The problems of trade imbalances and relative pricing of products from country to country are caused by one simple step taken by governments - fiat currency.
When the world operated on a gold standard a trade imbalance was a temporary occurrence that would soon be rectified as gold left the borrower country, it's currency was devalued and it's purchasing power declined. The relative price for good produced would go down and exports would pick up.
Today we are stuck directly in Tiffin's Dilemma. The dollar holds reserve currency status and is 100% fiat. The world demands dollars to trade so the relative value of the dollar is very high. That makes US goods very expensive to other countries. Demand for them slows. It also means that foreign goods are relatively cheap for US consumers. Our standard of living is enhanced as we can buy much more with dollars.
However, the bad side effects are that we stop producing goods in this countries since they are too expensive for foreign and domestic consumers and we pile up debt.
Tiffin explains all of this and the future outcome. The dollar will lose reserve status and will find it's true value relative to other currencies. Inflation in the US will spike, and standards of living will crash. The only question is when.
On tariffs, why not? We can simply print more money from nothing and still buy exactly as much as we did before.
When the world operated on a gold standard a trade imbalance was a temporary occurrence that would soon be rectified as gold left the borrower country, it's currency was devalued and it's purchasing power declined. The relative price for good produced would go down and exports would pick up.
Today we are stuck directly in Tiffin's Dilemma. The dollar holds reserve currency status and is 100% fiat. The world demands dollars to trade so the relative value of the dollar is very high. That makes US goods very expensive to other countries. Demand for them slows. It also means that foreign goods are relatively cheap for US consumers. Our standard of living is enhanced as we can buy much more with dollars.
However, the bad side effects are that we stop producing goods in this countries since they are too expensive for foreign and domestic consumers and we pile up debt.
Tiffin explains all of this and the future outcome. The dollar will lose reserve status and will find it's true value relative to other currencies. Inflation in the US will spike, and standards of living will crash. The only question is when.
On tariffs, why not? We can simply print more money from nothing and still buy exactly as much as we did before.