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The Almighty Buck United States Technology

Another US Tech Trade Deficit 498

Posted by kdawson
from the giant-sucking-sound dept.
eldavojohn writes "The United States is suffering again from a massive trade deficit — $38.3 billion in 2006. And it's been going on since 2002. From the press release: 'In 2006, Asia supplied 60 percent of all US imports of advanced technology products. Europe supplied more than 20 percent, and North America more than 15 percent.'"
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Another US Tech Trade Deficit

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  • How long (Score:5, Insightful)

    by downix (84795) on Thursday August 23, 2007 @11:43AM (#20331141) Homepage
    When a country exports all of it's facilities, manufacturing, and infastructure overseas, how long before that countries trading partners realize that they can cut the country out of the loop entirely?
    • Re:How long (Score:5, Insightful)

      by MontyApollo (849862) on Thursday August 23, 2007 @11:50AM (#20331225)
      The US is a huge consumer. They can't cut us out all the way.
      • Re:How long (Score:5, Insightful)

        by downix (84795) on Thursday August 23, 2007 @11:54AM (#20331299) Homepage
        And with what money shall the US consume if it does not manufacture anything to sell for profit? Technology was the last real growth manufacturing field. Without turning one thing into another, to sell for profit, there is no more real consumption as rather than generating money, you are just recycling money. And then, when you buy foreign made goods, that recycled money leaves the country, leaving you with less to purchase with. It is an entropic cycle, and will eventually fail.
        • It is in the foriegn companies' best interest to keep the money flowing though, so they won't "cut us out", which was the point of the first post I thought.

          • Why? (Score:4, Insightful)

            by FatSean (18753) on Thursday August 23, 2007 @12:14PM (#20331565) Homepage Journal
            Why is it in their best interest to send money through the USA when we don't make much of what they want to buy, and we can't afford to buy what they sell?
            • and we can't afford to buy what they sell?
              What do you mean with that, I thought the only way to have a trade deficit was to buy more from abroad than locally. So if we have a trade deficit it doesn't seem like we are having a problem affording stuff.
              • Re: (Score:3, Interesting)

                What do you mean with that, I thought the only way to have a trade deficit was to buy more from abroad than locally. So if we have a trade deficit it doesn't seem like we are having a problem affording stuff.

                Short term vs long term viewpoint. If we have a trade deficit today- and it's large enough- it means that comparative advantage rules have broken down, and that the nation that no longer produces ANYTHING will start losing high-paying manufacturing jobs (gee, kind of like what we've been doing for 40
                • Re: (Score:3, Insightful)

                  by aldousd666 (640240)
                  so you're saying that if someone loses their high paying manufacturing job, then they can't go do something else ever? not even 20 years from now? It's a local hiccup to lose a local industry to foreign competition, it doesn't make the next generation (next 4 year class of college students even) of workers immune to finding jobs. It's those high paying jobs anyway that make American companies unable to compete with foreign companies who don't pay them as much. So you're basically saying that we should som
                  • Re:Why? (Score:4, Interesting)

                    by Marxist Hacker 42 (638312) * <seebert42@gmail.com> on Thursday August 23, 2007 @02:09PM (#20333275) Homepage Journal
                    so you're saying that if someone loses their high paying manufacturing job, then they can't go do something else ever?

                    No, I'm saying that the options to high paying manufacturing jobs pay less than a living wage.

                    not even 20 years from now?

                    Unless something comes along that pays a living wage, not even 20 years from now. The race for cheap labor is a race to the bottom, not to the top.

                    It's a local hiccup to lose a local industry to foreign competition, it doesn't make the next generation (next 4 year class of college students even) of workers immune to finding jobs.

                    It just means that the next generation only has burger flipping available- because nobody can afford anything else.

                    It's those high paying jobs anyway that make American companies unable to compete with foreign companies who don't pay them as much.

                    And we want to compete with them exactly why? Why not just lock them out of our market so that we don't have to compete with them?

                    So you're basically saying that we should somehow tell the other countries that they have to be fair and pay them as much as we'd like to make, because.. it's only fair that way... right?

                    No, I'm saying that if they want to sell goods here, then they have to pay equal to American wages. If they don't want to pay equal to American wages, then I see NO reason why we should allow their imports AT ALL.

                    I don't think they'll buy it. And you will be left behind whining about how life isn't fair, while the people who adapt will be moving on buying more plasma screen tv's they shouldn't be able to afford.

                    At least until China realizes that all they're getting for those plasma screens are IOUs that will never be paid off. I don't see any reason why we can't just sink the Chinese ships trying to cross our borders, and make the plasma screens here. But hey- if you like selling out your nationality for cheap labor, so be it. There's a name for that: treason. And someday, patriots like me will be handing out the proper punishment for that crime.
                    • Re: (Score:3, Interesting)

                      by timster (32400)
                      Thanks for showing your open hate at the end there, MH42. Nice to know that marxists are still empty violent rebel types.

                      Your economic theory is interesting but baseless. If you get out a map you can draw arbitrary lines on it and make any silly economic point that you please. Suppose you draw a line around downtown San Francisco, and you notice that goods and services come in while only trash goes out. You haven't made an economic point about downtown San Francisco; you've just found where some rich pe
                    • Re: (Score:3, Insightful)

                      by aldousd666 (640240)
                      you don't have a 'right to a job' you have to right to apply for a job. if nobody wants to pay your for your services, learn some new services. nobody 'took our jobs away' they simply outperformed us for a lower price. I'm not talking about quality necessarily, that's another issue, and it varies as well. People go to work and get paid because someone feels the need for their services, and that it's worth forking out the cash for said service instead of, for example, doing it themselves. You don't get a pa
        • Re:How long (Score:5, Funny)

          by russ1337 (938915) on Thursday August 23, 2007 @12:25PM (#20331773)
          >>> with what money shall the US consume if it does not manufacture anything to sell for profit?

          What are you talking about? You do what the rest of us do and put it on your credit card [brillig.com]
        • No worries - we're sliding headlong into feudalism, the conservative utopia. There will always be a plentitude of feudal lords to serve on their Manors. Surely they will treat their serfs with kindness, compassion, and generosity, as they have through all of history.
        • Re: (Score:3, Interesting)

          by kripkenstein (913150)

          And with what money shall the US consume if it does not manufacture anything to sell for profit? Technology was the last real growth manufacturing field.

          On that note, perhaps you or someone else understands enough economics to explain something to me.

          The US has a trade deficit with (say) Japan of $80 billion, if I am not mistaken. Now, assuming 1 PC per Japanese citizen (sure, not all have one, but some have more than one), that is over 100 million PCs. Say each PC pays Microsoft $200 (for Windows + Of

          • Re:How long (Score:4, Informative)

            by joggle (594025) on Thursday August 23, 2007 @01:39PM (#20332775) Homepage Journal

            Is this $20 billion included in the $80 billion trade deficit? That is, would it be $100 billion without Microsoft?

            Yes, this is included in the trade deficit calculation so yes, if your numbers were correct then the deficit would be $100 billion without Microsoft. Washington state is one of the very few states with an international trade surplus in large part due to Microsoft and Boeing. Other companies with a trade surplus are restaurant chains that sell franchises overseas (such as Starbucks, McDonalds, and KFC).

            On the other hand, is perhaps this money not arriving to the US, but rather received only by "Microsoft Japan"

            The money is funneled through Microsoft Japan. Microsoft in Redmond still gets a slice of every license sold there (or at least for the great majority of licenses). In the case of restaurant chains usually the franchises are locally owned and operated so the American company only profits from the initial franchise sale and (sometimes) from the ingredients sold.

        • Re: (Score:3, Interesting)

          by RexRhino (769423)

          And then, when you buy foreign made goods, that recycled money leaves the country, leaving you with less to purchase with. It is an entropic cycle, and will eventually fail.

          U.S. dollars only have value because they can be spent on U.S. goods. When the U.S. has a 'trade deficit', it means that those foreign countries are sitting on those dollars we send them (or, more likely, purchasing U.S. government bonds). We give them peices of paper (or nowadays, bits on a computer), and they send us DVD players and Barney toys.

          Eventually, they will spend those dollars on U.S. goods, as that is the only thing they are good for, or sell them to someone else who will spend those dollars on

          • Those exporting countries are willing sit on trillion+ dollar reserves because oil typically hasn't been available for import with any currency other than US dollars. Cutting a deal with Saudi Arabia (the OPEC swing producer) to price oil only in dollars in exchange for propping up their oppressive dictatorship, has caused the rest of OPEC to fall in line... at least until 2000 when Iraq switched from the dollar to trading oil exclusively in euros.

            In other words, there was an artificially-maintained relatio
        • And with what money shall the US consume if it does not manufacture anything to sell for profit? Technology was the last real growth manufacturing field. Without turning one thing into another, to sell for profit, there is no more real consumption as rather than generating money, you are just recycling money. And then, when you buy foreign made goods, that recycled money leaves the country, leaving you with less to purchase with. It is an entropic cycle, and will eventually fail.

          When that money leaves th
      • by *weasel (174362)
        Exactly. If you look at the products that, e.g., the Chinese make for the Chinese market -- they've already 'cut us out'.

        But that doesn't mean they want to stop doing production runs of American designs for the American markets. Not when there's still a pile of cash to be made from factories that would otherwise sit idle. As their own market becomes larger and larger it'll naturally be less and less advantageous for both of us to continue the relationship - and we'll amicably part ways and our manufactur
      • The US is a huge consumer. They can't cut us out all the way.

        Until no-one is making any money because all the jobs have been exported too... Is this one of those #3 profit moments?
      • Re:How long (Score:4, Insightful)

        by Bluesman (104513) on Thursday August 23, 2007 @12:53PM (#20332131) Homepage
        They can't if they care about their economy.

        But what if they don't care? The Chinese don't have a history of being enamored of the global free market. They might be willing to cut of their nose to spite their face, especially if their new middle class gets too uppity for the party's taste.

        Our massive debt that the Chinese control means that they could sink their economy and ours with a single move. It's like a financial nuclear bomb, only the Chinese have the only trigger.

        I'm all for globalism, but the massive amount of debt the U.S. government is creating isn't going to go away, and there will be consequences eventually.

      • once we no longer have the ability to pay. We have done a fine job of looking and thinking VERY short term. Far too many even on /. that think in terms of sending jobs elsewhere due to costs, with no real knowledge about teh true costs involved (ask mattel; no only are they now going to have to start doing real QA, but even the chinese gov is pushing to double the price of nearly everything).
    • Re:How long (Score:5, Insightful)

      by BrianRoach (614397) on Thursday August 23, 2007 @11:51AM (#20331253)

      You see this all the time now with Chinese produced goods. They copy whatever it is they were manufacturing for American company X, then produce it for themselves and ship it into the US. Basically, all they need is someone in the US to handle sales and distribution (Walmart, for example).

      - Roach
      • Re:How long (Score:5, Interesting)

        by archen (447353) on Thursday August 23, 2007 @12:31PM (#20331865)
        I've actually had discussions on this sort of topic and I didn't realize the implications until later. It's almost impossible to get an electronic system manufactured in the U.S. now because we've shipped all of our capabilities overseas - mainly to China. I was having a discussion with a friend about a product which he was talking about producing - a one time thing, for himself. I mentioned that it was a pretty cool idea and that he should consider making such a product commercially and selling it. He said that it wasn't worth the effort. You need to produce the product, that means using a Chinese manufacturer. They will copy it and undercut you to hell and back, whether you have a patent or not. So really there is no reason to think up new products because in the end China will end up screwing you.

        There is an amazing amount of gadgetry out there now days, but I wonder how many products never come to life because people (in the U.S.) understand that there is no way to really make any money on it.
        • by russ1337 (938915)
          >>> .....So really there is no reason to think up new products because in the end China will end up screwing you.

          Wow.,.. Just when I was thinking about putting the laptop down, having some breakfast and taking a shower, you removed my last piece of motivation for getting out of bed today - altogether.
    • When a country exports all of it's facilities, manufacturing, and infastructure overseas, how long before that countries trading partners realize that they can cut the country out of the loop entirely?

      Sure they could, but they need customers. The loop that the US needs to be worried about getting cut out of is the profit loop. Sure there are lots of manufacturers in China and the rest of Asia, but they're in killer competition to underbid each other to manufacture stuff designed in the US or Japan and

      • Re:How long (Score:4, Insightful)

        by Ohreally_factor (593551) on Thursday August 23, 2007 @12:13PM (#20331551) Journal

        they need better brands and more of a retail channel. They'll be looking to acquire that.
        coughcoughLenovocough

        The main problem for the U.S. is that wages are relatively high, while they are low in these rapidly developing countries. And we're apparently on a generally downward spiral while they're on a generally upward spiral. The competition you mention is going to keep wages in these countries from rising quickly, so the "floor" is going to be lower, and workers in the U.S. are going to be in for some long term pain.

        There are a lot of other factors involved, such as the lack of effective regulation (for product safety, working conditions, environmental issues, etc.) that play into this in complicated ways. But the bottom line is that we're in for some belt tightening here in the U.S., barring some major technological breakthrough.
        • Re:How long (Score:5, Interesting)

          by Carewolf (581105) on Thursday August 23, 2007 @12:43PM (#20332029) Homepage
          Wages are even higher in Europe, yet according to the story you import more electronics from Europe than you produce yourself.
          • Is got more to do with our overpriced real-estate than export/import.
          • Re: (Score:3, Interesting)

            by RexRhino (769423)

            Wages are even higher in Europe, yet according to the story you import more electronics from Europe than you produce yourself.

            WRONG! According to the article, the U.S. imports more tech products from Europe than it does from Canada and Mexico (i.e. North America). It doesn't say anything about more tech goods being produced in Europe than the U.S..

            The U.S. actually maintains a trade surplus in tech good with Europe, to the tune of $13 billion... Europeans buy far more U.S. tech products than the U.S. buys European tech products. http://www.aeanet.org/PressRoom/prac_TCS_2007.asp [aeanet.org]

            China, and their cheap consumer electronics is where

    • bingo. We're doomed because we really dont care about our country. Oh we sit around and say its the best at everything.... when its not.
    • by zx75 (304335)
      Why on earth would we? We make a ton of money by exporting our goods to the US. Being the largest consumer market in the world (in terms of total goods consumed, not population) why would we choose to cut out such a rich market?

      The only reason I could possibly see is if the US dollar were to become worthless, and better profits can be made elsewhere. But until that happens, there is no worry about countries deciding to *not* ship to the US.
      • by cHiphead (17854)
        You will stop as soon as there is no money, and in the cycle, if we, the US, do not fix the trade deficit, money will just gush out of our economy, eventually it will decimate the economy and the money printers wont be able to afford paper and ink to print more money on.

        Cheers.
    • Re: (Score:3, Insightful)

      by aldousd666 (640240)
      england seems to be doing alright. what do they export? deficit doesn't mean 'debt' in case those of you hadn't caught on yet. All it means is we import more than we export. It is not a disaster. It's not even necessarily bad.
      • Re: (Score:3, Insightful)

        by drsquare (530038)
        The British economy is almost entirely based on debt. It's not a good example to follow. We have millions of people employed by the government doing non-jobs, their wages paid by private finance-initiatives, which means jobs otherwise done by the public sector are done by the private sector, at much higher cost and much less efficiency, but it looks good on the books as the cost can be deferred for twenty years, by which time all the current politicians will have retired and won't have to deal with it. Mill
  • by dtjohnson (102237) on Thursday August 23, 2007 @11:49AM (#20331221)
    ...we'll end up living in huts made of logs and sod, driving pushcarts full of firewood, and eating soybeans. Seriously, doesn't 'trade' mean an 'exchange' of goods and services? Obviously, the exchange is not happening, just a transfer of currency.
    • ...we'll end up living in huts made of logs and sod, driving pushcarts full of firewood, and eating soybeans. Seriously, doesn't 'trade' mean an 'exchange' of goods and services? Obviously, the exchange is not happening, just a transfer of currency.

      and that's why i'm getting used to eating tofu now, so that i won't have to later...
    • Let's just hope that the logs and sod, the pushcarts, and the soybeans aren't all imported.
  • It's true (Score:5, Funny)

    by solevita (967690) on Thursday August 23, 2007 @11:51AM (#20331255)
    Too many of the US' imports are coming from abroad.
    • by daeg (828071)
      Not only are there too many international exports, we rely too far on them. Industry should be scattered over the globe to protect against natural and political disasters. Imagine, for instance, that India and China somehow get entangled in a war. They enact trade barriers against each other to hurt the other economically (both are huge exporters). Both countries suffer, but so do other countries. Less trade gaps and a more even distribution of wealth (and thus production capability) should decrease the num
  • by DukeLinux (644551) on Thursday August 23, 2007 @11:53AM (#20331291)
    I vote in EVERY election in my precint. I vote against ALL incumbants and against any additional spending. I am doing my part. I think when the dollar finally collapses people will get a clue that deindustrializing along with de-educating our kids was a really bad idea. I am not sure if our Government fully appreciates the impact of a bunch of pissed-off gun-owning "peasants." Shrub never read the history around Viet Nam and wonderfully repeated it. I bet he knows even less about European history...regarding uprisings, inserection and revolutions, etc.
  • Well, yeah.... (Score:5, Insightful)

    by FooAtWFU (699187) on Thursday August 23, 2007 @11:55AM (#20331323) Homepage
    It shouldn't be the least bit surprising to anyone that we import our electronics from overseas. It's also not surprising or even necessarily bad that we have a trade deficit. We're the rich country, and we're spending money on buying stuff. And it's not like global trade is a zero-sum game; we remain pretty darned capable of generating wealth ourselves, and indeed can do so far more effectively than manufacturing a bunch of cheap electronic parts.

    Yay, so the markets are hiccuping because people didn't understand the risk associated with the debt securities they were buying. let's get scared about the trade deficit by posting scary-looking numbers when most people don't understand any of the concepts behind them, oooooooooooooooooh. scary! :P

    • by Bobzibub (20561)
      I would be concerned about the general trade deficit though. Consider how much the US dollar has dropped in the last six years, it should be boosting exports and suppressing imports -- like bananas. ; ) Since that doesn't appear to be happening, it appears that the elasticity is low and the green back has a lot more dropping to do.

      Perhaps the US simply has a surplus of wealth and an industrial production deficit?

      As far as the sub prime mortgage backed securities, nobody understood the risks. And the m
  • No other country tolerates such lopsided trading. Such lopsidedness creates instability for both individuals (job loss and frequent change), and the state (recessions, credit bubble poppage, etc.). The math used to justify "free trade" ONLY looks at total GDP and fails to take into account other important factors, such as stability, military secrets, income equality, etc. All factors are important, not just total GDP.

    Are "they" naive or lying with math for taking us down this road? I suspect the latter. Thi
  • Even law firms are getting into the act [iht.com].

    Just means bigger bonuses for the guys at the top because it makes them look good at cutting costs, while the folks at the bottom continue to slog along getting 2 - 3% raises.

    It's the way the free market works. Except if you're a big Wall Street brokerage firm or hedge fund in which case when the free market means you're about to go under the Fed will step in and save your asses with a bailout. But I digress.

  • and North America more than 15 percent.

    Nice tactful way to say "Mexico", guys...

    And I have nothing against that. "Grape-pickers" and all that - Thanks for the cheap stuff you've destroyed your bodies and your local environment to produce for us; enjoy the increasingly less valuable paper we traded it for (and to think, we laugh in school when we first learn the price of Manhattan...).

    • and North America more than 15 percent.
      Nice tactful way to say "Mexico", guys...

      Yup. North America contains the United States and Mexico. We're certainly not forgetting anyone, eh? [bts.gov]

  • by ErikZ (55491) *
    The US has been in trade deficit since 1976. At what point does it start to be "Business as usual" instead of "Suffering"?
  • Many posters seem to think this is a US-only problem. This issue is much bigger. For example, the EU has a large trade deficit with China. [eubusiness.com] Since the EU and US economies are about the same order of magnitude, and their trade deficits with China are similarly sized. I would argue that their economies have similar issues. All this discussion about exporting jobs, exporting factories, etc. needs to consider this.
  • What explains the US net income balance?
    http://www.bis.org/publ/work223.pdf [bis.org]

    And a great mystery for the uninitated.
    http://en.wikipedia.org/wiki/Federal_Reserve_Board [wikipedia.org]
    http://en.wikipedia.org/wiki/Fractional-reserve_ba nking [wikipedia.org]
    http://en.wikipedia.org/wiki/Money_multiplier [wikipedia.org]
  • by syrinx (106469) on Thursday August 23, 2007 @12:30PM (#20331833) Homepage
    I can tell that this will be a useful discussion. Once I'm finished reading the insightful and intelligent posts here, I think I'll go to the blog of The Economist or the Wall Street Journal and ask them about the latest Ubuntu release!
  • From TFA

    "U.S. technology product imports exceeded exports for the first time in 2002 starting a trend that left a $38.3 billion trade deficit in 2006 after reaching a high of $44.4 billion in 2005."

    So it actually went down.

    Also

    "in 2006, the United States continued to export considerably more than it imported in two technology areas: aerospace and electronics."

    Oh, the horror.
  • by LaughingCoder (914424) on Thursday August 23, 2007 @12:41PM (#20331995)
    Tell me another country whose government routinely punishes their most successful companies (AT&T, IBM, Microsoft) while at the same time spending billions to prop up failing companies (Chrysler). This is backwards behavior that naturally leads to trade deficits. What surprises me is how the US government does not smarten up and notice everyone else laughing at us.
  • by TonyXL (33244)
    Would you rather the US have:
    a) Jobs where things like iPods and iPhones are conceived from ingenuity, designed, and perfected (ie, the way things are now) OR
    b) Jobs where things like iPods and iPhones are assembled

    The fact that our economy and employment are pretty strong proves that the trade deficit is meaningless.
  • How is this a news item? "The U.S. trade deficit, which has been enormous for the past several years, once again failed to magically disappear for no reason." In other news, crime, cancer, and car accidents are also failing to suddenly blip out of existence.
  • by cartman (18204) on Thursday August 23, 2007 @05:27PM (#20335953)

    I read through a few of the posts here, and I think some of the posters are not experts in econ despite their claims.

    Although I'm not an economist, I am interested in the topic and have read some books about it.

    Some facts accepted by all trade economists:

    1. When the United States has a "trade deficit", it means that foreigners are buying US bonds (typically treasuries), or are increasing their reserves of dollars. (If you count selling bonds and sending currency as exports then the trade deficit is always 0).

    2.At some point in the future, foreigners will want their money back or will want to spend their dollar reserves, at which point the US will have to export more than it imports. Then the trade deficit will run the other way. There is no chance of other countries "cutting out" the US, because that would mean they sent us products and lent us money while getting nothing in return.

    3. The trade deficit increases the standard of living for Americans in the short term. It means that we can buy more things at Wal-Mart and other places than we otherwise could. It does not affect our overall unemployment rate. The only problem with the trade deficit is that it can't be extended indefinitely, which means that at some point we will have to export more than we import, which will be unfortunate for us.

    4. Although China accounts for a larger share of the trade deficit than any other single country, it accounts for much less than Europe and Japan combined.

    5. The reason Europe and Japan export things to the US is because they want to pay for imports from the US, either now or in the future.

    6. The trade deficit by itself is not necessarily a problem. The only problem is if there's a "hard landing" which means that Europe, Japan, and China demand their money back more quickly than the US economy can adjust, which would harm all parties.

  • by Ignatius (6850) on Thursday August 23, 2007 @09:49PM (#20338855)
    As a European, it I amazes me how many slashdotters seem to live in a complete state of denial, even going as far as to claim that "Trade Defcit" is an artificial and meaningless term - it is not! Unlike many other figures like the official GNP (which includes positions like "good will" and and other magic) or the official (hedonic) inflation rate, or the unemployment rate (determined by a telephone poll), the trade deficit is a very solid and easy to understand thing: the value of (real, tangible) goods and servicies going in minus the value of products going out.

    If you buy more stuff than you sell, then you have a net flow of dollars out. Whoever receives these dollars can do one of 3 things: (1) use the dollars (directly or indirectly) to buy US products, (2) lend the dollars back to the US (US bonds, treasury bills), expecting to get even more dollars back, or (3) buy stuff in the US (stocks, equity, real estate), again in the hope to make even more dollars from his investment. Since, for one reason or another, the US economy fails to offer enough products anyone outside the US wants to buy (1) (hence the trade deficit), we're taking about debt (2) and sell-out (3).

    A "normal" country wouldn't be able to do this for very long; as he would quickly (a) have its currecy devalued (if you have nothing to sell, no one outside needs your currency), (b) run out lenders (most countries dont have the luxury to indept itself abroad in their own currency to begin with) and (c) local assets to sell. Depending on whether you do or do not fire up the printing press you either end up in bancruptcy or hyperinflation.

    A super power like the US which is able to strongarm or otherwise convince the producers of some key commodities to trade exclusively in their own currency, can get away with it considerably longer as their are alway products to buy for dollars (most prominently oil) even if those are not made in the USA by US labour. This gives the dollar the liquidity which is necessary so that it even makes sense to lend back dollars to the US (instead of demanding real goods right away).

    It is even more helpful, if you can convice some producers of said key commodities (as e.g. Saudi Arabia), to set a good example by putting most of the money into US treasury bills and US assets (petro dollar recycling), as this postpones inflation and the devaluation of the dollar which in turn allows to keep the interest rates in a sane range as long as those bills are kept in the vault and are constantly renewed.

    Of course, not even the US can live on credit alone, eventually the lenders will want something "tangible", and if you cannot or don't want to provide goods, at least you can provide them "assets". Of course, there is only so much you can sell, so the trick is to invent more things to sell (e.g. "intellecual property") and to inflate the prices of existing investments. Since the inflation is in assets and not in consumer goods, this is not called inflation but a "boom" (after all, inverstors want prices to rise) before and a "bubble" after people realize that a high price dose not imply a sound and profitable investment (as happend in the dot-com crash and is happening right now in the real estate and mortage sector).

    You can, as some in this thread do, consider this a good thing for the US, after all, it basically means converting paper into Mercedes' and BMWs, and they would be correct if this games can be played infinitely - if you happen to be in the group that actually profits (that is, if you work in or close to the finance sector - if you're a production worker, well, too bad - maybe you can get a job as buttler or bodguard by those with better luck). Then it would make sense to deindutrialize your country and neither do you need an efficient education system as the rest of the world is supplying you with consumer goods basically for free.

    It won't work infinitely, though. The non-US world sits on an ever increasing pile of trillions of dollars in US-dept and overvalued assets. Ever

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