@WinByDying sorry for the confusing explanation using gold standard, when I wrote that I was dead tired and a bit drunk so it sounded like the best way to explain it. But yeah as @Cream explained there are several ways that the price is affected (excellent explanation by the way, kudos). But the problem comes not only from exchanging the currency from one to the other but also from using that money to do other things. Say you take the dollars from the US and instead of purchasing US companies/things they could go to Germany or Australia or X country and do the same with similar implications, the local currency will increase in value and the dollar will fall. This is something that I'm not sure if it's because they have an agreement or if it's simply wrong by my part but as I understood from a few notes and talk shows (yeah not the best places to be informed) the Chinese are spending most if not all the money they get from the bonds only on the US and also exchanging it for concessions. About why they would do something like that and how that goes to the original topic of a possible war beetween the US and China. *DISCLAIMER: This is not to cause a rage wall or anything nor to talk about Qidian in particular however it is an example of that most people in NU will understand and know.* The company Tencent (chinese company) owns many companies including Qidian and IIRC they also bought Gravity Tales and a bunch of other translation projects everywhere. Exactly same happens outside the translating circle, a chinese company with the direction and/or support of the chinese government buy other companies in different countries to encroach the market from different places. This creates a dependence on the chinese because several US companies are led and controlled by chinese people. Something similar happens with AT&T only they are on their own country, they have purchased already most if not all of the cable and film industry on the US (IIRC they bought Comcast (which incidentally owns disney) and TimeWarner). This big companies eventually can put great pressure in both the US government and US economy (which is something the chinese are really good at doing) which in the case of China is good because they leveraged the US debt into a economic and political tool/weapon. Sorry if I went a bit offtopic and for the wall of text. EDIT: A bit more offtopic but on to an example of leveraging this political/economic pressure. Ajit Pai an former AT&T high ranking employee is working as the chairman of the FCC which is supposed to control the communication companies, for example regulating the net neutrality (which this guy tried to destroy already). So they basically lobbied that fucking guy that they own into the same federal department that SHOULD control them.
Don't you all know what all wars ARE financial? Even when Hitler tried to conquer world he did it for resources, not because he hated other races.. In modern society war between two super countries is just not profitable at all. This is why we have relative piece. This and nuclear weapon.. When you read about some modern wars like in Syria you should understand what if such countries as USA or Russia used even 10% of their real fighting power.. it would be just one sided massacre. Still war there last for years.. because it is just profitable and have benefits to supporting countries. War is a business and always was.
You mean if they use the dollars to go to e.g. Europe and buy stuff? Yea then they're comparatively lowering the dollar with respect to the euro. Maybe this is a reason for China to not go buy with dollars anywhere else: are exchange rates interlinked? I mean, if only one exchange rate changes, then it's profitable to basically trade currency in some way, and I'd think it'd balance out. Forex trading exists. It might thus affect the Yuan-dollar exchange rate too, indirectly, and as such affect exports. This is conjecture though, maybe it's not that simple. Hey man, no need to be sorry. It's an interesting thread, I'm learning and putting things in new perspectives. Be drunk all you want. Wait wait wait, is this thread devolved into discussing economics with drunkards?
Yes exactly. The rates are linked either directly or indirectly depending on too many things, at first it will affect just the dollar and the euro or X currency but then the interactions betweent markets will affect the others. Now if the spend dollars on the US the price of the dollar won't be affected at all and their investments remain protected (incidentally they could also do the other way around so they can later purchase cheaper). The best way to think about macro economics and all the possible ways you are going to get fucked is to be at least slightly drunk.
The actual topic in this case is on the hypothetical case of a war between US and China, and this are arguments at why US is basically fucked and why it won't devolve into a arms race or an open conflict but will remain as a trade's war. However yes, wars are always about money at the end either on winning money as the final result of the war or earning money because the war is being waged (arms dealers for example), as time passes there is less and less ideological wars and more wars about interest.
There will be a lot of sex?? Women from neighboring Asian countries will be kidnapped to be comfort women for the Chinese army
There's a couple of other factors in the value of the Dollar that I didn't notice mentioned. 1) people/institutions buy it sometimes for 'safety' so part of its value is speculating on the US financial health 2) there is about 1.7 Trillion US dollars in circulation 3) It is pretty much the default reserve currency and oil currency. Meaning if a Brazilian company wanted to buy oil from Saudi Arabia it would use US dollars, because otherwise it would have to first buy a bunch of Saudi money or offer a bunch of Brazilian cash the Saudi company has no need of. The last point is a big deal, and why China, Russia and others like the EU want to get around it. It gives the US a lot of leverage.
I don't think you need to worry that much about deflation or inflation in the US market. If the Chinese sell Treasury bills to the point where it causes high inflation in the US, it will be hurting them just as much as us. After all, they will be holding a trillion, if not hundreds of billions, of dollars of our debt. If our currency experiences skyrocketing inflation, their 1 trillion dollars of US Treasury bills will become worthless. This sounds about right. They could sit on the dollars and it wouldn't impact the exchange rate. It's only when they convert it back to RMB that the exchange rate starts fluctuating. Just an aside and perhaps a personal rant, now that you bring up the gold standard: The gold standard is bullshit and we most definitely should not be returning to it. I sometimes hear people espouse that all will be well if we return to the gold standard. Those people need to go look at the collapse of the Bretton Woods system and tell me what exactly will be different this time around. I can't find the chart I was looking for So here's something semi-random as compensation. Spoiler Interesting to note that their current account balance (not trade balance) has been steadily declining since ~2015. I knew Chinese overseas tourism was big, but I never thought that it would be that big. Anyway, adding to the conversation, China actually sold off U.S. Treasury holdings last fall in 2018. So the situation we were discussing of "what happens if China sells its US T-bills" actually happened, though not on a massive scale. It's something I imagine would surprise many people, especially since there's that deeply-ingrained idea of China continuously snapping up US debt. The official US treasury data shows that their holdings decreased from 1.1877T in March 2018 to 1.1235T in Dec 2018. The tariff thing is... Sigh, let me just go get drunk again at this rate. It doesn't really hurt them but guess who it hurts? As this paper published by Columbia, Princeton and the Federal Reserve Bank of New York puts it: Overall, using standard economic methods, we find that the full incidence of the tariff falls on domestic consumers, with a reduction in U.S. real income of $1.4 billion per month by the end of 2018. Listen to @earthdrake . Talking current affairs, international economics, and global trade is 10x more fun with alcohol. Join us. All jokes aside, it was entirely a coincidence haha The event I was at had an open bar soooo.. Speaking on the last point, it kind of cracks me up. BRICS were like "screw US global supremacy and US currency dominance!" We're going to trade in our own goddamn currency! Who needs the greenback? Then a few years down the road, they banded together to make the New Development Bank, which is like their version of the International Monetary Fund. (They were like: "screw the Western-dominated IMF! We'll make our own bank!") To set up the New Development Bank, the members had to contribute a total of $100B to the Contingent Reserve Arrangement. Guess what currency that $100B was in? Yup, USD. I'm also curious @Vanidor . What's your background? You sound like you know a lot.
I prefer goes to China rather than Japan prior USAxChina trade warcuz I'm more interested to China history than Japan history as for now both country on same place for which country I wanna travel to as for war just trade war is enuf make global headache talk less about full frontal open war between two permanent member of UN security council most affected country beside those two is country on same region with China on 60's refuges from Vietnam, few years ago Suriah~ those 2 country refuges just on millions I guess and already enuf make world have huge headache~ imagine how leaders of many country will react if tens of millions refuges(or hundred) refuges flow out from China? and that only one aspect from war~ so meh~
Either talk about this while drunk or while getting drunk, otherwise this becomes incredibly either boring or depressing so yeah, join us, get drunk and relax but remember no politics while drunk only macroeconomics and possibly global catastrophes. Again @Cream excellent post and thanks for the data. Although don't know if what makes me more uncomfortable, knowing that they have 1.1235 trillion dollars of US debt sitting there or that they cashed just a little (just only the paltry sum of 57 billions) and don't want to do anything else.
I'm just old and pick up things along the way. One thing I've done lately was listen to some of Peter Schiff's podcasts, a libertarian economist if you aren't familiar with him. I disagree with a lot of what he says but I do like how he lays out some problems, and I like listening to opposing points of view.
I feel like I've heard of Peter Schiff. From reading his wikipedia page, I imagine I’d disagree with some of his ideas too. To competently and intelligently discuss current affairs, especially the economic portion, I imagine it takes many years of reading the news and just picking things up along the way. I was talking with one of my friends and she said, "I feel so overwhelmed I don't even know where to start. How do you learn all this stuff?" Personally, my background is probably similar to yours, in that I've just been listening and picking things up along the way. But I doubt I'm as old as you. You're making us sound like alcoholics haha Shame we can't talk about politics. But macroeconomics, economic theory, and economic policy is fun stuff. Especially economic policy in my mind. Earth, what's your background? Just curious. I think the fear is slightly overblown. It's like the Republican Party's bogeyman. If you look at the data I linked, Japan holds over a trillion dollars of US debt too. As I said earlier, if they do sell it off all at once to hurt the US economy, they'll have to take a loss and will be shooting themselves in the foot. That's dumb and unlikely to happen, so I think the concern is relatively unjustified.
He got famous for predicting the Housing Crash and basically telling Fox commentators and others that they are too left wing. His latest podcast is here: He was a Trump supporter until Trump didn't follow through on a lot of his economic promises. Has an ability to explain complex systems simply. One of the flaws of his podcast is he only touches on a lot of topics lightly(like tariffs on this one), but after a few podcasts generally has covered it fairly well. He's also a kind of doom and gloom guy, seizes on all negative news in general and only loves gold. Despite all that you can get a lot of info over 5-10 podcasts on how Libertarians see the US. After those 5-10 podcasts he mostly repeats with a bit of topical news. One interesting point that I had never heard before that goes to your discussions with others above was he mentioned China pretty much owns short term US debt only so that cashing out wouldn't affect later cashing outs. No clue how true that is.
I don't hear the libertarian economist perspective often, if at all. I'm kind of amazed he's able to cover a topic like tariffs without visual aids. I learned tariffs formally in econ class in uni, and I remembered it being a whole lot of graphs. I'll have to check him out. (For definition's sake, Treasury bills, notes, and bonds differ in maturity dates. Bills are short term and mature within a year. Notes and bonds are long term and mature in over a year.) I'm pretty sure China owns more than just short-term US debt. I looked it up, and the US Treasury data says that the distribution of total foreign-owned Treasury bills, notes, and bonds are: 315.3B in Treasury bills 3709.2B in Treasury notes and bonds (They didn't give the distribution per country.) Since China owns 1T+ in Treasury securities, it follows that at least 700B of it must be in Treasury notes and bonds, AKA long term debt. So in fact, the majority of their holdings are in long-term US debt. Hm... I should have used the term Treasury securities instead of Treasury bills in my previous posts.
Wouldn’t be the first time he has had to correct himself. And he mostly covers things in different slices each podcast. On the plus side I’ve learned how to troll as a libertarian after listening to enough. And how to troll libertarian commentators on YouTube. So definitely two fun skills gained.
It always made me uncomfortable the though of corporations/countries playing pissing matches with global economy. As for my background also pickup things from here and there however by working on IT on a latin country I had to pick a bit of economy, planned obsolescence and a few other things to keep my job.
Haha if I see a troll on the comment section of Peter Schiff's Youtube podcasts, it might just be you then. This image from this World Bank blog post kind of mind blowing: We've gotten to the point where some multinational corporations are bigger than first world countries. That's insane and certainly puts things into perspective. I think some of these multinational corporations certainly get away with unethical behavior in smaller, less powerful countries purely because of how much money and power they have. Also, with globalization linking the economies of the world that much closer, if one country fucks up their economy, that could easily ripple out and affect other economies, as with the Great Recession.
@Cream WOW... just WOW that puts things into a perspective I would have never imagined. Also Apple had more revenue than Microsoft? Another things, really, Walmart and then 3 chinese state companies? It's a bit mind blowing that information. Now I need a beer ... or 6.