Krugman Has His Backside Handed to Him

[c1ue]

Re: Krugman Has His Backside Handed to Him

My opinion is the the entire VAT tax structure was designed to subsidize exports and penalize imports against those who do not deploy a like system.

This is flat out wrong.

If this was true, then China and Japan would have a VAT - and they don't.

I'd also note that VAT is what most European nations use to fund their social safety nets and health care.

My opinion on currency exchange is that China uses a currency peg which is designed to increase exports and penalize imports.

I agree that this is true and it is because a currency peg is the quickest and easiest way to accomplish the goals you've stated here.

These two factors don't account for the trade deficit in its entirety. What is does do is explain in large part how the trade deficit has been achieved AND maintained. Currency manipulation is a way to keep your labor costs down and your population less able to purchase abroad. VAT schemes were designed with the intent to allow our trading partners to subsidize exports and penalize imports. Taken together with a total lack of respect of intellectual property and a wall of informal and formal trade barriers they round out a mercantilist's wet dream.

But that is just my opinion. I'm interested in hearing yours.

Do you believe it is reasonable to dismiss both those major issues as irrelevant? I want to know how an export tax approaching 20% and active currency pegs don't affect price and therefore the balance of trade. Is this what you are putting forth? I know wage arbitration was a fact of life. No way we bring 2 Billion people into the labor force and not see a downward force on labor. But to dismiss these two factors as in no way making the problem worse and preventing a self correcting cycle is something I am not sure I have heard outside of right wind radio and some extreme anarchist websites.

My view is that the root cause of the problem is cost of living in the US due to FIRE asset inflation, a ridiculously expensive health care system, and massive foreign expenditures on non-productive efforts (if at least in some portion necessary) toward 'defense'.

I say this because the standard of living isn't the issue; Germany has a very similar standard of living, yet German workers are able to compete very effectively in the world marketplace in many labor intensive industries like automobile manufacturing.

I also say this because I have direct experience with Russia - where the import tax is 40% - yet it is still cheaper to import (from Europe, a higher standard of living area) than it is to try and build a business in Russia.

As for currency, it is a factor by which China accelerated job losses in the US, but you're forgetting that China is only the latest rider on that trend: the Asian Tigers in the early '80s (Hong Kong, Taiwan, South Korea, and Singapore did the same thing, while Japan also was a player (and still is today).

The difference between the Asian Tigers plus Japan vs. China is that the former comprise a population smaller than the US and militarily weak (thus "impressionable") while China is much larger and not militarily weak.

What China is doing is therefore in no way unusual or unprecedented except in scale.

[raja]

Re: Krugman Has His Backside Handed to Him

I am arguing it had nothing to do with the current crisis.

I would agree that demographics has little to do with the current crisis . . . but it will be a cause of Americans becoming poorer in the future . . . and it is an inevitable problem that can't be "solved", only worked around.

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

The difference between a theory/dilemma and a law is that Triffin's dilemma posits there is a conflict of interest - but does not state one way or the other the way the balance shifts.

Triffin's law, as stated by you, is that the balance will always fall to the benefit of international interests.

Do you understand the difference?

The point of using Germany as an example is that international interests do not always win.

As for your commentary on minority interests, it is hardly compelling because the interests of a minority in power will always be incentivized to help itself irregardless of the presence of a reserve currency. China can peg the RMB just as easily to any other nation's currency.

I don't really understand the point of view. That isn't really the issue of Triffin's dilemma. The issue is the debt liquidity problem. If the US dollar is being used as an international currency, than to keep liquidity the US has to run deficits. That's the same dilemma of the federal budget where running a surplus would be a catastrophe. I don't see where this is up for debate. Any conflict of interest that arises is the same one everyone has in that they gain by any adulteration of the product, which no doubt our investment banks are apt to do.


It really isn't that complicated and its happing in plain site as we speak. It is a theory that is supported by many well established and observable facts. It was the leading cause of US Deindustrialization along with environmental arbitrage. With the arrival of the housing bubble, I have to give that crown to the FIRE sector oligarcs as the leading cause. Speculative land prices lead to industrial depressions.

Your comment about minority interests is even less compelling since it has to do with which minority interest that stands to gain and has hold of the political process. If car manufactures are running your country, much like in Japan, then the last thing you want is a reserve currency. If its bankers that run your country, then the reserve currency is exactly what you want. If you have a nut cracking factory in the US, then cheap nuts is best. If China is selling nuts, then they are happy to have the US subsidize nut cracking factories over corn husking. Again, its not rocket science. Its obvious. A mate in 3 puzzle is more complex.

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

I would agree that demographics has little to do with the current crisis . . . but it will be a cause of Americans becoming poorer in the future . . . and it is an inevitable problem that can't be "solved", only worked around.

That isn't what is sapping most of our wealth now and nor is it likely to do so. Until I see 3% unemployment, its not going to be an issue. As soon as we hit 2-3% frictional unemployment, I'll be the first to say it but then what of the 40% of our economy as FIRE sector at its peak? Do you suppose that perhaps there might be some spare hands for the real world that currently do nothing but shuffle papers? Not only do we have unemployment, half the economy is rent seeking, junk jobs and welfare. That problem too has an easy technical solution because there is plenty of man power if you only pay people for doing real work. It won't happen, but I am not going to pretend that its not possible due to the lack of resources. Its a political problem of a country being run by parasites.

[raja]

Re: Krugman Has His Backside Handed to Him

That isn't what is sapping most of our wealth now and nor is it likely to do so. Until I see 3% unemployment, its not going to be an issue. As soon as we hit 2-3% frictional unemployment, I'll be the first to say it but then what of the 40% of our economy as FIRE sector at its peak? Do you suppose that perhaps there might be some spare hands for the real world that currently do nothing but shuffle papers? Not only do we have unemployment, half the economy is rent seeking, junk jobs and welfare. That problem too has an easy technical solution because there is plenty of man power if you only pay people for doing real work. It won't happen, but I am not going to pretend that its not possible due to the lack of resources. Its a political problem of a country being run by parasites.

The employees in the financial sector are counted in the ratio of workers/retirees.
So regardless of whether they shift to more useful jobs, the demographic problem still exists.
Also, financial employees earn a lot, and if they shifted to useful jobs they would earn less, so have less to contribute to supporting retirees.

[Penguin]

Re: Krugman Has His Backside Handed to Him

I agree with most all that you say, except that to the best of my knowledge China does indeed use a VAT system. Japan uses a consumption tax that is its first cousin. It is a playbook that the Asian tigers and even old Europe have used to gain advantage in trade for decades.

The WTO in its infinite wisdom deems this not a trade tariff although it works in exactly the same manner... it allows companies to avoid taxes for exporting and puts a tariff on imported goods. It is up to the US to reciprocate and up to this very minute we have declined to do so. I would love to see a reciprocal tax imposed to the level of the VAT that American companies have to pay to import. Unfortunately that is considered an import tariff and not allowed apparently. Plus our leaders call that 'protectionism'... incredible as it seems.

I agree that the main difference is scale. It is all rotten to the core but China has taken it beyond former levels. In the end it is all the same, we have a populace with an indifference toward putting American workers at a disadvantage or placing them in direct competition with the most desperate workers on the planet. From the consumer end and for individuals and individual companies it may work out for the better. But my opinion is that this is catastrophic for the system as a whole.

Will

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

The employees in the financial sector are counted in the ratio of workers/retirees.
So regardless of whether they shift to more useful jobs, the demographic problem still exists.
Also, financial employees earn a lot, and if they shifted to useful jobs they would earn less, so have less to contribute to supporting retirees.

I think we got lost somewhere. My response was originally about this:

"Then PK went on the point out a few of the proven failures of his critics' predictions."

For a prediction to be a proven failure, it has to expire as to the prediction date. So I did not think I was speculating about the future.

There are no new ways to create poverty. They are all old. The demographic crisis will diminish wealth but against hit rentiers, just like we saw after the plaque. The rentiers will try to maintain their rents, just like after the plaque. What will the outcome of these two opposing forces be?

As to economic theory, I find things such as supply and demand, rents, scarcity and so forth to be as potent as physical laws, especially when considering statistical significance. What we don't know is how they will interact because they are often at odds, and thus it can be very hard to predict the outcome. A good example is two men suffering from thirst. More thirst can actually mean less drinking. If two men thirst, it raises demand for water but... if they are not both free to drink, one may be in a position to hoard it. So the result of more thirst is less drinking. This does not change the more or less factual certainties of thirst, power and hoarding. Its only the actual interaction that is difficult to predict. All I know is why we are poorer now and the past and present is rather easier to explain. One thing I do know is how Malthus assuaged the guilt of the wealthy for poverty already, and I am sure that "nothing can be done" will also be welcome in those circles that benefit from nothing being done. Something certainly can be done.

[don]

Re: Krugman Has His Backside Handed to Him

My view is that the trade deficits are a symptom, not the cause.

The cause is poor American wage competitiveness driven by high costs of living, which in turn are induced by FIRE (Finance, Insurance, Real estate, and Education).

High housing costs due to asset inflation promulgated by banksters, high insurance costs due to an incredibly expensive health care system, finance levering up corporate debt and thus levering down employment, and student loans/college cost inflation putting yet more bankster leechs on the PC (production/consumption) economy's back.

TECI is one path towards growth and is worthwhile, but it is unclear how it resolves the FIRE problem. A 100% inflation will prune down the asset inflation/debt problem somewhat, but will not fix the forces which set that dynamic into motion, nor will it fix a dysfunctional political system distorted by ever more masses of campaign contributions.

+1 Always nice to see a Hudson advocate in action.

Of course there's a larger historical context to FIRE's creation and the dirty deeds they've done. The US, albeit with brilliant statecraft, was left alone following the mutual anniliation of all of its competitors following WW2. An unprecedented historical moment. By 1970 all the old competitors were rebuilt, and not only rebuilt, but rebuilt following the most up todate production processes. The US, meanwhile, was stuck with the heavy drag of existing means. Not that there wasn't innovation - but a clean slate is hard to beat. Inevitably the trade balance went negative, the gold supply came under increasing pressure, and the out was - FIRE, baby, which eventually went into hyperdrive when the USSR collapsed. American labor, saddled with ever growing demands of FIRE, was increasingly non-competitive without any real plans to be so, by those steering the ship of state.

[c1ue]

Re: Krugman Has His Backside Handed to Him

I don't really understand the point of view. That isn't really the issue of Triffin's dilemma. The issue is the debt liquidity problem. If the US dollar is being used as an international currency, than to keep liquidity the US has to run deficits. That's the same dilemma of the federal budget where running a surplus would be a catastrophe. I don't see where this is up for debate. Any conflict of interest that arises is the same one everyone has in that they gain by any adulteration of the product, which no doubt our investment banks are apt to do.

The disagreement is that you are assuming the US must provide liquidity for international trade in dollars.

There is no such requirement.

As for the federal budget - I don't agree that the having a surplus is always a catastrophe. Certainly it would be right now, but there is no structural reason whatsoever why surpluses could not have been accumulated in the good economic times.

Absolutely there are perverse incentives, but there are reasons why the path to the perverse outcome is not always chosen.

It really isn't that complicated and its happing in plain site as we speak. It is a theory that is supported by many well established and observable facts. It was the leading cause of US Deindustrialization along with environmental arbitrage. With the arrival of the housing bubble, I have to give that crown to the FIRE sector oligarcs as the leading cause. Speculative land prices lead to industrial depressions.

Your line of reasoning is flawed because you're extrapolating backwards from your thesis into the past 2 or 3 decades. There have been many reserve currencies in the past prior to that period. The situation you ascribe to the present US dollar reserve currency didn't occur for any of them.

For that matter, the US was able to accumulate large deficits even under Bretton Woods - when gold was the official settlement between currencies (i.e. the reserve currency). Surely you aren't going to argue that those deficits were due to some Triffin law equivalent?

Your comment about minority interests is even less compelling since it has to do with which minority interest that stands to gain and has hold of the political process. If car manufactures are running your country, much like in Japan, then the last thing you want is a reserve currency. If its bankers that run your country, then the reserve currency is exactly what you want. If you have a nut cracking factory in the US, then cheap nuts is best. If China is selling nuts, then they are happy to have the US subsidize nut cracking factories over corn husking. Again, its not rocket science. Its obvious. A mate in 3 puzzle is more complex.

Toyota doesn't run Japan. And even if they did, the decision to become a reserve currency is a combination of desire by government, visible if not dominant presence in the world trade marketplace, and acquiescence from other participating nations.

Thus even if Japan wanted to become a reserve currency, irrespective of who actually wants it in Japan, it is hardly a foregone conclusion that the JP Yen would become so. Any number of other nations have desired reserve status and not gotten it.

So I'm unclear what you are saying is obvious.

I agree with most all that you say, except that to the best of my knowledge China does indeed use a VAT system. Japan uses a consumption tax that is its first cousin. It is a playbook that the Asian tigers and even old Europe have used to gain advantage in trade for decades.

Having lived in Japan - the consumption tax you speak of is far lower than the sales taxes in California and Texas, states in the US which I have lived in.

Japan's consumption tax: 5%
California and Texas sales taxes: 8%

Japan, however, collects its health care and retirement as a monthly garnish from wages, thus doesn't use VAT.

As for China - the consumption tax you speak of is actually only on a very few items: cigarettes, alcohol, cars, gasoline etc a total of 11 categories: http://www.by-cpa.com/html/news/20076/583.html

They are equivalent to the sin taxes applied in the US on alcohol and cigarettes. In general these are higher than the US, but then again China isn't building its trade deficit on cigarettes, alcohol, jewelry, gasoline, etc.

China does have a VAT - but it applies not just to imports but also certain exports. The amount collected, however, is really small: $2.2 billion in 2007 vs. hundreds of billions in the EU. (source: wiki)

Doesn't seem like such a big number to me - especially given that US excise tax collections were more than 30 times that in 2004:

http://www.bus.umich.edu/otpr/WP2007-2.pdf

For example, in 2004 the U.S. federal government collected $72 billion in excise taxes, representing four percent of its total tax revenues, of which petroleum taxes accounted for $33 billion, or 45 percent of total excises.

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

The disagreement is that you are assuming the US must provide liquidity for international trade in dollars.

What do you mean by must? We must die, but everything else is pretty much a matter of taste.

If the rest of the world falls into depression is it your taste to see their flagging demand on American goods? I'd also like to know how it will be prevented. If there is demand for American money, it will leave our local economy. So then our local money supply will shrink and we will go into depression.

You are a very odd one indeed to have such respect for Micheal Hudson who is a Post Keynesian to essentially have a Ricardian view of the world.

As for the federal budget - I don't agree that the having a surplus is always a catastrophe. Certainly it would be right now, but there is no structural reason whatsoever why surpluses could not have been accumulated in the good economic times.

Who said it was? They should have run a surplus to stop the housing bubble.

Absolutely there are perverse incentives, but there are reasons why the path to the perverse outcome is not always chosen.

Your line of reasoning is flawed because you're extrapolating backwards from your thesis into the past 2 or 3 decades. There have been many reserve currencies in the past prior to that period. The situation you ascribe to the present US dollar reserve currency didn't occur for any of them.

That is because they were specie backed currencies. The pound sterling was still linked to PMs so you didn't have big piles of them all around the world. The US dollar is a very novel thing.

For that matter, the US was able to accumulate large deficits even under Bretton Woods - when gold was the official settlement between currencies (i.e. the reserve currency). Surely you aren't going to argue that those deficits were due to some Triffin law equivalent?

I think that once the American debt was more than all the gold in the world one might get the picture that the deficit was at an end. Then American political and military power led to 1971. Greece ran deficits too for a time since debts may accumulate for a time. You don't like the word law I see even so that Say's law is very much challenged. Law and theory in economics is just a label. Yet would you not agree it is a virtual law that a creditor will allow deficits up to the maximum point that can be repaid and that is in fact their end goal and no more no less? The deficit must end. If the debtor makes its debt fungible until its like money, it can make credit on demand becoming a vanishing point of endless deficits. If the US remains the provider of the reserve currency, it may be endless since it appears as inflation rather than debt. Again , given Hudson's view on MMT, your view is very stage to me, if you adhere to his theories as you say.

Toyota doesn't run Japan. And even if they did, the decision to become a reserve currency is a combination of desire by government, visible if not dominant presence in the world trade marketplace, and acquiescence from other participating nations.

You take things far too literally. However I can tell you the export industry had far more influence than ours. Your argument seems that a conflict of interest cannot happen in different modes of industry, and that parasites cannot become symbiont with other parasites. If you sell silk to a certain gold smith, would you be happy to see silver monetized? You'd be a fool since you are one proxy away from gold rather than silver. Export industries that are paid in dollars are one proxy away from the reserve currency.

Thus even if Japan wanted to become a reserve currency, irrespective of who actually wants it in Japan, it is hardly a foregone conclusion that the JP Yen would become so. Any number of other nations have desired reserve status and not gotten it.

So I'm unclear what you are saying is obvious.

How clear does it have to be? Its Tiffins dilemma. We will run trade deficits by creating less real product than we otherwise would which makes it an economic rent. Its another bias to be a rentier society . Rentier societies, just as Thucydides observed, tend toward oligarchy because it only takes one to receive any amount of unearned income. Unearned wealth can become very concentrated and so it seems democracy does poorly the more rents you have. That is why the US thrived in democracy on a huge land mass free of rent just like Athens.

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

I sure am not the only one who observed what the US must do.

http://www.moneyding.org/triffin-dilemma/

"This dilemma was first identified by Belgian-American economist Robert Triffin in the 1960s, who pointed out that the country issuing the global reserve currency must be willing to run large trade deficits in order to supply the world with enough of its currency to fulfill world demand for foreign exchange reserves."

[c1ue]

Re: Krugman Has His Backside Handed to Him

What do you mean by must? We must die, but everything else is pretty much a matter of taste.

If the rest of the world falls into depression is it your taste to see their flagging demand on American goods? I'd also like to know how it will be prevented. If there is demand for American money, it will leave our local economy. So then our local money supply will shrink and we will go into depression.

You are a very odd one indeed to have such respect for Micheal Hudson who is a Post Keynesian to essentially have a Ricardian view of the world.

Interesting - I've pointed out that the decision to accommodate dollar liquidity for the world is not foreordained; there are just as many domestic reasons not to as there are international/cartel reason to.

As for Hudson - perhaps you can point out where he blames the US economic situation as being a foreordained negative consequence of being the reserve currency.

I think that once the American debt was more than all the gold in the world one might get the picture that the deficit was at an end.

If you mean the US federal deficits, the total federal deficits between 1966 and 1975 would translate to about 93000 tons of gold @ $35/oz - which is a significant fraction of the world's supply - this is true.

However, this can be said for world debt in general thus is pretty much meaningless.

The US going off the gold standard wasn't because US federal deficits were more than the gold supply, it was because the US gold holdings couldn't stand up to ongoing trade deficits.

The point remains the same: even with gold as a reserve currency for excess US dollars, the US was still perfectly able to accumulate trade as well as federal deficits.

To me it would seem that it is US behavior rather than the structural details of the currency system which is the root cause of the problem - whereas you are saying (if I understand correctly) that it is the structural fact that the US dollar is a reserve currency which is the cause.

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

Interesting - I've pointed out that the decision to accommodate dollar liquidity for the world is not foreordained; there are just as many domestic reasons not to as there are international/cartel reason to.

As for Hudson - perhaps you can point out where he blames the US economic situation as being a foreordained negative consequence of being the reserve currency.

Because its just MMT on a world scale. So how again would you prevent dollars from leaving the country while having no effect on the domestic money supply? Interest rates will be set lower as a result, essentially pumping money out of the country. If that did not happen, then foreign countries would lower demand for our goods since they would not dare part with a dollar being so scarce. I just don't see how you can have a world reserve currency without a deficit of real goods.

If you mean the US federal deficits, the total federal deficits between 1966 and 1975 would translate to about 93000 tons of gold @ $35/oz - which is a significant fraction of the world's supply - this is true.

However, this can be said for world debt in general thus is pretty much meaningless.

The US going off the gold standard wasn't because US federal deficits were more than the gold supply, it was because the US gold holdings couldn't stand up to ongoing trade deficits.

Thats axiomatic. The US holdings could not stand up to it because gold is scarce and generally fixed making it the choice of marking credit in a stable manner. It would soon become apparent the US could not pay. Now as is the weakness of MMT, its not readily apparent when the US cannot pay. If gold were plentiful anywhere, especially unexpectedly so, it would mean fewer goods in the US would be required to pay . If it became less scarce because a huge gold mine was discovered in the US, then the gold debt would be even less and there would be no need to make American products for our imports. So yeah, you totally lost me too. How would a big gold discovery not also de-industrialize the country like any old Dutch disease?

The point remains the same: even with gold as a reserve currency for excess US dollars, the US was still perfectly able to accumulate trade as well as federal deficits.

As I said, it was not perceived as an unpayable debt.

To me it would seem that it is US behavior rather than the structural details of the currency system which is the root cause of the problem - whereas you are saying (if I understand correctly) that it is the structural fact that the US dollar is a reserve currency which is the cause.

It helps to de-industrialize us absolutely. Its not the only cause to be sure, but it is a cause. I just don't see how dollars could be prevented from leaving the US while having no influence on interest rates which would remain lower than they otherwise would.

[Penguin]

Re: Krugman Has His Backside Handed to Him

That's kind of the point isn't it? To have very small levels of imports and therefore import taxes?

As far as the percentage goes my friends in the auto industry tell me that the actual import taxes on their cars goes up to about 25%. Lower percentages for fuel efficient cars and up to 25% for gas gusslers. It is usually fairly high and is but another reason American companies are forced to relocate their plants over there. Another tasty bit of marksmanship on their part is the law that forces any company relocating their plants to have 50% Chinese ownership. This way they can take full advantage of technology transfer.

Look, I'm not knocking on the Chinese or the Japanese or whatever for doing these things. This is merely putting their own citizens ahead of US interests on these issues. Fine. Great.

But what about those of us who actually do produce things of value that are targeted by these mercantilist methods. Why is it that the mere mention of a reciprocal tax to offset these VAT subsidies sends economists into conniption fits? Why is it that our politicians go into free trade mantra seizures at the mention of putting Americans in a position to actually compete on an even field with these guys?

I'll tell you why, because they are getting paid to keep shut while those of us who work on real products are kneecapped by these unfair tactics. It is a god damned disgrace that all of these so called leaders tell us that we can't impose the same tactics that our trading partners do because that would be unfair. If it is so unfair then why in the hell aren't they standing up and taking a stand as millions upon millions of goods producing jobs are stolen right out from under our noses.

IF this stuff doesn't matter then our trading partners should not mind at all if we reciprocate all of those VAT on their imports should they?

Will

[c1ue]

Re: Krugman Has His Backside Handed to Him

Because its just MMT on a world scale. So how again would you prevent dollars from leaving the country while having no effect on the domestic money supply? Interest rates will be set lower as a result, essentially pumping money out of the country. If that did not happen, then foreign countries would lower demand for our goods since they would not dare part with a dollar being so scarce. I just don't see how you can have a world reserve currency without a deficit of real goods.

You're now assuming that the US cannot keep dollars from leaving - therefore that the US cannot control its own currency.

This is patently false - both because the control of the currency isn't about the physical location or use of the currency, it is the value of the currency.

The US can devalue the dollar (as it has been doing so for the past few years) much as reserve status of the dollar acts as a strengthening mechanism. ZIRP is just one of the ways by which the US can force the dollar lower, much as high interest rates can be used to prop up a currency's relative value.

As for your example of 'pumping money' out of the country - perhaps you can be more clear what you are saying. Is a strong dollar good or bad for trade deficits? The US built its present level of trade deficits on a strong dollar, but the present weak dollar isn't reversing the trend back to surpluses.

Thats axiomatic. The US holdings could not stand up to it because gold is scarce and generally fixed making it the choice of marking credit in a stable manner. It would soon become apparent the US could not pay. Now as is the weakness of MMT, its not readily apparent when the US cannot pay. If gold were plentiful anywhere, especially unexpectedly so, it would mean fewer goods in the US would be required to pay . If it became less scarce because a huge gold mine was discovered in the US, then the gold debt would be even less and there would be no need to make American products for our imports. So yeah, you totally lost me too. How would a big gold discovery not also de-industrialize the country like any old Dutch disease?

The problem, though, isn't the fundamentally limited nature of any resource - including foreign nations' willingness to accept US dollars.

The problem was sustained US deficit spending leading into a serious trade deficit. The form of the denominator thus is arguably irrelevant whether gold or fiat US dollar.

As I said, it was not perceived as an unpayable debt.

Because the entire point of Bretton Woods was to use gold as a neutral exchange medium to even out trade imbalances hence currency imbalances over time. But the US chose to not allow its domestic economic policies to be affected by the curbs imposed by the Bretton Woods agreement - and so broke out of said regime.

Even today - does anyone doubt that a US dollar debt owed to anyone is unpayable? Just fire up the printing presses.

It helps to de-industrialize us absolutely. Its not the only cause to be sure, but it is a cause. I just don't see how dollars could be prevented from leaving the US while having no influence on interest rates which would remain lower than they otherwise would.

I think the dichotomy is that you're thinking dollars leaving the US is a bad thing.

It is not. If some other nation is willing to collect a bunch of pieces of paper (or more likely electronic 1's) in return for physical goods, this would seem a great deal for everyone in the US. Literally something for nothing - since the US has all sorts of barriers to prevent these dollar holders from acquiring major US assets with said dollars.

It is also not a bad thing because the US controls the value of said dollars. At any time, the US can devalue the worth of all existing dollars everywhere with the push of a button. The impact of this devaluation on Americans could be easily nullified by a straight helicopter drop. The problem we're having is that the former is being done, but the latter isn't - and that is a political issue.