For example, an appendicitis creates an economic activity of at least $7000 dollars in US and much much less elsewhere even if the work done on the human body is the same.
Similar situation for the software, for some reason writing a for loop in SV is at least 3 times more valuable than writing it in London.
So I would argue that the forumula of country's currency = How much stuff it produces / How much money it prints doesn't necessarily be working the same everywhere.
Why? IMHO it's for 2 reasons: barriers on people moving and the US being de facto reserve currency. There are too many artificial barriers on the free market around the globe, the capital flows much more freely than the labor around the globe and this creates artificial valuations of properties and economic activities.
I mean, yes, writing the same line of code at Google, Uber or OpenAI is more valuable than doing so at a British neobank.
You're correct in productivity being a nefarious beast to measure. But the examples given--extending the life of a high-GDP-per-capita person or doing identical work in dramatically different contexts--aren't making your point.
Sure. Because they’re doing different work, in proximity to different people and different resources, within different economic contexts. A developer in Silicon Valley is fundamentally more productive than one in London, in part solely by virtue of being in Silicon Valley. (Not true at the individual level, of course. But statistically, of course.)
The value of a currency is how much people are willing to pay to have the other currency. For example, if Japan is importing many goods and services, they need to pay them in USD and so they have to buy USD on the market.
> Both, Japan and the US are increasing their monetary base by what, 10% per year?
The monetary base is not strictly connected to the money in the economy. Most of the money is created by commercial banks when they hand out loans. So the entire money in the economy can shrink (people paying back more loans than they), while at the same time the central bank increases currency.
For reference: https://www.bundesbank.de/resource/blob/654284/df66c4444d065...
if Japan is importing many goods and services,
they need to pay them in USD
Most of the money is created by commercial banks
The first bank credits the account the different bank has with it in the amount of a hundred dollars. This involves updating a spreadsheet.
"Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money" [1].
[1] https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
Yes. This is why not every pair of banks supports direct transfers.
> No established bank would make such an agreement with a bank that has no assets
Yes, it's a hypothetical you created.
Why does Japan need to pay them in USD?Because, as ArtTimeInvestor wrote,
> but the US still seems on top of its game.
Whatever the US sells, whether it be purely business/technology or even commingled with military resources, a lot of people in the world are interested in buying it.
Price = demand/supply.
But as I wrote. This is a controversial subject. And there are economists out there who will tell you that the special status of the US dollar makes no difference at all and this de Gaulle guy just was upset about losing some colonies.
Why? It would be quite odd. Certainly Japan has generated far more currency and debt over the last 35 years while inflation stayed low (and the relative value of Yen stayed high). I don't see any explanation for that here any more than the yearly gyrations of other currencies crypto or fiat.
#1 - Being the largest consumer economy. The economy of many countries depends on exporting stuff to the US. Now imagine the US prints a lot of money so its currency becomes weaker, relative to yours. This is a real problem because it means Americans aren't able to afford as much of your country's stuff. And if there are other countries whose currency has not strengthened as much (relative to the dollar), then their stuff becomes even more desirable, relative to yours. But there's actually a simple and happy solution - print money. Devaluing your own currency not only fixes this problem by 'importing' US inflation, but it also gives you lots of money to spend as well. The only problem is ever-mounting debt, but hey - if modern economics is about anything, it's about kicking the can to the next generation!
#2 - Being the global reserve currency. Until extremely recently, if China and Russia were going to go trade some goods between each other, they'd have settled the balance in USD! And nearly all oil was sold in USD. As the USD weakens, this obligates these countries to start increasing their reserves of it to continue ensuring the same level of real liquidity. But this also has the side effect of taking more USD out of general circulation which drives the price of the USD up, which also simultaneously makes your own reserves worth even more!
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It's also for these sort of reasons that, for instance, China is accused of being a currency manipulator for weakening their currency. We kind of intuit "strong = good" but in international economics, that's definitely not the case. It depends on the exact composition of your economy, and your role in global trade. China thrives because of a weak currency. But for Japan this is not the case. They are, amongst other things, the world's largest single importer of both natural gas and food. So their currency weakening is likely to be very damaging for a country that's already been suffering economically for decades, and is only getting worse due to an increasing demographic collapse.
Depends on if it offsets their exports, which has increased last few years due to weak yen despite switching to "premium" energy pricing. Might also make a lot of their ASEAN/foreign infra tenders more competitive. I think there's gains for JP with weak yen, but can't happen faster than businesses can adjust.
This linear model isn't predictive of purchasing power. (The missing variable is velocity, which is itself a multi-dimensional beast.)
Your container is in danger from Houthis? SBF is not coming for help, neither the Chinese. The US navy comes.
You wanna operate you business in a failed state? Guess what, the CIA is there for you.
So yes, the value of US dollar is infinite.
With the benefit of hindsight it was a damned clear success. At the time it looked limited. But strikes have subsided [1]. And the Houthis’ situational awareness is so poor they’re potting the Russians [2].
[1] https://en.m.wikipedia.org/wiki/Red_Sea_crisis
[2] https://maritime-executive.com/article/houthi-missile-damage...
The article says they struck one, the one carrying Russian oil, and targeted (but did not strike) two others. No strikes the U.S. would care about.
It looks like the U.S. is pursuing a counterbattery strategy in Yemen. Keep assets remote. Watch for enemy fire. Use their revealing their locations by firing to counterstrike. It's a safe, effective but slow strategy.
I was premature to call it a success--the Red Sea hasn't re-opened. But the risk to global trade has been sidelined to the extent that the entire debacle is a negigible sideshow.
You can check the status of the blockade here. [1] Scroll down to the bottom, and they have a regularly updated graph of traffic through the Suez. US airstrikes started January 12th.
[1] - https://portwatch.imf.org/pages/c57c79bf612b4372b08a9c6ea9c9... (be sure to change the date range. it defaults to 3 months which misses the impact of the blockade, given it began more than 3 months ago)
Blockade means blockade. This is a traffic rerouting. It's a bit nutty to say the U.S. vs Houthis is in any way a policy failure for the U.S. The threat was reduced and then it ceased to be pressing.
Contrast that with the oil markets before the U.S. intervened.
> the United States special envoy for Yemen, stated that he hoped to achieve a diplomatic solution with the Yemeni Houthis
Sure, this was never contested. Again, they're an irrelevant fighting group. What's desired is for the missiles to stop so they can go back to threatening the Saudis and we can reposition naval assets from playground patrol duty.
I am seeing statistically fewer strikes on friendly ships after the intervention versus before. And less oil-price volatility. The goal wasn’t to bail out the Suez, it was to calm markets—ships circumventing the Red Sea does that as cleanly for American purposes as the Houthis packing up.
Obviously there's been less strikes, because the blockade has been completely successful, meaning Israel linked ships aren't even trying. What was probably tens of billions dollars wasted trying to stop it has been a complete failure and waste of money, like usual.
[1] - https://en.wikipedia.org/wiki/Operation_Prosperity_Guardian
Some won’t be happy with anything short of America removing the Houthis from power entirely, but fortunately there are adults in the room who know when to call a win.
You are literally just making up random things to try to convince yourself of what you want to believe, to the point I can't even tell if you're being serious.
[1] - https://www.drewry.co.uk/supply-chain-advisors/supply-chain-...
Labor too, TSMC had to bring welders from Taiwan for it's US fabs.
I think food and shelter are primal. Anything bad happens and software along with datacenters matter no more.
America is the world's largest agricultural exporter [1].
[1] https://www.investopedia.com/financial-edge/0712/top-agricul...
The US produces roughly 4 Billion bushels of soybeans a year. Bushel = 60 pound. About 6 bushels of soy (yielding 60ish pounds total protein) meet the protein requirements for an adult for a year. Provides additional total calories to boot.
Just corn and beans. The US will do just fine…as will the rest of the Americas, since Brazil is outproducing the US in soybeans and producing 5 Billion bushels of corn a year.
You personally can value the bakery next door higher than Microsoft, because "Hey, I can eat bread but I can't eat software". But the market will not agree with you.
Both, Japan and the US are increasing their monetary base by what, 10% per year?
Don't know about the productivity of Japan, but the US still seems on top of its game. Software and datacenters are the most important resource of the future. And so far the US is leading the way. Microsoft, Apple, Google, Amazon, Meta, Nvidia ... all in the US. The US is also the world's leading country when it comes to Bitcoin mining.