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Comment by owisd

7 days ago

Foreign countries buy USD through trade. Japan needs dollars for international trade so the US Treasury prints dollars and gives them to Japan and in return Japan gives the US Nintendo Switches or whatever. Those dollars go into the international trade system and some of those dollars will just circulate internationally indefinitely and won't ever make their way back to the US, hence the perpetual trade deficit. This is a great deal for the US because at the national level they effectively got those Nintendo Switches for free.

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owisd

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kortilla  7 days ago

That’s not how that works. If Japan needs USD it goes to the forex market. That market represents a massive trade flow.

It doesn’t matter which currency you pick in that world apart from capital control. As long as it’s reasonably stable you flow through it with many billions of dollars a day with ease. The conversions are effectively free because the spreads are tiny.

Using the US dollar to trade between two countries that are not to US does nothing to the the currency. It just shifts a deficit.

DrFalkyn  7 days ago

It’s not for free. It’s in return for being under the US security umbrella, which costs the US about $800 billion a year

Of course that umbrella could soon be gone, so it would be a moot point

  • roenxi  7 days ago

    The umbrella could already be gone. There are big question marks over how much the in-practice umbrella looks like the Ukraine war where the US State Department provokes something then Japan gets flattened in the crossfire. How much should they be paying for that?

    People are coming out of the 90s mindset where the US was substantially more important than its competitors. It was easily worth paying for US protection then because it was obvious the US could back it up with muscle. Now the calculation is a lot less clear.

  • thoutsnark  7 days ago

    Of that 800 billion, where is the money spent? If it goes to US military/industrial complex, it is basically a creator of US jobs.

    So it doesn't cost the US anything.