[starspangled]

> It gets massive amounts of products and services enabling the US residents live well beyond their means.

What does this mean really? That is their means.

For a somewhat topical example, people of Australia get access to cheap medications (in part because they pay to subsidize the cost of them but also because) their government negotiates with pharmaceutical corporations to pay lower prices. This kind of negotiation would be completely out of reach of any private Australian person, but they are not living outside their means. Their means includes the means to elect governments to run the country for the benefit of its own people including doing things like securing lower prices for medications.

> China for example, sends huge number of electronics and all kind of other consumer goods that Chinese produce by sweating in 12 hours shifts in 6 day work weeks in exchange for imaginary numbers.

Until 1990, Kenya had a higher GDP per capia than China. It is absolutely not "imaginary". Work produces real value, just because you can represent or trade that for allegedly "imaginary" currency does not mean that the value created was imaginary.

> US is definitely not the victim here. There's the risk of this system stop working and that's when the US might have hard times due to being forced to live by its means and have no ability to kickstart its own production when that time comes.

US manufacturing output is double that of China's on a per-capita basis.

> It makes sense to be worried for such an eventuality but US is definitely not being taken advantage here.

Seems like that's the popular assertion but I don't see much solid reasoning behind it in this thread (not picking on you specifically), just handwaving about how USD's status as a global currency somehow makes trade deficits inevitable despite simple facts available that US had a surplus trade balance 50 years ago, when the USD has been considered the global / reserve currency for over 60 years.

[mrtksn]

For other countries USD is something they have to work for or sell something to acquire it. If they screw up they may end up in crisis being unable to obtain USD. Borrowing in their own currency will be much more limited and borrowing in USD much more costly.

USA on the other hand can just print it out of thin air and because the global USD liquidity is huge they can do it for much longer without facing the consequences of it. USA is also borrowing in currency they can just print to pay their debts. Very advantageous position for USA and they took advantage of it, imported crazy amount of products and services otherwise they wouldn't have.

[avidphantasm]

Thank you for elucidating the fact that US “borrows” in its own currency and so as long as we have monetary sovereignty (which we do to a great degree due to USD being the global reserve currency) we have no deficit problems (as long as we keep inflation in check).

I implore everyone reading this thread to read up on Modern Monetary Theory (MMT). Stephanie Kelton’s “The Deficit Myth” is a good place to start. Until more people have a better understanding for how the system works, they’ll continue to be confused and easily led astray by politicians who don’t have the best interests of most people in mind, but instead wish to rob us blind in a vain attempt to eliminate trade/budget deficits.

(Note: I’m very much for restoring domestic manufacturing as much as possible, including the use of highly targeted tariffs, industrial policy, R&D, workforce development, etc. but this is not what the current administration is doing, not even close).

[zaphar]

    as long as we keep inflation in check

That's the trick though isn't it? MMT discourse tends to gloss over or ignore the dangers of runaway inflation and act as if you can borrow all you want with no consequence. But that part that you put in parentheses above is precisely why you can't do that. What you borrow for your budget has to be payed back later. If you just print money to do it because you borrowed more than you could afford then you inflate your currency. If inflation happens too quickly you have serious problems. It's not free money.

[h2zizzle]

Taxes. Letting bubbles pop without bailing out the losers.

Both of those can be targeted in such a way as to deflate an inflated economy in a controlled way. The messaging is the hard part, as you're fighting against the emotions of a prideful workforce and the teeth-gnashing of the ambitious elite who see the stars as the literal limit. It is, however, possible to make sure everyone gets what they need to survive and even modestly thrive, while bringing the insanity of our current asset valuations and consumer prices back down to Earth, for a fraction of the cost of trying to keep the charade going indefinitely. You just have to throw rich people under the bus, instead of young and middle-aged workers whose purchasing power bleeds out every time we do yet another never-done-before thing to backstop failing banks and securities.

>That's a planned economy.

Man, do I have something to tell you about the FFR, porkbarrel spending, etc....

[zaphar]

Taxes don't remove money from the supply unless the government is refusing to spend it. In which case that is just "reduce your budget and spend less" with extra steps. If you could do one you could do the other just as easily.

And letting bubbles pop isn't an MMT thing. It's bog-standard economic theory. The fact that politicians often don't do it has nothing to do with which theory they subscribe to. It's just cowardice on their part.

[0xBDB]

> In which case that is just "reduce your budget and spend less" with extra steps.

I'm pretty sure the extra steps are the point, in that I simply don't believe the MMT folks expect them to ever take place.

It's not a coincidence it's an American theory, from a country where it's politically almost impossible to raise taxes. Otherwise it would just be a roundabout way to raise taxes and pay for stuff in reverse order. But in fact it isn't "buy now pay later". It's "buy now YOLO LOL". But hey, maybe I'm missing something.

[OGWhales]

> MMT discourse tends to gloss over or ignore the dangers of runaway inflation and act as if you can borrow all you want with no consequence.

I see people say this a lot, which is odd since as far as I have seen it's one of the main points MMT people make. I'm not sure how one of the core insights of MMT has become the main criticism of it, it's kind of funny.

I suppose this is because some people have taken MMT to mean that debt doesn't matter, however that is really not at all what it says. I think a more reasonable conclusion of the system MMT describes is that how money is spent matters greatly (productive vs unproductive spending), the primary purpose of taxes is keeping inflation in-check, and real resources are critical to the health of a currency.

[avidphantasm]

Exactly. The power of MMT is that it credibly explains what taxes actually are (not a source of government funding, but control rods for inflation and a constant source of domestic demand for the currency that helps maintain monetary sovereignty) and how to make sure spending is productive and not inflationary (e.g. through the currency issuer being the employer of last resort, etc.). You might not like it, but if you want to have a vaguely capitalistic system that has long term stability, you need to employ mechanisms like this.

[zaphar]

I have not seen an explanation that makes the case for taxes as a good tool for controlling inflation. This is sort of what I mean by the discourse ignoring inflation. We already know what how inflation happens. MMT doesn't bring anything new to the table here.

[MichaelZuo]

It really is bizarre that huge portions of economics nowadays sidestep the fact that individuals, groups, and countries, have finite amounts of credibility.

That it can be depleted and take well over an average lifetime to regain.

[Flemlo]

I don't think domestic manufacturing works anymore.

The pressure to automate will just skyrock.

I'm more for a global currency which will be given to everyone who does certain jobs we can't automate away or don't want to like nursing, teaching.

Everyone around the globe can get worldfiat when they do these jobs.

We need to start thinking beyond known capitalism in a modern highly automated world.

[mmillin]

There are important reasons to have domestic manufacturing even if automated and not creating jobs.

[Flemlo]

Sure but that's not enough to give people enough jobs.

[mensetmanusman]

We want automation x1000, every useful automaton increases the quality of life by increasing productivity.

[johnrgrace]

We don't have as problematic a deficit problem so long as reasonable sane people are running tr4e system and willing to turn on the printers when required so as not to generate excess inflation.

[starspangled]

Many countries control their currency and can print money to pay debts, and can control their fiscal and monetary policies to best gain advantage for themselves. And they do.

US can do some things more, bigger, longer, etc., for various reasons. Just like Australia can do more, bigger, longer, etc., than Tonga. I don't really see anything profound being said here.

USA might be in some advantageous position now, and it might not always be in such a position, which is a pretty bland observation, but it also does not support the idea that they are living beyond their means today.

[mrtksn]

The reserve currency status makes all the difference on how much of all this you can do and under what conditions. That's the difference and that's why US had it so good for so long and now is due for such a large correction. Also, US is blessed with huge natural reserves, didn't actually waste it all on drugs and alcohol but did in fact created some of the best institutions in many areas so maybe it wouldn't be that bad if the politics don't make it bad.

[starspangled]

It's not a reserve currency because the US decided it is, it's a reserve currency because everybody else decided it is. They decided that because they decided it was in their own best interest to trade in and maintain reserves of USD.

But whatever difference it makes is still just a matter of degrees. Countries keep reserves of and trade in currencies other than USD. Some get more benefit than others from this, and they all work to benefit from what advantage they can take from their own positions within their means to do so.

[jampekka]

USD became the reserve currency in the Bretton Woods, when it was pegged to gold and major currencies were pegged to USD. This was pretty much demanded by US in the Bretton Woods conference.

In 1971 US unilaterally scrapped the Bretton Woods and essentially stole the gold reserves. Other countries protested heavily but could not really do much.

US then transitioned to the petrodollar system where demand for and value of the dollar is/was ensured by dollar monopoly in oil trade. This was done with deals with oil producing countries with varying levels of coercion.

Granted it is in a country's best interest not to piss off the world's largest military. Silver or lead is a decision too.

[chii]

The gold reserves wasnt stolen - it is the US's gold that was acquired as a result of WW2. The revocation of the convertability of the US dollar to gold was suspended because it became impossible to honor it due to the increase in the amount of circulating dollars (what people generally call printing - it isn't "printed", it is debt created that produced more currency). And imho, while it seemed like other countries complained, i think this system allowed the world to move off the gold standard - a system which does not allow for flexibility.

And the idea that the US somehow enforces their dollar as being the reserve is moot - it is simply not true. Countries use the US dollar for trade because both sides of the trade believes that the other side cannot "cheat" using this currency, and implicitly believes that the US gov't won't "cheat" on behalf of one side either.

Unfortunately, this trust is being undermined from various sides, including the current US administration (and i have a hard time believing that the trump administration doesnt know this - it seems deliberate).

[starspangled]

In other words, what I said was correct.

[OGWhales]

Is the USD due for a correction? I would agree the current policies do not help, however I have a hard time seeing any other currency actually replacing the dollar as the world's reserve currency.

[unionpivo]

If USD stops being global currency, there probably will not be just one that replaces it, but there will be several competing ones (USD still probably being there), for foreseeable future, with countries hedging bets.

[pbhjpbhj]

When Aus print money they devalue the currency, spreading the cost over all Aus dollar holders.

When USA do the same, the non-USA dollar holders also take on the cost, same-same, excepting that is everyone around the World who trades in dollars. Which comes back to USA's military-industrial complex to some extent. It's like having the ability to steal a gram from every gold bar in the World.

[starspangled]

> When USA do the same, the non-USA dollar holders also take on the cost

They don't. If they aren't holding USD or something pegged to it then it is not devalued.

[pbhjpbhj]

Sorry, I made that hard to parse - "the dollar holders outside USA".

[mtrovo]

It doesn't matter how much money you print if your debts are USD denominated. If for example Tonga has double their currency in circulation with a debt of Y USD tomorrow they will still owe Y USD and their currency will probably be worth half of what it was before.

In the case of the dollar if you suddenly double the supply it's not just the US national debt that is affected, it's all the secondary financial products indexed on dollar that are affected: debt from countries and private companies across the world, commodities and all transactions between countries not involving US that are dollar denominated. So in a way the value of a single dollar is diluted but it's diluted over a much bigger pool of participants.

That's the main reason printing money is cheaper to US as is reflected on the bond market, just look at supply vs inflation around the years following the global pandemic.

Living beyond their means is very relative. When credit is virtually free for years it makes sense to run 10x leveraged, the problem is when interest rate rises and you have to deleverage without showing too much that you don't have that much money as failing to do so could result in a death trap spiral.

[nisegami]

>For other countries USD is something they have to work for or sell something to acquire it. If they screw up they may end up in crisis being unable to obtain USD.

Right on the mark. This is happening to my country and it's an existential threat to my country's continued existence tbqh.

[chabska]

> US manufacturing output is double that of China's on a per-capita basis.

Only on a dollar value basis. And that's heavily skewed on how an item's value is calculated. When you use $50 of parts (all made in China) to assemble a machine that you sold at $500 , $50 of GDP value is attributed to China while $450 of GDP value is attributed to the US. But who did more "manufacturing"?

[AnIrishDuck]

What other system of value are you using here? Bottle caps? Nostalgia?

While the dollar remains the global reserve currency, this is just a wild theory of trade. If the $450 of value was so easy to extract, why wouldn't China simply assemble it in their own country and take the whole pie?

(they clearly already do this everywhere they can)

[chabska]

> What other system of value are you using here? Bottle caps? Nostalgia?

A common proxy is "metric tonnes of steel produced" and "metric tonnes of sulfuric acid produced". For China, these have been going up in-line with their GDP growth, whereas for USA they have flatlined since 1980 despite the increase in manufacturing dollar-value output.

[chii]

And how do you compare metric tonnes of steel produced, with metric tonnes of plastic produced? What about metric tonnes (hours?) of entertainment on films?

The metric to measure value using quantity of goods must use a common denominator unit, otherwise, comparison becomes subjective (one might want to value tangible goods more than intangibles for example).

So making comparison using a price makes a lot of sense.

[AnIrishDuck]

You, of course, can choose these as your units of value.

I think it is telling that the rest of the world (particularly the central banks of most countries) have instead chosen USD (well, more specifically US treasuries) as their preferred store of value.

Well, at least, for now...

[biorach]

(Not the person you were replying to)

You asked a question, they answered in good faith, and now you've dismissed their answer. I would also point out that you're dismissal is actually about a related, but separate issue - you've suddenly started talking about preferred store of value, when your original question was about how to value production.

I don't think you're arguing in good faith.

[AnIrishDuck]

I pointed out they were providing ridiculous answers to the question of "how do you measure value" and they doubled down on the ridiculous.

You are correct, there are many ways to measure value.

However, I don't think picking various commodities as the "true" measure of what is "valuable" is a useful exercise.

You may disagree. That's fine! I suggest you put your wisdom to use on the various markets that are set up for this purpose instead of arguing with me.

EDIT: they ultimately never reached my main point anyway, which is: regardless of if you measure value in tons of steel or crushed coconut shells, if China could easily obtain that value by assembling this stuff themselves, why export all the inputs to us instead?

[chabska]

I didn't "choose" these, they are standard metrics used by industrial analysts. You know, the people who plan port expansions and cargo ship purchases, they need to deal with the actual tonnes of goods moved, not the dollar value of those goods.

[p_j_w]

Why should tonnage matter more than value? Would you rather have 10 tons of dung or 1 ton of smartphones?

[motorest]

> If the $450 of value was so easy to extract, why wouldn't China simply assemble it in their own country and take the whole pie?

If you pay attention, you'll notice that's what China is doing. For decades, China's GDP growth towered over the US's. Around 2015, China's GDP PPP overtook the US's.

[AnIrishDuck]

Growth is trivial to achieve when you are starting from zero. My footnote very much alludes to this. This is incidentally what the US did to powers like Britain a century and a half ago.

I just find it amusing that in this theory of trade China has found a way to do all the work while the US does nothing and takes all the value. Perhaps all that extra money is not as easy to claim as the OP suggests.

Maybe economies are changing and purely physical goods are becoming less valuable...

[motorest]

> Growth is trivial to achieve when you are starting from zero.

China currently reports the second highest GDP in the world.

[AnIrishDuck]

> For decades, China's GDP growth towered over the US's.

It's much easier to 100x $1k than to 10x $1m.

This is not to take away from the achievements of the Chinese economy, which are gargantuan. You just can't linearly extrapolate growth rates.

[jorts]

China’s GDP growth is great but they will face a huge pain now that they face an unsustainable population decline. They have more people aged over 52 than younger. I empathize with their youth.

[NhanH]

You are claiming that the median age in China is 52 or did I read this wrong? That would be beyond fake news level of statement (for my reading of the meaning)

The current median age of China is about 40, which is not great for their context, but a world apart from 52.

[aylmao]

China is automating at an impressive rate. Isn’t automation easier to face with population decline than with population increase? I’d imagine young people mind getting replaced by machines more than old people.

[Ray20]

>Isn’t automation easier to face with population decline than with population increase?

No? These things do not seem to be connected in any way.

[ReptileMan]

The good thing about being authoritarian is that you can easily solve the births issue. The same way there was one child policy, there could be 3 or 4 with penalties for non compliance.

[jampekka]

Highly unlikely CCP would pursue coercive birth policy, or even could do it if it wanted. CCP is extremely powerful but it still has to rely on the consent of the governed. It has to frequently roll back policies due to public outcry.

Current birth rate increase policies in China are based mostly on rewarding for births and subsidizing parenting costs.

[wqaatwt]

> GDP PPP

That’s not a particularly meaningful metric.

[psalaun]

No more no less than GDP. They outline different realities, which are all interesting to analyse as a whole.

[wqaatwt]

PPP on its own is a relatively poor metric and only covers a subset of the economy.

Then when you have semi closed economy like Russia with unclear currency rates (due to external capital inflow/outflow barriers) and convert the figures to USD you can end up with all sorts of wacky numbers

[amilios]

but not GDP per capita in purchasing power, in that the US is still far ahead. China's GDP PPP is greater, but with 4 times the population.

[NobodytheHobbit]

They do. If you just scroll the ubiquitous online market, that doesn't need to be named, and look for odd brand names. Intentionally odd. Like "sxrpgh" as the brand as a made up placeholder. These brands are named to quickly start a business.

Why? It's an aliexpress model. Create as many legal entities as you can and let an economic Darwinism kill the ones you do poorly at and cherry pick your successful businesses.

The actual labor is outsourced to the market itself with products produced in southeast Asia by a wholesaler, sent to the market by said contracted wholesaler, and sales handled by the market's fairly much only retailer. It's so automated you really only have to be lucky that consumers pick your product and luck can be bent to will at times.

It's a very botnet approach to business.

This does expand the approach from flooding the market with cheap goods, to making cheap goods and competing with prices from the middlemen, making less efforted profits using the same approach, but exports the profits out of the US economy. I know this is a unusual framing but that's exactly what is happening.

Before a middleman within the economy would extract the wealth from that labor in this way. Why not cut out the middleman if the formula can be followed by anyone? And in the current belligerent state of trade it would politically expedient to do so or at the very least encourage this model if you are adversarial to the US because it works well. Our businesses already proved that.

[usrbinbash]

> What other system of value are you using here? Bottle caps? Nostalgia?

The system where "production" means "where has item XYZ actually been made".

And for more than 1/3rd of all items, the answer to that question is: China.

https://cepr.org/voxeu/columns/china-worlds-sole-manufacturi...

[aylmao]

China's GDP (PPP) is already ~22% higher than the USA's [1]. Arguably, isn't this a better measure of value? PPP measures the real value to the citizens in a nation, and more closely measures actual economic activity.

Say a bottle of wine costs $20 in the USA, and in total one bottle is produced and sold for a total of $20 GDP. France makes 10 bottles at $2 each, for a similar GDP of $20. It's cool that the USA manages to "extract more value" from its smaller wine production, but at the end of the day, France has the stronger economy.

There's more wine to go around, more resilience to the loss of a bottle, arguably this higher production means more export capacity, more employment, more generation of wine expertise, supply chains, etc.

The nominal GDPs might be the same, but the GDP (PPP) of France in this case would be $200 to the USA's $20.

[1]: https://www.cia.gov/the-world-factbook/field/real-gdp-purcha...

[deaddodo]

> China's GDP (PPP) is already ~22% higher than the USA's [1]. Arguably, isn't this a better measure of value? PPP measures the real value to the citizens in a nation, and more closely measures actual economic activity.

Only if the only things you purchase are exclusively domestic. Turns out, the vast majority of Chinese citizens with any means are interested in foreign products (like most people in the world).

[oblio]

> Only if the only things you purchase are exclusively domestic. Turns out, the vast majority of Chinese citizens with any means are interested in foreign products (like most people in the world).

Are they, though? China has its own huge software stacks, cloud providers, car manufacturers, etc? Is China really starving for anything not made in China, except for luxury goods? To which, I would point at Lexus (the archetypal example from Japan, a comparable country) and say that if you're a luxury good manufacturer in the Western world, I would not rest on my laurels, it's just a matter of time: either by development or acquisition, China will be making its own luxury goods and even exporting them, soon.

[ggandv]

If China embraces capitalism more tightly that will be a good thing for the world. The problem with China is not its wonderful people or culture, nor its prosperity, the glaring problem with China is Communism and the morality of authoritarian style central planning and the Xi/Putin axis of evil.

[aylmao]

> Turns out, the vast majority of Chinese citizens with any means are interested in foreign products (like most people in the world).

Is there data that backs up this claim? Is this broadly the case? Cause I do know that local brands have been taking over foreign brands recently. Take for example Apple— sales in China plunged 50%, and reports are pointing at Huawei [1], which amongst other things has been making some impressive high-end phones. Tesla is falling to Chinese brands too [2].

Moreover, foreign brand != foreign product. Tesla manufactures in China, as does Apple, Louis Vuitton, etc.

But regardless of specific examples, I'd imagine the vast majority of consumption in China isn't products of foreign origin given its massive trade surplus [3] and just how much of what it imports are materials, rather than finished consumer goods [4].

[1]: https://www.asiafinancial.com/apple-sales-in-china-plunge-50...

[2]: https://carnewschina.com/2025/05/12/teslas-sales-in-china-do...

[3]: https://tradingeconomics.com/china/balance-of-trade

[4]: https://oec.world/en/profile/country/chn?selector343id=Impor...

[deaddodo]

> Moreover, foreign brand != foreign product. Tesla manufactures in China, as does Apple, Louis Vuitton, etc.

This has nothing to do with PPP, and the fact that you are making this argument means you have no idea what it consists of at all.

If Chinese citizens purchase those products, they don't get them at an adjusted price because they are manufactured in China. They pay the same base price as worldwide, else they buy them secondhand (or, more frequently, bootleg).

Your questions reinforce, rather than dismiss, why PPP is a useless metric outside of base domestic purchase economics (primarily rent and food).

[seanmcdirmid]

That bottle of wine is going to be at least 400 RMB in China, so I’m not sure how PPP can be argued here. You would need to focus on things that are less expensive in China than the UsA (services mostly, low end goods and food), but things get more expensive quickly if you go for something nice outside of a restaurant. PPP is oddly calculated given that services in china’s case are mostly what is driving its higher value, and that simply means people are paid less (and increasingly they aren’t, which means PPP will shrink closer to GDP unless their automation investments really pay off).

[ozgrakkurt]

The he issue with this is the dependency direction, if the supplier learns to do the assembly then they don’t need US anymore and can sell the same thing for a fraction of the price.

Or if you go to war then all those base manufacturing can be used to manufacture for military

[pjmorris]

> If the $450 of value was so easy to extract, why wouldn't China simply assemble it in their own country and take the whole pie?

As someone else pointed out, they do, under various odd brand names.

You make what seems like an obvious point. However, The iPhone is assembled in China for the ballpark cost you mention, and sells for double the $450 price you mention... so they must have reasons to not take the whole pie.

[seanmcdirmid]

The IP is important. Not only did you use $50 in parts, but the design, software, and marketing were done in the states. One critical flaw in MAGA thinking is that these inputs are worthless: the full value of an iPhone comes from China because that’s where it was assembled even if most of the value was actually added in the USA. China wants to be on the other side of the value chain as well and really don’t mind swapping places with the US (and it looks like that will happen long term now due to Trumpism).

[adrian_b]

The value of the American "IP" consists more in the might of the US government than in the actual value of that "IP".

A few years ago, Huawei was in a clear path of becoming the biggest producer of smartphones in the world, with smartphones that by now were based on their own IP, including CPUs and modems, even if Huawei had started 20 years ago by buying smartphone IP from companies like Siemens (which had been reckless enough to sell it). At that time, the latest Huawei designs were superior in performance to those of Qualcomm and superior in performance per dollar to those of Apple.

The result was that the US government has started a campaign of sabotage against Huawei, because they did not like the result of a "free market".

A couple of years later everything has repeated when there was the danger that Chinese manufacturers of flash memories will overcome Micron.

So the percentage that American "IP" takes in the products of other countries is only maintained by quasi-military actions of the US government, which treats any commercial rivals as enemies against which any sanctions are justified.

[seanmcdirmid]

China is definitely getting there, no doubt. They won't be a place where assembly just happens anymore, it will be more like robots assemble things and people mostly focus on IP/software/etc...

The fairness of the competition between American and China in IP, I'm sure if you are heavy on one side or the other its obvious, but to me it seems like there is truth in China stealing secrets and there is truth in America using quasi-military actions to protect what is basically a monopoly on a segment of high-value goods. But whatever you think, what Trump is doing now ultimately benefits China and hurts America in the short and long term.

[adrian_b]

I have no doubt that China has stolen IP whenever they had a chance.

For example, Huawei was famous for draconic rules imposed to its employees in order to ensure that they could not take out any information from their computers and also that no information could be accessed by any visitor or by anyone outside working hours.

Presumably they were very careful with this because that is how they would have attempted to exploit a competitor.

Nevertheless, the many Americans who still believe that the Chinese success is based on stolen IP are completely delusional.

China has bought most of the IP with which they have started developments and not stolen it. Reckless companies from USA and EU have sold all that IP. Talking about "stealing" is just a tactic used to obscure who are the culprits, who have obtained nice financial gains from selling IP to China.

Moreover, in recent years China no longer has much to steal from USA, more the opposite becomes true.

If I look at recent research papers, even if there are also many published Chinese papers that are garbage, there also many that are very innovative, and such innovative Chinese research papers have become much more numerous than the innovative research papers coming from USA. The reason appears to be that the Chinese seem now willing to assume more risks, in searching paths that are uncertain to lead to useful results, while the research in USA seems to have become more conservative, striving to obtain immediate and guaranteed results, which however may not be able to exit a local optimal point in the space of solutions.

I assume that as research financing becomes more difficult, the research in USA will become even more conservative, diminishing its chances to compete successfully in innovations with China.

[starspangled]

> Only on a dollar value basis.

Uh, yes.

> And that's heavily skewed on how an item's value is calculated.

An item's value is calculated according to what it is bought and sold for. That's how value is determined. What would you rather it "skew" towards?

> When you use $50 of parts (all made in China) to assemble a machine that you sold at $500 , $50 of GDP value is attributed to China while $450 of GDP value is attributed to the US. But who did more "manufacturing"?

If an American company can design and develop and sell a product that requires $50 of parts and people are willing to pay $500 for it, then clearly that company created an enormous amount of value, didn't it? By definition almost. Manufacturing output or value is not a function of the number of beads of sweat or drops of blood or hours in a factory to make something. It is how much value (i.e., what others are willing to pay for) the things you create.

[hakfoo]

I suspect in many cases, the "value add" an American firm provides is an intangible.

In the pre-tariff omnishambles world, I could buy a more or less equivalent widget for $18 branded with a recognizable American brand, for $12 as a KWJIBO non-brand delivered from Amazon, or for $6 more-or-less manufacturer direct from AliExpress.

Amazon added $6 of value by saying "I can get it to you in a timely manner and offer a confidence-reinforcing return policy."

The American brand added another $6 of value for "this can probably be sourced consistently and people won't look at you weird trying to get it Shenzhen Tchang Zu Shrimp Cannery And Electrolytic Capacitor Plant #5 onto the approved vendor list."

They didn't actually improve the widget itself, just logistics around it. That means their value-add is extremely tenuous, and has a limited moat.

[selimthegrim]

Well, I never thought that Toby Jones barbecue and foot massage would have a resurrection, but here we go.

[starspangled]

The fact remains that the data we have says the value of US manufacturing is about 50% of that of China. You have your own perceptions of value of course, but that's not how value is actually calculated. The same as people who perceive China's manufacturing to be worthless because they produce cheap flimsy junk is also not an indication of any reality other than their own.

[coliveira]

> then clearly that company created an enormous amount of value

No, it is more like these companies monopolized access to the high income market and exploited this inefficiency. It is similar to buying a stock for $10 then increasing the bid ask spread to sell it for $100.

[starspangled]

> No, it is more like these companies monopolized access to the high income market and exploited this inefficiency. It is similar to buying a stock for $10 then increasing the bid ask spread to sell it for $100.

Okay so we have this scenario you constructed where the Chinese company produced great value without engaging in any IP theft or unbalanced terms of trade or currency manipulation and the American company simply took that and gouged prices with anticompetitive practices. What exactly is your question? The hypothetical American company in your example did not create value, by definition. I don't see how that's particularly useful though.

[intended]

This applies to a very specific type of constrained market, and does not generalize in this manner, making your example trivial to argue against, and then confuse readers.

If access was monopolized, then no competition would exist. Competition very much exists, and has resulted in a massive amounts of growth and improvement globally.

[int_19h]

The main reason why the American company can do this is because we have borders that allow said company to move goods across them, but prevent the cheap Chinese labor from moving to US. If not for the latter, US would be mostly speaking Mandarin by now and things would be a lot cheaper (and salaries would be a lot lower).

[friendzis]

> > It gets massive amounts of products and services enabling the US residents live well beyond their means.

> What does this mean really? That is their means.

The argument presented here is that economic growth (more specifically trade volume increase) outside USofA forces USD acquisition transactions with USofA. This means that there is constant surplus of goods flowing into USofA without accompanying surplus of circulating money supply, leading to artificial deflation.

In other words, the cumulative productivity, measured in USD, of USofA is lower than cumulative outside-USofA-fair-market value of goods transacted in USofA. This effect increases gross value on supply side without balancing out gross value on demand side, allowing domestic players larger transaction volumes than their total productivity, with deficit covered by the central bank.

[michaelt]

> US manufacturing output is double that of China's on a per-capita basis.

If you're going around quoting those figures, you should be aware they're kinda sketchy.

Headline manufacturing output figures measure "real" output, rather than $ of output, as the latter would just be a graph of inflation and exchange rate. And when measuring "real" output, if a factory making 1TB SSDs switches to producing 2TB SSDs it has increased its output, despite the fact they're shipping the same number of boxes as they were yesterday.

Sure, the numbers say real output per worker has risen a lot since 1980. But most of the "rising efficiency" comes from the folks making 33MHz 1-core CPUs now making 5GHz 24-core CPUs. Cut out that sector and you'll discover why the US has an entire region known as the "rust belt".

[xk_id]

> What does this mean really? That is their means.

It means Americans are providing mainly a financial service, by managing the dollar. The value of their currency therefore doesn’t accrue from a real economy, which, by definition, only includes consumer goods and services.

[starspangled]

Even if we take what you wrote as fact, that does not answer how it is living beyond their means if their means includes "providing mainly a financial service, by managing the dollar".

[vanviegen]

If you're spending $1.9 trillion per year more than you're earning (projected for 2025), accumulating debt, I think it's fair to say you're living well beyond your means.

We're talking about $5600 per inhabitant per year.

[starspangled]

I didn't say Americans aren't living beyond their means. Just that on the face of it they aren't living beyond their means due to their currency's status if that status gives them some means to buy more. OP just didn't really provide a rationale as to why it's this currency issue in particular that you can point to to say Americans are living beyond their means.

Lots of countries have a lot of debt, many are in similar boats or worse as USA when you look at various metrics like debt per capita, per gdp, etc. Politicians and their "experts" and economists etc generally insist this is perfectly fine. I also get the feeling they're probably lying about that and many other things, though I don't know enough about the subject to actually know myself.

[__m]

it's called the “exorbitant privilege”

[starspangled]

I'm not asking what it's called, I'm asking why that's claimed to be out of their means when it quite clearly is within their means to have this exorbitant privilege, as evidenced by the fact that they have exorbitant privilege.

[dns_snek]

Because at some unspecified point in the future, the rest of world will stop playing the game where the house always wins.

[starspangled]

No, the meaning of the phrase "living beyond one's means" doesn't go to the unavoidable fact that circumstances change over time. I will one day become infirm and unable to earn money, that does not mean I'm currently living beyond my means.

US dollars might one day cease to be the global reserve currency in which case Americans will not see such benefits associated with that. This is a true statement. That doesn't mean they are currently living beyond their means either though.

[intended]

The rest of the world wants to be the house.

The rest of the world was and remains very happy to play this game, because it reduces the amount of trouble people have when exchanging currencies.

It gives advantages to America, sure. But America recognized that there were consequences.

Today, 1/3rd of the American electorate is insulated from reality, and its politics are free to downplay, or ignore consequences, if not just blame them on the opposition.

No one has an answer to a broken market of information. In the end, reality will have its due.

[alexey-salmin]

> What does this mean really? That is their means.

Kind of, yes. Also if you take away other's people assets by force you can say you live by your means because you produce violence.

That's a matter of terminology, the real thing to be considered is the sustainability of this system.

If this setup can be sustained perpetually then yes, it's sort of within your means. If gradually deplete some reserves (gold or trust or domestic stability due to rising inequality) then it can be argued that you live beyond your means.

[jampekka]

> just handwaving about how USD's status as a global currency somehow makes trade deficits inevitable despite simple facts available that US had a surplus trade balance 50 years ago, when the USD has been considered the global / reserve currency for over 60 years.

US has had two trade surplus years since the USD essentially replaced gold as the reserve asset: 1973 and 1975. The reserve currency status is the primary reason for the practically constant deficit. During the Bretton Woods era US ran consistent surplus.

https://www.stlouisfed.org/publications/regional-economist/t...

[formerly_proven]

> Seems like that's the popular assertion but I don't see much solid reasoning behind it in this thread (not picking on you specifically), just handwaving about how USD's status as a global currency somehow makes trade deficits inevitable despite simple facts available that US had a surplus trade balance 50 years ago, when the USD has been considered the global / reserve currency for over 60 years.

Prior to 1971 the Dollar was tied to Gold and exchange rates were fixed by agreement.

[nis251413]

> What does this mean really? That is their means.

The "means" is being able to print trillions of imaginary dollars with value that magically pops into existence, merely backed by the fact that other nations do not want USD to lose value because they invest in it.

US did not care about trade deficits because they were able to just print dollars without having dollar itself devalued, which is what happens if any other nation decides to print currency without having a way to back its value. Because the US status as global hegemony is getting challenged, these trade deficits may become an issue. But trade deficits were not an issue until now (and they still are not as long as they can keep printing dollars without hyperinflation happening).