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@ Mike Dilger
2025-03-05 03:30:54
But I'm constructing a thought experiment only, not telling you that the thought experiment is the real world! In my thought experiment, the Mexicans get the money from Canada.
In the real world, much of the USD that America spent on Chinese goods was passed on to Saudi Arabia to buy oil. So the trade defecit with China is much higher than the actual USD holdings of China. The key insight is that money is not spent just once. It goes around in circles. But trade defecits are measured as only between two parties. And people keep thinking the US trade defecit with China has some scary meaning. But it is a terribly inaccurate way to measure anything, and it doesn't represent a debt that America owes to China, unless China can actually present those USD to American sellers of goods, which IMHO they can only present a fraction of.