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Effect of Trade Deficits Are So Destructive to the World Economy by jholdsworthy

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money · @jholdsworthy · (edited)
$897.93
Effect of Trade Deficits Are So Destructive to the World Economy
Creation of bubbles worldwide
Trade deficits may sound like something that will only affect the country that incurs it, but really that is not the case. It affects every countries in the world, as we are all trading partners with each other. The dollars that the USA print to pay the exporters for their goods is entered into their country to fuel asset bubbles - and they eventually return to the US as investments, because the exporters don't want to raise the price of their currency by buying in their own currency with the USD. And in turn it creates asset price booms in the USA. It's like an endless loop.

Current account deficits = Financial account surpluses


As I've stated, the exporters don't want to ruin their business. They want to use their existing capacity to the full, and if they dumped the USD on the open market, then it would affect the livelihood of their business.

So what's the point of holding onto worthless pieces of paper? Exporting countries invest the money that the US gave them for their goods back into the US... Confusing, but it is accurately reflected through the current account balance(trade deficit) and capital account surplus(financial account balance), being mirror images of each other.

This fuels asset price inflation both in the exporting country, as it goes through the commercial banking system, as well as the importing country, as it comes back as financial account surpluses.

The world relying on the US running into debt
There must be a demand for goods for there to be money to be made. Over the past few decades American consumption has outweighed its GDP(output), which meant that they were essentially borrowing other countries' output to satisfy their own.

There will be a time when people have enough, and simply can't take anymore, even if you beg them to take out a loan. This has happened with the 2008 subprime lending crisis, as all the prime borrowers are gone, banks are forced to supply loans to subprime lenders.

Deflationary collapse due to excess capacity
In the end, after the bust, there will be a whole ton of excess capacity as there is no demand, and the world will go through a destructive deflationary stage.
πŸ‘  , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , and 56 others
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vote details (120)
@artsteemit · 
Thanks for excurs in economic history. Yes, the Jamaican system is flawed and based on the desire to have the power of money at will. 
And the fact that this money will be zero and no assets have not been confirmed - nobody cares.
πŸ‘  
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@fred703 · 
magnificent article for us dummies to understand
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@idealist ·
$0.04
Interesting article, and well written!

Could you explain what "trade imbalance" means? What is the chart telling?
πŸ‘  
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@knircky ·
$0.07
Really love your article. I also have written a bit about our financial and political structures and how they are destructive. I'd be honored if you were to check it out: https://steemit.com/politics/@knircky/steem-for-the-win-i-don-t-care-who-wins-the-white-house-pt2
πŸ‘  
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@metaflute · (edited)
Π’ruth!!! Yes, the precious metals will be on the markets forever, but there is no choice between them and the cryptos. If I need to pay with 1 tone gold, I will choose simply to tap on my phone screen.
πŸ‘  
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@pierce-the-veil · 
@pierce-the-veil: Very informative jholdsworthy.

Thanks for sharing and best regards.

@pierce-the-veil
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@skum · (edited)
I also am passionate about this subject and have been preparing for quite some time. Gold, silver, land, BTC, ETH and now steem power. I also believe it's inevitable and in my honest opinion I believe the US has already collapsed, why else is there such blatant election fraud and a heavy push towards war. Time to reset the score with the middle class baring the brunt of it... again.

The more public blockchain's the better I think. I think of a future where open, transparent and auditable blockchains eliminate much of the corruption and power centralisation we are now seeing at a rate worse than ever before.
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@stephen-somers · 
Wow this story is so well put together. It's only a matter of time until the SHIAT currency hits the fan.
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@sweetsssj · 
Isn't the best thing to do, to encourage people to have more children so we can 'expand' the economy?

Any boom in world economy has to be accompanied by a population increase. This brings things like additional demand for goods and services.

Whilst I am a supporter of Steem and Crypto-Currency in general, I cannot fall prey to being a full on libertarian. Lets not forget that crypto eco-systems have not been around long. The prevailing monetary systems adopted world wide such as central banking have been holding it all up for all this time.
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@timsaid · 
Playing with money is playing with life. I deliberately say playing because there is nothing wrong in working with money.

But to see what these politicians does is evil
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@vee.kay · 
Don't forget budget deficits...

https://steemit.com/money/@vee.kay/u-s-federal-government-deficit-last-week
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