The Euro vs Dollar Conspiracy Theory: part II - "The P

[Huck]

RE: The Euro vs Dollar Co

Toro, money for every country other than the USA is created by selling goods. They basically credit the USA with their very own money, buy buying US bonds (ionvesting in). But, this is totally independent from their reserves, although thay CAN use their USD dolalrs to pay for the bonds if they wish (hence, the more USD resreves they have, the better). ALso, every time you buy a made in china toy, or a made in japan TV, you are giving them USD which they add to their reserves.

If the world diversifies and starts using these dolalrs in the USA for goods, yes. it will dilute the dollars, lowering the value. This will scare investors, banks will raise interrest rates, there causeing inflation.


And for the banks loan: i NEVER said the banks buyed commodities; countries do.

 

[Huck]

Re: RE: The Euro vs Dollar Conspiracy Theory: part II - &qu

Oh, and we've already shown the US imports from OPEC account for 0.8% of GDP, and are thus a very small part of US capital flows.

It does not matter. What matters is that other countries buy oil. to do this, they need USDs. Hence the whole dynamic.

The only real impact of the US tjhemselves on the oil, is that if their dollar value fluctuates, so does the price of oil

 

[Huck]

Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Are we good?

 

[Huck]

RE: The Euro vs Dollar Co

Why do you think its so easy for me to deflect all you attacks? this is becasue i am right.

And, most of this is basic economics, im supprised you dont know this toro. I suggest you keep reading, as if this was a test, you would not pass..

 

[Toro]

Re: RE: The Euro vs Dollar Co

Toro, money for every country other than the USA is created by selling goods.

No, no, no, no, no, no!

This is so completely wrong!

Nations around the world have experienced hyperinflation by turning on the printing presses. Countries create money by printing it. Any country can do that. That is why you had inflation rates of 1,000%+ percent in Latin America in the 1980s.

Wealth is created by selling good. Wealth and money are different things.

They basically credit the USA with their very own money, buy buying US bonds (ionvesting in).

Aha! So Huck is right when he says they buy US BONDS. We'll get back to this.

But, this is totally independent from their reserves, although thay CAN use their USD dolalrs to pay for the bonds if they wish (hence, the more USD resreves they have, the better).

No, no, no, no, no, no! Central banks hold bonds. They hold very little actual currency relative to their reserves because currency is of little use as a transactional item in their domestic economy and because holding the actual dollar bills yields nothing. Bonds, however, yield something, so central banks hold these instead. Go look at the financial statements of the Bank of Canada, Huck. The bank owns bonds and derives interest income from those bonds. Its right there on its income statement.

ALso, every time you buy a made in china toy, or a made in japan TV, you are giving them USD which they add to their reserves.

Huck gets the flows right, but not the mechanics. Central banks are not buying goods and services. Individuals and organizations are. When they do so, they take their US dollars and deposit them in the bank. The bank then exchanges the foreign currency with the central bank for domestic currency, and the central bank then buys US dollar bonds. All of this, BTW, in a modern economy, takes place with little or no actual currency changing hands. Its done electronically. For example much, if not most of the US bonds actually owned by China are held in an electronic account at the Federal Reserve Bank of New York.

So Huck, what happens to the money supply when a central bank buys and sells bonds?

 

[I think not]

Re: RE: The Euro vs Dollar Co

Why do you think its so easy for me to deflect all you attacks? this is becasue i am right.

And, most of this is basic economics, im supprised you dont know this toro. I suggest you keep reading, as if this was a test, you would not pass..

Oh ya, printing money out of thin air would make you pass with flying colors. :roll:

 

[Huck]

Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Toro, again you are shaking my credibility on nothing

Lets see: i know countries print their own money. And they are subject to the simple law of dillution creates inflation. But, to value their money, they must get USD and export to the USA. Plus, no serious economy will run without oilk so they need more USD. so, it comes back to: The money of a country is a lot dependent to the export relation with the USA (or USD incomes).

As for the bonds, no matter how interrsting, this has no relation with the model of the hegemony. It is not part of the model and is another topic (although also very interresting)

 

[Huck]

Re: RE: The Euro vs Dollar Co

Why do you think its so easy for me to deflect all you attacks? this is becasue i am right.

And, most of this is basic economics, im supprised you dont know this toro. I suggest you keep reading, as if this was a test, you would not pass..

Oh ya, printing money out of thin air would make you pass with flying colors. :roll:

This is what is happening ITN. A fiat currency is an abstract concept. You can 'invent' as much as you want, as long as the economic balance is maintained.

 

[Huck]

Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Up to now, the model still stands unshaken guys. shall we keep going?

 

[Huck]

Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Toro, about the bonds: what is the relevancy of this?


the mechanics remain the same: the US bonds are priced in USD. to invest in the USA, i must buy bonds, thats it. The complex internal mechanics are meaningless.

and agin, the investment in the USA concept is not related to our model (except in the concept that if investors stop investing, inflation raises, but we dont need to know bonds mechanics for this)

 

[Huck]

Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Lol, i feel like a toreador playing with the toro.. hehe

Olé! 8)

 

[Toro]

Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Toro, again you are shaking my credibility on nothing

It doesn't take much. :wink:

Lets see: i know countries print their own money. And they are subject to the simple law of dillution creates inflation. But, to value their money, they must get USD and export to the USA.

BINGO!

And vice-versa. So when the US prints money, it also debases its own currency. That's one of the reasons why the US dollar has lost value the past five years.

So we know that a country creates inflation when they print too much money.

Plus, no serious economy will run without oilk so they need more USD. so, it comes back to: The money of a country is a lot dependent to the export relation with the USA (or USD incomes).

But, as we've shown, US imports from OPEC account for 0.8% of GDP, and 11% of the trade deficit. So in terms of capital flows, oil imports are quite minor.

As for the bonds, no matter how interrsting, this has no relation with the model of the hegemony. It is not part of the model and is another topic (although also very interresting)

Nope, there's a reason why I'm taking you down this path. You asked the question about what would happen if countries "returned" dollars in exchange for other currencies in their reserve base. Would that be inflationary? You tell me, Huck. Is it?

So, we know that central banks own bonds, not actual dollar bills, in their reserve base. We know that it is inflationary to print money. So, tell me Huck, what happens to the money supply when a central bank sells bonds? This is pretty simple Macro 101 stuff.

 

[Toro]

Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Here's Huck's position in this debate.

 

[Huck]

Re: The Euro vs Dollar Conspiracy Theory: part II - "T

toro:

The inflation for the US money printing happens only if the money goes back into circulation. If it is stocked up by a country in it's reserve, devaluation does not occur. As long as it remains in the countrie's safe, the devaluation will not happen.


About buying oil, it is for other countris than the US. to buy oil, the USA do not ned to import to themselves to get USDs, they have em. other countries have to get USDs by selling to the US.

If a country usues it's USDs from its reserve back on the market, yes it will dilute the USDs. To buy bonds, they must pay in USD toro. banks hold the bonds, but they dont get paid in maple syrup, they get paid with USDs (for US bonds)

 

[Huck]

Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Here's Huck's position in this debate.

hehe, funny, especially that you have yet to find me wrong at lesat once

 

[Huck]

Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Toro, the money used to buy bonds return to the USA. But, this does not necessarely cause inflation, as this is considered new money for the economy and the investor want that. So, they keep investing, preventing interrest rates to go up. This is what is happening with china buying US bonds. They buy bonds with their USD which dilutes the USD in circulation, but this stimulates your economy and is a good thing for investors.

 

[I think not]

Re: The Euro vs Dollar Conspiracy Theory: part II - "T

I have a dumb question Huck, if the US constantly prints and prints and prints money to quell the thirst for other countries to obtain US dollars to buy oil, why doesn't it continue to print more dollars to close the federal deficit, or even better, pay off the debt?

 

[Huck]

Re: The Euro vs Dollar Conspiracy Theory: part II - "T

I have a dumb question Huck, if the US constantly prints and prints and prints money to quell the thirst for other countries to obtain US dollars to buy oil, why doesn't it continue to print more dollars to close the federal deficit, or even better, pay off the debt?

Because THIS would dilute the dollar causing inflation. This is what you need to understand: the new money does not remain in circulation, is is stocked by other countries, in exchange for goods. But, if these countries return the USD to the circulation, yes it will devalue.

Money reserved by a country is basically money of this country convertred in USDs (i.e. canadian dolalrs, in the form of USDs)

 

[I think not]

Re: The Euro vs Dollar Conspiracy Theory: part II - "T

I have a dumb question Huck, if the US constantly prints and prints and prints money to quell the thirst for other countries to obtain US dollars to buy oil, why doesn't it continue to print more dollars to close the federal deficit, or even better, pay off the debt?

Because THIS would dilute the dollar causing inflation. This is what you need to understand: the new money does not remain in circulation, is is stocked by other countries, in exchange for goods. But, if these countries return the USD to the circulation, yes it will devalue.

How is it stocked in other countries if they need dollars to buy oil?

 

[Huck]

Re: The Euro vs Dollar Conspiracy Theory: part II - "T

I have a dumb question Huck, if the US constantly prints and prints and prints money to quell the thirst for other countries to obtain US dollars to buy oil, why doesn't it continue to print more dollars to close the federal deficit, or even better, pay off the debt?

Because THIS would dilute the dollar causing inflation. This is what you need to understand: the new money does not remain in circulation, is is stocked by other countries, in exchange for goods. But, if these countries return the USD to the circulation, yes it will devalue.

How is it stocked in other countries if they need dollars to buy oil?

Here is what happens:

Canada sells steel to the USA to get USDs and keeps it (they could get paid in CAD too, but USD is betteer, because we can reuse it, so it is CADs in the form of USDs). When they buy oil, they use these USD and give it to iraq. Then iraq converts the USD back to their money. The concversion rate from the USD with their money affects the profit they make. this is why when the USD value goes down, oil price go up. they adjust prices depoending on the conversio rate with their currency,