What Recovery?

[itfitzme]

What's really great is we are borrowing from China, so we can subsidize China, so they can compete with American businesses, put Americans out of work, with cheap inferior products from a country that doesn't have any environmental standards.

I wonder what we are thinking.

We are borrowing our dollars. US dollars.

The dollars are useless pieces of paper, if even that. We gave them numbers, We got stuff. They have numbers recorded in an account with the Fed.

This is cool. When we "borrow" from them, the Fed marks down one account, the "checking" account and marks up the other, the "savings" account. It's just bookkeeping.

Think about it.

And, all US dollars have to be spent in the US dollar zone. They are meaning less unless spent here.

None of this was even an issue when we were at full employment. The problem is employment and the flow of goods. Money is only an issue if it is failing to do what it is designed to do, make the flow of goods an efficient process.

Problem was, it got inefficient. And the economy didn't shift smoothly to new growtu industries. Instead, the large investment and financial firms went after an asset bubble. When that tapped out, everyone freaked and stopped borrowing and spending. Demand collapsed. The economy fell below where it might otherwise have been had the economy not been side tracked into an asset bubble.

 

[itfitzme]

Raise the livable wage to $23.50/hr and double Social Security payments.

Allow employers to deduct employee expenses dollar-for-dollar from Federal, State, and local taxes and fees. This will boost the GDP by $175 Billion.

I don't think the math is going to work out there.

Please explain.

I've been thinking more about this. You know, the price of things is just a percentage of the money supply. Double the supply and prices eventually creap up. It's a funny thing. It kinda depends on how fast the money supply increases and by by how much. At first production goes up. But production can only go up so fast. Any excess money will then drive prices. When production reaches a maximum, like on some limited resource, prices start climbing.

And there is the thing that the lowest income level sets a sort of baseline for prices. SSI and minumum wage is that baseline. Really, allnother things being equal, a better standard of living is in terms of how much more than minimum wage and SSI you make.

I think that just jacking SSI and min wage up all at once is a bit much. IMHO, it's the right idea, just needs to be more slowly and there has to be some balance with regard to the rest of the flow of funds.

 

[oldfart]

The appropriate natural unemployment is not simply a high-brow, academic discourse among pointy-headed economists either. If the economy has reached the natural unemployment level, then the government need take no further action to move it lower. Doing so, in fact, would trigger inflation.

We are using the same benchmark then. The difference is that mine is an econometric concept (the level where the tendency to inflation and deflation are about equal) and I don't know where yours comes from. Using this definition and any standard econometric model, the target unemployment rate comes out in the range of 4.0%--5.0%. Anything over 5.5% is clearly not necessary to avoid inflation and anything under 3.5% would clearly be associated with significant inflationary pressures. These numbers are not constant over time, as I noted they have probably risen a percentage point in the last 30-40 years. They are determined by the structure of the economy and arrived at through modeling and statistical methods. The best starting point would be to look at the CBO projections for growth rates, inflation, and unemployment. It may not be the best macro model, but it's public and free and is what Congress has to use to score bills.

I believe, and I think you may as well if I make my case, is that one of the issues starting in 98-20 was that we maxed out in labor utilization. A that point, every time we bounce against that peak, the economy went into a recession.

I'm not sure what you mean by "maxed out in labor utilization".

There has to be a better balance struck between US and China (foreign) production. They began gaining absolute advantage as their capabilities increased and wages remained low. But obviously that isn't sustainable. The only sustainable association is comparative advantages.

Labor markets and international trade are obviously related. But China is still a centrally planned economy, despite all the rah-rah about free markets and capitalism. Just where did the capital come from and who decided to build the "ghost cities"? This is all changing pretty rapidly, and it's going to be a while sorting out.

I can't hazard to guess what to exactly expect going forward but we are currently sitting at a sustainable level, all hunkered down for the winter, and without any intervention or a kickass new tech, this is about all the market is going to bear for a while. That 3% GDP growth and <5% unemployment is a long ways off unless we just do the asset bubble thing again.

I would agree with one caveat. We have failed to institute the reforms necessary to prevent a crash like 2008 again and if we don't address meaningful financial regulation another and probably worse crash is inevitable. I don't think we can muddle on another five years and be OK.

Oh, and you may have hinted at infrastructure investment. In the current climate, I don't see that as a viable alternative in the next two years.

I'm a part time economist now, and never was a political scientist, so I don't comment on what is politically feasible. If America chooses to become a third-world nation, it can surely accomplish that.

 

[oldfart]

What's really great is we are borrowing from China, so we can subsidize China, so they can compete with American businesses, put Americans out of work, with cheap inferior products from a country that doesn't have any environmental standards.

I wonder what we are thinking.

It seemed like a good idea to Nixon and Kissinger at the time. Your answer might lie in who financially benefits from these changes. Does the Walmart model care where the production occurs?

 

[oldfart]

I've been thinking more about this. You know, the price of things is just a percentage of the money supply. Double the supply and prices eventually creap up.

If this were true, we would have prices tripled by now. Look under "liquidity trap", "velocity of money", and "zero lower bound".

It's a funny thing. It kinda depends on how fast the money supply increases and by by how much. At first production goes up. But production can only go up so fast. Any excess money will then drive prices. When production reaches a maximum, like on some limited resource, prices start climbing.

And there is the thing that the lowest income level sets a sort of baseline for prices. SSI and minumum wage is that baseline. Really, allnother things being equal, a better standard of living is in terms of how much more than minimum wage and SSI you make.

I think that just jacking SSI and min wage up all at once is a bit much. IMHO, it's the right idea, just needs to be more slowly and there has to be some balance with regard to the rest of the flow of funds.

This is an interesting monetary theory with one drawback: it doesn't work that way. No matter how elegant or attractive an economic theory is, if it doesn't predict, it's wrong. The last six years have been the biggest "natural experiment" in monetary theory in history and the results are an unqualified FAIL. The alternative theory ("New Keynesian theory/Hicksian IS--LM analysis/old Keynesian liquidity preference") seems to stand up pretty well. This leaves people like Feldstein either predicting hyperinflation "soon" year after year to avoid admitting they simply were using a bad model.

 

[itfitzme]

What's really great is we are borrowing from China, so we can subsidize China, so they can compete with American businesses, put Americans out of work, with cheap inferior products from a country that doesn't have any environmental standards.

I wonder what we are thinking.

It seemed like a good idea to Nixon and Kissinger at the time. Your answer might lie in who financially benefits from these changes. Does the Walmart model care where the production occurs?

Therr is a curious topic. We buy net China imports. What do they do with US cash? Not alot. They can buy US goods, and they do. They can exchange it for Renminbi at the Chinese CB. Both can buy US treasuries.

It is virtual. US money, in the hands of Chinese businessea and banks, is just some numbers in an account. As I understand it, it's an account with the Federal Reserve. It either sits in a checking account or a savimgs account.

At some point, they may decide to spend it. Still, there isn't any where but the US currency zone to spend it. If they decide to buy US goods, sommaybe we'll sell them US goods. Maybe not.

The money is nothing more than a tool that facilitates the flow of goods. Its more like grease then anything else.

 

[itfitzme]

What's really great is we are borrowing from China, so we can subsidize China, so they can compete with American businesses, put Americans out of work, with cheap inferior products from a country that doesn't have any environmental standards.*

I wonder what we are thinking.

It seemed like a good idea to Nixon and Kissinger at the time. *Your answer might lie in who financially benefits from these changes. *Does the Walmart model care where the production occurs?

This idea of having "shipped jobs to China" is an interesting one. *My real fascination is how thinking functions and this is a good example. *I banged my head on it for a while before I unstuck myself. *The issue is a false comparison of how it is to how "it should be". *Every measure is relative to something. *There are no absolute measures but we sure do like to think so. *This isn't a *new concept, Aristotle wrote about it. Einstein hammered a nail into it.

No one was complaining when we we at full labor utilization and imports were climbing like no ones business.

*(we hit some sort of ceiling for EMRATIO in like 2000 and 2007. *If you plot net imports against EMPRATIO it is "apparent". Use monthly data. And be happy with two data points. *Statistically significant or not, its all you get.)

Anyways, the idea that "we shipped jobs to China" or "it's imigration" always comes up when we slide into a recession. *Except imports always fall and immigration declines).

The problem is that it assumes that somehow the jobs would be here if not for them having been elsewhere before. *

Had there been no trade the economy would have been and would be something entirely different. We would likely

a) not have enjoyed quite the standard of living
b) still have hit some recessionary shock
c) still have the same problem and been in recession.

or

d) be in some entirely different mess.

All that would be different would be that we would have a different mix.

That said, it's no better guess than the economy having those jobs had we not had trade. *

It's all just an illusionary comparisson of what is to what never would have happened. *It is comparing what is to some parallel universe.

And it is just a distraction from what we do now.

 

[itfitzme]

*I've been thinking more about this. *You know, the price of things is just a percentage of the money supply. *Double the supply and prices eventually creap up. *

If this were true, we would have prices tripled by now. *Look under "liquidity trap", "velocity of money", and "zero lower bound". *

* It's a funny thing. *It kinda depends on how fast the money supply increases and by by how much. *At first production goes up. *But production can only go up so fast. *Any excess money will then drive prices. *When production reaches a maximum, like on some limited resource, prices start climbing.

And there is the thing that the lowest income level sets a sort of baseline for prices. *SSI and minumum wage is that baseline. *Really, allnother things being equal, a better standard of living is in terms of how much more than minimum wage and SSI you make.

I think that just jacking SSI and min wage up all at once is a bit much. *IMHO, it's the right idea, just needs to be more slowly and there has to be some balance with regard to the rest of the flow of funds.

This is an interesting monetary theory with one drawback: *it doesn't work that way. *No matter how elegant or attractive an economic theory is, if it doesn't predict, it's wrong. *The last six years have been the biggest "natural experiment" in monetary theory in history and the results are an unqualified FAIL. *The alternative theory ("New Keynesian theory/Hicksian IS--LM analysis/old Keynesian liquidity preference") seems to stand up pretty well. *This leaves people like Feldstein either predicting hyperinflation "soon" year after year to avoid admitting they simply were using a bad model.

Lets not confuse M1 with Mb. Mb was increased by *208%. * M1 didn't move, liquidity trap. *Jack up SSI and minimum wage, all other thing being equal, something has gotta give. *SSI and min wage is M1 money, not Mb. * All other thing not equal, where is all that money going to come from? M2? *Corporate profits? *Mb? I don't know, the original suggestion didn't say.

(Look at M1 in real dollars per cap. *If we don't normalize for pop growth and inflation, its pretty meaningless. Last I looked, it's relatively *flat. *Plot M2 with it. Give a sense of scale.)

 

[OnePercenter]

I don't think the math is going to work out there.

Please explain.

I've been thinking more about this. You know, the price of things is just a percentage of the money supply. Double the supply and prices eventually creap up. It's a funny thing. It kinda depends on how fast the money supply increases and by by how much. At first production goes up. But production can only go up so fast. Any excess money will then drive prices. When production reaches a maximum, like on some limited resource, prices start climbing.

And there is the thing that the lowest income level sets a sort of baseline for prices. SSI and minumum wage is that baseline. Really, allnother things being equal, a better standard of living is in terms of how much more than minimum wage and SSI you make.

I think that just jacking SSI and min wage up all at once is a bit much. IMHO, it's the right idea, just needs to be more slowly and there has to be some balance with regard to the rest of the flow of funds.

Think about it. We have high unemployment because companies won't hire since they aren't getting their subsidies. States can't afford subsidies due to the high unemployment, lowering of wages, and reduced sales tax revenue. So why not give corporations a mega-subsidy? Even better, eliminate ALL business deductions except for employee costs.

 

[itfitzme]

I've been thinking more about this. You know, the price of things is just a percentage of the money supply. Double the supply and prices eventually creap up.

If this were true, we would have prices tripled by now. Look under "liquidity trap", "velocity of money", and "zero lower bound".

It's a funny thing. It kinda depends on how fast the money supply increases and by by how much. At first production goes up. But production can only go up so fast. Any excess money will then drive prices. When production reaches a maximum, like on some limited resource, prices start climbing.

And there is the thing that the lowest income level sets a sort of baseline for prices. SSI and minumum wage is that baseline. Really, allnother things being equal, a better standard of living is in terms of how much more than minimum wage and SSI you make.

I think that just jacking SSI and min wage up all at once is a bit much. IMHO, it's the right idea, just needs to be more slowly and there has to be some balance with regard to the rest of the flow of funds.

This is an interesting monetary theory with one drawback: it doesn't work that way. No matter how elegant or attractive an economic theory is, if it doesn't predict, it's wrong. The last six years have been the biggest "natural experiment" in monetary theory in history and the results are an unqualified FAIL. The alternative theory ("New Keynesian theory/Hicksian IS--LM analysis/old Keynesian liquidity preference") seems to stand up pretty well. This leaves people like Feldstein either predicting hyperinflation "soon" year after year to avoid admitting they simply were using a bad model.

Please explain.

I've been thinking more about this. You know, the price of things is just a percentage of the money supply. Double the supply and prices eventually creap up. It's a funny thing. It kinda depends on how fast the money supply increases and by by how much. At first production goes up. But production can only go up so fast. Any excess money will then drive prices. When production reaches a maximum, like on some limited resource, prices start climbing.

And there is the thing that the lowest income level sets a sort of baseline for prices. SSI and minumum wage is that baseline. Really, allnother things being equal, a better standard of living is in terms of how much more than minimum wage and SSI you make.

I think that just jacking SSI and min wage up all at once is a bit much. IMHO, it's the right idea, just needs to be more slowly and there has to be some balance with regard to the rest of the flow of funds.

Think about it. We have high unemployment because companies won't hire simce they aren't getting their subsidies. States can't afford subsidies due to the high unemployment, lowering of wages, and reduced sales tax revenue. So why not give corporations a mega-subsidy? Even better, eliminate ALL business deductions except for employee costs.

How about a negative tax rate? $.25 for every dollar in sales?

 

[OnePercenter]

I've been thinking more about this. You know, the price of things is just a percentage of the money supply. Double the supply and prices eventually creap up.

If this were true, we would have prices tripled by now. Look under "liquidity trap", "velocity of money", and "zero lower bound".



This is an interesting monetary theory with one drawback: it doesn't work that way. No matter how elegant or attractive an economic theory is, if it doesn't predict, it's wrong. The last six years have been the biggest "natural experiment" in monetary theory in history and the results are an unqualified FAIL. The alternative theory ("New Keynesian theory/Hicksian IS--LM analysis/old Keynesian liquidity preference") seems to stand up pretty well. This leaves people like Feldstein either predicting hyperinflation "soon" year after year to avoid admitting they simply were using a bad model.

I've been thinking more about this. You know, the price of things is just a percentage of the money supply. Double the supply and prices eventually creap up. It's a funny thing. It kinda depends on how fast the money supply increases and by by how much. At first production goes up. But production can only go up so fast. Any excess money will then drive prices. When production reaches a maximum, like on some limited resource, prices start climbing.

And there is the thing that the lowest income level sets a sort of baseline for prices. SSI and minumum wage is that baseline. Really, allnother things being equal, a better standard of living is in terms of how much more than minimum wage and SSI you make.

I think that just jacking SSI and min wage up all at once is a bit much. IMHO, it's the right idea, just needs to be more slowly and there has to be some balance with regard to the rest of the flow of funds.

Think about it. We have high unemployment because companies won't hire simce they aren't getting their subsidies. States can't afford subsidies due to the high unemployment, lowering of wages, and reduced sales tax revenue. So why not give corporations a mega-subsidy? Even better, eliminate ALL business deductions except for employee costs.

How about a negative tax rate? $.25 for every dollar in sales?

No. Won't help the middle class prosper. Won't raise GDP.

 

[oldfart]

There is a curious topic. We buy net China imports. What do they do with US cash? Not alot. They can buy US goods, and they do. They can exchange it for Renminbi at the Chinese CB. Both can buy US treasuries.

It is virtual. US money, in the hands of Chinese businessea and banks, is just some numbers in an account. As I understand it, it's an account with the Federal Reserve. It either sits in a checking account or a savimgs account.

At some point, they may decide to spend it. Still, there isn't any where but the US currency zone to spend it. If they decide to buy US goods, sommaybe we'll sell them US goods. Maybe not.

The money is nothing more than a tool that facilitates the flow of goods. Its more like grease then anything else.

You raise some good points. Since the dollar is used as an international reserve currency, China like most countries maintains a higher level of dollar reserves than would be necessary for ordinary trade. For the same reason practically everyone is in a "dollar zone" so a surplus of dollars can be used to purchase things almost anywhere in the world (unlike for example the Zimbabwe dollar which is essentially worthless unless you want to buy something in Zimbabwe!).

So after stashing a couple trillion of currency in their reserves, what have the Chinese been buying with their dollars? Well, there is a little bit of practically everything, including stock in American businesses. But the big spending has been in natural resource development in Africa and Asia. Who is financing the Iraqi oil industry? Who is the biggest investor and foreign aid provider in Africa? Whose engineers are crawling the world with foreign aid infrastructure projects?

What has China really been buying? Access to natural resources and influence. And they have been very smart about how they do it. I really see a bit of a challenge but no threat here. It's much better for China to be seeking advantage in world markets by supporting economic development and trade rather than through military intimidation and political meddling.

Think of China's dollar surplus as working capital. They are not going to sit on it or horde it so they can ruin the American economy (which would do them great harm). They are using it to forward their own economic and political development.

 

[itfitzme]

You raise some good points. *Since the dollar is used as an international reserve currency, China like most countries maintains a higher level of dollar reserves than would be necessary for ordinary trade. *For the same reason practically everyone is in a "dollar zone" so a surplus of dollars can be used to purchase things almost anywhere in the world (unlike for example the Zimbabwe dollar which is essentially worthless unless you want to buy something in Zimbabwe!). *

So after stashing a couple trillion of currency in their reserves, what have the Chinese been buying with their dollars? *Well, there is a little bit of practically everything, including stock in American businesses. *But the big spending has been in natural resource development in Africa and Asia. *Who is financing the Iraqi oil industry? *Who is the biggest investor and foreign aid provider in Africa? *Whose engineers are crawling the world with foreign aid infrastructure projects? *

What has China really been buying? *Access to natural resources and influence. *And they have been very smart about how they do it. *I really see a bit of a challenge but no threat here. *It's much better for China to be seeking advantage in world markets by supporting economic development and trade rather than through military intimidation and political meddling. *

Think of China's dollar surplus as working capital. *They are not going to sit on it or horde it so they can ruin the American economy (which would do them great harm). *They are using it to forward their own economic and political development.

Agreed.

I've been meaning to get to reading;

China's Trade with the United States and the World.

http://www.fas.org/sgp/crs/row/RL31403.pdf

It focuses more on our imports from China than China's imports. I'd like to see more of an analysis of that. *Still, it does have some things.

 

[AmazonTania]

What's really great is we are borrowing from China, so we can subsidize China, so they can compete with American businesses, put Americans out of work, with cheap inferior products from a country that doesn't have any environmental standards.

I wonder what we are thinking.

It seemed like a good idea to Nixon and Kissinger at the time. Your answer might lie in who financially benefits from these changes. Does the Walmart model care where the production occurs?

Therr is a curious topic. We buy net China imports. What do they do with US cash? Not alot. They can buy US goods, and they do. They can exchange it for Renminbi at the Chinese CB. Both can buy US treasuries.

It is virtual. US money, in the hands of Chinese businessea and banks, is just some numbers in an account. As I understand it, it's an account with the Federal Reserve. It either sits in a checking account or a savimgs account.

At some point, they may decide to spend it. Still, there isn't any where but the US currency zone to spend it. If they decide to buy US goods, sommaybe we'll sell them US goods. Maybe not.

The money is nothing more than a tool that facilitates the flow of goods. Its more like grease then anything else.

They're not purchasing US goods. They're just loaning you back the money.

 

[itfitzme]

It seemed like a good idea to Nixon and Kissinger at the time. Your answer might lie in who financially benefits from these changes. Does the Walmart model care where the production occurs?

Therr is a curious topic. We buy net China imports. What do they do with US cash? Not alot. They can buy US goods, and they do. They can exchange it for Renminbi at the Chinese CB. Both can buy US treasuries.

It is virtual. US money, in the hands of Chinese businessea and banks, is just some numbers in an account. As I understand it, it's an account with the Federal Reserve. It either sits in a checking account or a savimgs account.

At some point, they may decide to spend it. Still, there isn't any where but the US currency zone to spend it. If they decide to buy US goods, sommaybe we'll sell them US goods. Maybe not.

The money is nothing more than a tool that facilitates the flow of goods. Its more like grease then anything else.

They're not purchasing US goods. They're just loaning you back the money.

Because it is just little piece of paper. Everything we make, we keep. And they make more stuff for us, and we keep it. We give them little numbers on little pieces of paper. Then they give those numbers back in exchange for more numbers.

Here. I will give you some numbers...

1 2 3 1000 163 452 $200 £60

Later, when your done with them, can I have them back?

Get it?

 

[itfitzme]

It seemed like a good idea to Nixon and Kissinger at the time. Your answer might lie in who financially benefits from these changes. Does the Walmart model care where the production occurs?

Therr is a curious topic. We buy net China imports. What do they do with US cash? Not alot. They can buy US goods, and they do. They can exchange it for Renminbi at the Chinese CB. Both can buy US treasuries.

It is virtual. US money, in the hands of Chinese businessea and banks, is just some numbers in an account. As I understand it, it's an account with the Federal Reserve. It either sits in a checking account or a savimgs account.

At some point, they may decide to spend it. Still, there isn't any where but the US currency zone to spend it. If they decide to buy US goods, sommaybe we'll sell them US goods. Maybe not.

The money is nothing more than a tool that facilitates the flow of goods. Its more like grease then anything else.

They're not purchasing US goods. They're just loaning you back the money.

Here. Here is a number with a picture too.

 

[AmazonTania]

Therr is a curious topic. We buy net China imports. What do they do with US cash? Not alot. They can buy US goods, and they do. They can exchange it for Renminbi at the Chinese CB. Both can buy US treasuries.

It is virtual. US money, in the hands of Chinese businessea and banks, is just some numbers in an account. As I understand it, it's an account with the Federal Reserve. It either sits in a checking account or a savimgs account.

At some point, they may decide to spend it. Still, there isn't any where but the US currency zone to spend it. If they decide to buy US goods, sommaybe we'll sell them US goods. Maybe not.

The money is nothing more than a tool that facilitates the flow of goods. Its more like grease then anything else.

They're not purchasing US goods. They're just loaning you back the money.

Because it is just little piece of paper. Everything we make, we keep. And they make more stuff for us, and we keep it. We give them little numbers on little pieces of paper. Then they give those numbers back in exchange for more numbers.

For now...

 

[itfitzme]

It seemed like a good idea to Nixon and Kissinger at the time. *Your answer might lie in who financially benefits from these changes. *Does the Walmart model care where the production occurs?

Therr is a curious topic. *We buy net China imports. *What do they do with US cash? *Not alot. *They can buy US goods, and they do. *They can exchange it for Renminbi at the Chinese CB. *Both can buy US treasuries. *

It is virtual. US money, in the hands of Chinese businessea and banks, is just some numbers in an account. *As I understand it, it's an account with the Federal Reserve. *It either sits in a checking account or a savimgs account.

At some point, they may decide to spend it. *Still, there isn't any where but the US currency zone to spend it. *If they decide to buy US goods, sommaybe we'll sell them US goods. *Maybe not.

The money is nothing more than a tool that facilitates the flow of goods. *Its more like grease then anything else.

They're not purchasing US goods. They're just loaning you back the money.

I know what might make sense.

Imagine you have a store in Duluth Minnesota. *A Chinese man comes in and wants to buy something. *He offers you Renminbe

Do you take the Renminbi in exchange for your goods?

 

[AmazonTania]

Therr is a curious topic. *We buy net China imports. *What do they do with US cash? *Not alot. *They can buy US goods, and they do. *They can exchange it for Renminbi at the Chinese CB. *Both can buy US treasuries. *

It is virtual. US money, in the hands of Chinese businessea and banks, is just some numbers in an account. *As I understand it, it's an account with the Federal Reserve. *It either sits in a checking account or a savimgs account.

At some point, they may decide to spend it. *Still, there isn't any where but the US currency zone to spend it. *If they decide to buy US goods, sommaybe we'll sell them US goods. *Maybe not.

The money is nothing more than a tool that facilitates the flow of goods. *Its more like grease then anything else.

They're not purchasing US goods. They're just loaning you back the money.

I know what might make sense.

Imagine you have a store in Duluth Minnesota. *A Chinese man comes in and wants to buy something. *He offers you Renminbe

Do you take the Renminbi in exchange for your goods?

If I lived in China, I would. But I don't live in China. The United States has to purchase Renminbi in order to purchase Chinese goods, and vice versa for the Chinese regarding American goods. The only problem with this is that the U.S. doesn't actually export much of anything, so it doesn't accumulate much Reminibi from it's trade with China. As a result of this, America doesn't pay for it's imports with exports, but with worthless pieces of Federal Reserve notes.

Now again, if I lived in China and an American gave me their Federal Reserve notes in exchange for my goods, I wouldn't be able to eat, pay the bills or rent with this money. But luckily for me, the Bank of China is willing to intervene and give me Renminbi in exchange for those rather worthless Federal Reserve notes. Now I am able to do everything that I need to do with the Reminibi that I have, and the Central Bank of China can use those USD's to buy US treasuries to prop up our phony economy.

 

[itfitzme]

They're not purchasing US goods. They're just loaning you back the money.

I know what might make sense.

Imagine you have a store in Duluth Minnesota. *A Chinese man comes in and wants to buy something. *He offers you Renminbe

Do you take the Renminbi in exchange for your goods?

If I lived in China, I would. But I don't live in China. The United States has to purchase Renminbi in order to purchase Chinese goods, and vice versa for the Chinese regarding American goods. The only problem with this is that the U.S. doesn't actually export much of anything, so it doesn't accumulate much Reminibi from it's trade with China. As a result of this, America doesn't pay for it's imports with exports, but with worthless pieces of Federal Reserve notes.

Now again, if I lived in China and an American gave me their Federal Reserve notes in exchange for my goods, I wouldn't be able to eat, pay the bills or rent with this money. But luckily for me, the Bank of China is willing to intervene and give me Renminbi in exchange for those rather worthless Federal Reserve notes. Now I am able to do everything that I need to do with the Reminibi that I have, and the Central Bank of China can use those USD's to buy US treasuries to prop up our phony economy.

US exports to China were $10.3 Billion for last December alone.

The US doesn't purchase Renminbi from China. *China businesses take US dollars.