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by nemothekid 2014 days ago
I agree with your view wrt to regulations, but doesn't the article paint a different story? I'm wondering if I understood the article wrong -

As I understand it, the US status as a global reserve currency requires us to maintain a perpetual trade deficit - other countries need dollars and we must give it to them. This is done by buying goods from overseas which has eroded our manufacturing base, as the foreign demand for the dollar is greater than the local demand (which means there is a cheaper manufacturing market).

I'm not sure what regulation you could enact here that wouldn't severely depresses other sectors as they exist today.
2 comments
AnthonyMouse 2014 days ago
The status as a reserve currency requires dollars to flow into other countries, but that doesn't mean it has to be in exchange for manufactured goods. Example: US individuals or businesses buy real estate or stakes in local businesses in foreign countries with US dollars, causing US dollars to flow into those countries. Rents collected from the properties or businesses are used to buy more properties or businesses rather than being extracted from the country.
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nemothekid 2014 days ago
Labor is likely the most plentiful asset any developing country has as well as it's a system that doesn't require much legal overhead. Manufacturing goods would be the easiest asset any country could produce - trying to own an asset in a foreign nation is an expensive endeavor that requires military might (the middle east probably being the most pertinent example). Trying to collect rents requires the maintenance of an international legal system that will rule fairly. I'm not saying it's impossible, but that manufacturing requires way less overhead to maintain.
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zozbot234 2014 days ago
The flip side of a current account deficit is a capital account surplus. To the extent that the informal notion of a "global reserve currency" means anything economically, that's perhaps the best description of it. Such an investment surplus would tend to improve the country's economic base over time, far more than implied by any direct effect of the trade deficit.
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