The Value of the US Dollar

[Texan77]

What being missed that is different this time is USA debt and problem with USA treasuries. If there is a bond crisis, we will not need tariffs as USA consumers will not be able to afford foreign products to the same quantities as they buy them now. The Japanese and the Chinese have threatened to sell USA treasuries in response. The problem with this it does not fix their export problem. The same problem we have exist in most western countries and they too will likely have a bond crisis. The question is, is this going to be the great reset??? Or do we find a way to kick it down the road a few more years.

[andrewfi]

Selling treasures does not fix the problem of exporting to the U.S., of course. I doubt anybody with a mind to think could assume it would. What it does do is signal to the U.S. government that Japan and others take the tariff activity very seriously and have stopped seeing the U.S. as a reliable partner.

In practical terms, if one is not trading with the U.S in the same volume as before, then there is less need to hold dollar reserves in any form. So, getting out makes sense because the dollar's value will tend to fall. It's another instance where leaving the dinner party earlier rather than later is the best plan.

Remember that every dollar held outside the domestic economy is an exported dollar of domestic inflation. When dollars are repatriated, every dollar is a dollar of inflation returning to the U.S.

Trump has now set himself a trap. You say that a closed economy will not need tariffs because every USAian will be too poor to buy anything from the ROTW. That might be true, but your President has promised to use tariffs to replace federal income taxes in all or in part. He needs tariffs to carry out his stated policy. Of course, the value of tariffs paid by U.S consumers will not cover more than a small part of federal income taxes and the less that U.S. consumers pay in tariffs, the less that can be reduced from income taxes.

[AvHdB]

Perhaps we are seeing the same thing from a different perspective, the returning dollars (IF THEY RETURN) are a reduction in Americans GDP. It can also be my terminology is incorrect. But certainly team Trump is playing with a two edged sword.

In the end though most things like this balance out over time.

[Texan77]

In practical terms, if one is not trading with the U.S in the same volume as before, then there is less need to hold dollar reserves in any form. So, getting out makes sense because the dollar's value will tend to fall. It's another instance where leaving the dinner party earlier rather than later is the best plan.

Remember that every dollar held outside the domestic economy is an exported dollar of domestic inflation. When dollars are repatriated, every dollar is a dollar of inflation returning to the U.S.

In order to repatriate the dollar, they have to buy something. That would give us a positive balance of trade. They cannot just give them back and flood the market with dollars. I guess if they want to they could just drop them out of a helicopter, that will work. We have to have a positive balance of trade for the dollars to get returned. That is the idea. Yes, it does not make sense for everyone to trade in dollars if we are not the country that is buying everyone stuff. Actually, Trump wants the value of the dollar to fall. This is a form of a tariff as it makes other country's good more expensive in the USA and reduces the need for tariffs.

There is a very lot of Chinese assets in the USA. If they are sold, then they end up taking dollars out of the country.

Sadly, I do not feel this is going to end well, but that is the logic.

[Jonas!]

 Actually, Trump wants the value of the dollar to fall. This is a form of a tariff as it makes other country's good more expensive in the USA and reduces the need for tariffs.

 

I don't think I believe Trump on wanting the dollar to fall in value.  That would incentivize foreign investors to dump our treasuries even faster if their real value is going to go down the drain.   He is probably saying something opposite of what he really wants...but the smokescreen may not be thick enough.

In order to repatriate the dollar, they have to buy something. 

Why do you think that?  Sometimes people exchange currencies.  If we do wind up with a bunch of nations/people wanting to get rid of their dollars that would mean more dollars competing for less product which logically would cause inflation. 

[Texan77]

 Actually, Trump wants the value of the dollar to fall. This is a form of a tariff as it makes other country's good more expensive in the USA and reduces the need for tariffs.

 

I don't think I believe Trump on wanting the dollar to fall in value.  That would incentivize foreign investors to dump our treasuries even faster if their real value is going to go down the drain.   He is probably saying something opposite of what he really wants...but the smokescreen may not be thick enough.

In order to repatriate the dollar, they have to buy something. 

Why do you think that?  Sometimes people exchange currencies.  If we do wind up with a bunch of nations/people wanting to get rid of their dollars that would mean more dollars competing for less product which logically would cause inflation.

This problem is cause in part of the over value of the dollar. Ever other currency goes down when the dollar goes down. All the other large western countries take on debt when we take on more debt. Then the Chinese take on far more debt than we do. All the major countries will have a bond problem when we have one. It is all the great reset. If not now, then soon.

The trouble when they get rid of dollars, they want what?

[Jonas!]

 Actually, Trump wants the value of the dollar to fall. This is a form of a tariff as it makes other country's good more expensive in the USA and reduces the need for tariffs.

 

I don't think I believe Trump on wanting the dollar to fall in value.  That would incentivize foreign investors to dump our treasuries even faster if their real value is going to go down the drain.   He is probably saying something opposite of what he really wants...but the smokescreen may not be thick enough.

In order to repatriate the dollar, they have to buy something. 

Why do you think that?  Sometimes people exchange currencies.  If we do wind up with a bunch of nations/people wanting to get rid of their dollars that would mean more dollars competing for less product which logically would cause inflation.

This problem is cause in part of the over value of the dollar. Ever other currency goes down when the dollar goes down. All the other large western countries take on debt when we take on more debt. Then the Chinese take on far more debt than we do. All the major countries will have a bond problem when we have one. It is all the great reset. If not now, then soon.

The trouble when they get rid of dollars, they want what?

To be frank, i can't make sense of anything you wrote here. I'm not sure if it is the way you wrote it or what you were trying to say. 
I do note that you repeated that China has more debt than the US which is factually very incorrect.  We (The US) have the highest debt by far in terms of amount, not to mention that China continues to own 750 billion of our debt.  In terms of debt to GDP the US sits at around 130% while China is at around 76%.  We have much more debt than china. It makes sense it would be that way, I mean China has trillion dollar surpluses they invest, and we have 1 or 2 trillion-dollar deficits yearly.   

You are talking about a "Great Reset".  What do you mean by that? 

Jonas!

[andrewfi]

I don't think I believe Trump on wanting the dollar to fall in value.  That would incentivize foreign investors to dump our treasuries even faster if their real value is going to go down the drain.   He is probably saying something opposite of what he really wants...but the smokescreen may not be thick enough.

There are at least two goals that conflict with each other. Based on what we have been told recently, let us look at the two main goals.

1) The government wants to enforce the dollar's use as a global reserve currency, as it has been and still is (albeit reducing in volume).
2) The government knows that debt needs to be reduced.

The first means that the value of a dollar needs to be maintained to enable it to be attractive to economies around the world to hold it - there's only so much enforcing can be done by military means or sanctions. Ultimately, the currency needs to maintain genuine utility.

The second requires that at least one of the following be true:
a) Deficits need to be reduced or turned into surpluses (The U.S. maintains a healthy BoP in terms of services, but goods, that's another story).
b) The dollar's value needs to fall so that debt incurred with 'good' dollars can be repaid with 'bad' dollars, which implies inflating the dollar's value.

Those two options conflict. Sections of the administration support each option, and Trump, as a mouthpiece, blusters about both.

[AvHdB]

. . .
2) The government knows that debt needs to be reduced.

The first means that the value of a dollar needs to be maintained to enable it to be attractive to economies around the world to hold it - there's only so much enforcing can be done by military means or sanctions. Ultimately, the currency needs to maintain genuine utility. . . .

Trump inherited a mega deficit, and while one can blame Biden, Corona or prior administrations, the reality is it exists.

For the US Dollar to be viable the debt must be seriously reduced. At first I thought okay DOGE was a good way to do this and in reality reductions, IF CONFIRMED BY CONGRESS, will be real. The ugly fact is the military budget has increased or gone UP.

I am reluctantly coming to the opinion that while far better than a sloshed word salad, Trump is just another politician.

[Faux Pas]

I am reluctantly coming to the opinion that while far better than a sloshed word salad, Trump is just another politician.[/size][/font]

It is certainly possible and the end result may be the same as any other politician. Trumps bag of tricks is out of the norm from any previous politicians in my lifetime. His business approach in the White house is what many (including me) have hoped for years to happen. Increase revenue and cutting expenses is business 101. This has been his approach day one on his 2nd term. As with any business when the nut cutting has to be done there's going to be pain. Implementing the tariffs and cutting the fat and freebies out of the budget (IMO the military should be included in the cuts) I sense the bleeding is about to occur.

I suspect the military budget increasing indicates war