued, which is what happens if any other nation decides to print currency without having a way to back its value. Because the US status as global hegemony is getting challenged, these trade deficits may become an issue. But trade deficits were not an issue until now (and they still are not as long as they can keep printing dollars without hyperinflation happening).