Cpt. Charisma on Nostr: Your thought experiment leaves out the part of the transaction where the actual ...

Your thought experiment leaves out the part of the transaction where the actual deficit is created, then says it doesn't matter because you can't see it anymore. You then go on to make an argument based on that fact. Do you not see why that is a problem?

The USD is a little weird, since it is the world reserve currency. That means that yes, China can use dollars received to buy goods from other countries. That doesn't work the other way around, though. We can't send Chinese Yuan to Canada in exchange for wood. Not that it's impossible - they just don't want it. But the real problem comes when the Chinese have enough dollars to pay for everything they buy from other countries. They end up with an ever-increasing pile of dollars for which they have no use. This is the situation we are in now. A large part of the deficit has gone to treasury bonds, meaning we are literally paying interest on the deficit. The money is also used for things like the Belt and Road initiative and building a navy, that give China a strategic advantage. If China wanted to, they could just sell it all and crash the dollar. Are you starting to see why it matters yet?