The Impact of Savings on Trade

[Hawkize!!]

Being the Reserve currency of the world is not something the US had to apply for. It just happened as the UK went bankrupt after WW2.

The rest of the world's business model is to sell stuff to the US. If the US starts trying to dramatically weaken the $, the rest of the world would do the same thing with their currencies and their would be hyperinflation.

Two years after the Plaza Accord was the Louvre Accord which ended the weakening of the $.

It is not easy and nobody wants to hear it but the way to lose weight is to increase exercise and/or cut caloric intake. That is the same with a countries currency. The hard work is to raise taxes and/or cut spending like Bill Clinton did. The challenge is to cut price levels and interest rates without subsidizing the rich.

It actually is something the US applied for as part of Bretton Woods, since we held all Europe's gold. When we realized that wasn't working (we were printing more dollars than we had gold to compensate), we convinced the Saudis to accept USD for oil. It's absolutely something we actively sought.

 

[Hawkize!!]

Thank you for your reply. Respectfully, I disagree with MMT.

MMT would turn a country into the Weimar Republic. People would need wheel barrows of money to buy a loaf of bread.

I repeat ... I don't believe MMT is prescriptive, it is best seen as a description of the present system. Whether we like it or not, MMT is already happening.

MMT explains one possible scenario where we can employ 'fiat' currencies as our medium of exchange while still maintaining market equilibrium. What I haven't seen anyone discuss is (in the context of the three 'characteristics of money' - accounting unit, medium of exchange and store of value) that it would not work as a long term store of value. Ironically, we could well see gold back at the center of global finance in an MMT world.

 

[West Dundee Hawkeye]

It actually is something the US applied for as part of Bretton Woods, since we held all Europe's gold. When we realized that wasn't working (we were printing more dollars than we had gold to compensate), we convinced the Saudis to accept USD for oil. It's absolutely something we actively sought.

Good point.