From: Reason (reason@exratio.com)
Date: Sun Mar 09 2003 - 18:08:26 MST
> In a message dated 3/9/2003 5:00:40 PM Central Standard Time,
> reason@exratio.com writes: The bottom line is that the US
> supplies dollars to
> the world. Dollars are just another commodity. Since dollars are
> not backed
> by any other commodity (gold, say), and cost far less to produce
> than they
> retail for, the US can create the means to pay for resources out
> of thin air.
>
> Reason,
> Is that just a complex way of saying that we have we have
> financed our negative trade balance by printing money and the other
countries,
> thus far, have been foolish enough to accept the printed dollars -- they
> have no value behind them.
Yes to the fincing by printing money (all other States would be doing it too
if they had a large enough external market for their currency). No to the
value thing. Value is defined by the interactions of the market; dollars
have value -- whatever the market participants are prepared to pay for them
in any given transaction.
I think that a very good way of looking at dollars is to think of them as
diamonds. You have the same situation on both sides; a single organization
effectively controls the entire world supply, and creates the commodity for
far less than it retails for.
> Tell me what happens if they refuse to accept dollars. Or on the
> other hand begin using their dollars to buy commodites in this
> country? I always understood that was the way free trade was supposed to
work.
It does work this way. Free trade means that if you trade 50 X for 60 Y to
someone, and then devalue the purchasing power of X by creating more of it
before that person can trade the 50 X on, there's going to be consequences.
But that's a simplistic view of things. I suggest you do some more research;
www.mises.org is a good starting place for that sort of thing. Just read the
daily artile for a couple of months and follow up on the references.
Reason
http://www.exratio.com/
This archive was generated by hypermail 2.1.5 : Sun Mar 09 2003 - 18:09:32 MST