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  1. I think the situation is not as prior. It’s true the US tariffs in 1930 (“Smoot Hawley” Bill) launched a tit for tat and collapsed the world economy, causing the Great Depression. Right now, is different. The might of the USA is truly enormous, and the others won’t win a trade war, or a war war (although Chinese keep on firing lasers at US pilots over international waters). Moreover, US PLUTOCRATS produce in China. So it’s going to be Plutos getting punished, directly. Also the USA can go autonomous: and, moreover rumors of the death of NAFTA are exaggerated… The North Korean situation is still the most dangerous: if the N Koreans desist, and resist, it HAS to be war… Everything is tangled up.

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    • Agreed, until now nothing significant happened, except lots of talking. But economy can collapse just because of talking. Except of it Tramp doesn’t seem to have system, he seems to me acting like a hero in a western movie. First shoot and then check whom you killed.

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  2. Dear Eugen: It’s meant with all dues respect, of course, and I thank for making me think about the subject! ;-)

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  3. I am writing an essay, if Dog leaves me time enough, answering the preceding… because I don’t agree… The essence of my argument:

    OK, so we need X amount of dollars to create an overseas dollars stash. Say that stash is 10 trillion (a large overestimate). That’s 25 years at the present rate of deficit with China alone. And the stash existed before, it started before 1945. And also 4 trillion dollars of the stash is unpaid taxes by US corporations…
    Moreover, consider, say, Argentina. It has a dollar stash. However the US has long exported cars to Argentina, so how did the stash develop? Through plutocratic mechanisms involving either tax cheating (laundered Argentine currency) or US plutocrats buying vast tracks of the country (also done in Chili).

    In any case, the fact that the US dollar is considered reserve doesn’t mean one needs to have a deficit! And the fact is the US has been reserve since 1944 (after cheating Lord Keynes who didn’t want the $ as reserve, and headed Bretton Woods, but documents were switched!) There was no deficit for decades! And the fact is the massive deficit with China and Germany, or Ireland are recent. And the fact is, Germany has used its bankrupt small banks to self-finance its massive export machine, even within Europe…

    And the fact is, the industrial core of the USA in the Middle West, got gutted, although it had a large educated population, and lots of fossil fuel energy. I say it got gutted precisely because it was educated (and thus a risk). Unions used to be hyper powerful in the USA, now they are near nothing…

    Trade is good, exporting work, ALL work, is bad…

    Here it is:
    https://patriceayme.wordpress.com/2018/07/03/must-a-reserve-currency-explode-the-trade-balance-no-just-look-also-avoiding-slavery-is-no-socialism/

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    • Trade deficite is just like having booze. While you are drinking you feel good, but next day, when you wake up, the hangover is unbearable. Other problem is that the surplus country is a drinking partner of the deficite country. Big parts of Chinese manufacturing capacity are export oriented. To stop drinking will be easy for either of them. More than that, reshifting whole economy needs fundamental changes and huge investments. It can’t be done overnight. If these changes will come in one day, in one moment, like Donald the Great wants to do it, to continue the methafor, it is like to drive home after the booze in high speed, against the traffic. Can catastrophe be avoided in this situation?
      Luckily the trading partners of US, still don’t react, they rather try to speak to the crazy driver to stop the vehicle. But even so, there are other drivers on the road. Can anyone be sure that they will not panic?
      One of the panic can be in form of disapearance of US dollars value. It already happened twice in the last century. The US dollar lost more than half of its value against the D.Mark in seventies and once again in eighties. But then the US debt was still in its diaper phase.

      So what would happen with half trillion US dollar current trade deficit of US, if suddenly the dollar would be let say two dollars to one Euro? Or even better, if the Cinese RMB would become 3 RMB to one dollar insted of 6.5 today?
      Just imagine all the Made in China product prices would double. What a disaster for the American consumers society. And what a disaster for Chinese Manufacturers of export items.

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  4. [Duplicate of answer to you on my site!]

    Specialists say that the dollar as reserve currency creates the deficit. I don’t understand it, it smells false to me, and, even if I did, it’s irrelevant considering what is at stake. Employment is the essence of civilization.

    I was direct witness of massive IP theft from USA by China (they had massively financed a company employing US state employees; things were set-up to make believe it was a US company; we had secret documents we found in devious ways translated from Chinese by a friend, a top Chinese engineer, exposing the scheme…)

    Europeans are imbeciles, economically and strategically speaking: they think they can go transferring massive Intellectual Property to China. Your analysis above is correct, and confirms that fact. However the USA, its leading Pluto class, pretty much plotted the 20C the way it went, helping out STALIN and HITLER, Mussolini, Franco, CRUCIALLY, and dumping them when they had been useful.

    At this point, China is invading Africa. Only the US and France resist that, but their approach is mostly military: at this point they give cover to the Chinese… The Chinese research budget is greater than the GDP of nearly all European countries… The Chinese sales in the USA amounts to 1/3 of all product (not services) sales…. Unsustainable…

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    • Even if it is hard to believe, that you Patrice don’t understand how reserve currency will necessarily create deficit, i will do my best to explain to you and to your followers in a very easy way, why reserve currency necessarily creates deficit in US.

      Reserve currency means, that the currency is saved in other countries, than country of its origin. It can be done by private or public entities, or even private people, who prefer to hold the reserve currency, as media of savings, because of the trust in it, compared to the local currency. By doing so, they create demand for the money itself, as if it would be commodity or item of value by itself. And the truth is the reserve currency is an item of value, because of the trust people all over the world put in it. This trust is result of long history of reserve currency origin country’s military dominance, democratic political system, free competitive market economy and unchallenged right for private property and wealth. China, even with its size of economy, (bigger economy than that of US, not in nominal but real terms) doesn’t have a reserve currency, because it couldn’t create the trust in its sincerity in most of the above mentioned issues. Europe succeeded only partly in making the Euro a reserve currency, because of its history of world wars it initiated, and their economic consequences on Europe. Even 70 years of peace was not enough to create enough trust in Europe, to make from its currency a reserve currency comparable to US dollar, that has history of continuous respect for these values mentioned above, since its declaration of independence.

      The need for reserve currency exists, to create trust in local currencies, based on these reserves. Just as in the past precious metal reserves, like gold or silver, made the currencies trustworthy, today holding of US dollars makes local currencies trustworthy.

      But then if there is demand for reserve currency, not as media of exchange, but as value holding item, its price, or exchange value will be influenced by this demand, without the question if exists enough additional production capacity to satisfy the value of potential demand that reserve currency promises. But then the relative prices in the country of origin of reserve currency, have to be higher than in countries who accumulate the reserve currency, that has to create surplus in trade with reserve currency origin country, to be capable to accumulate these reserves. Such a surplus can be created only if the local currency value is undervalued compared to the reserve currency. Then the other side of this surplus has to be the deficit of the reserve currency origin country.

      And here comes my warning, such a trust can be easily destroyed by irresponsible acts of politicians, who make big mistakes like, a. making wars destructive to economy, b. budget deficits creating debts, that are not invested into the increase of potential of production capacity, c. Not fulfilling the obligation given to the holder of the reserve currency, to supply against the reserve currency the promised value in form of products, whenever demand to its fulfilment will come, d. many more issues, known and unknown, that the reserve currency promise represents in the eyes of the reserve currency holder.

      Irresponsible president, who acts out of urge of the moment, without understanding or without caring of the possible consequences of his acts, and proving that after all, the legal -political system of reserve currency origin country has no instruments to stop such a policy of one man, can be a very good reason to undermine the trust in the reserve currency.

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