Reply To: Trade


Ask your friend what Americans would do with Chinese Renminbi they acquired by selling goods to the Chinese? They would spend them in China or trade them for dollars to someone who then spent them in China.

Even if the Chinese kept dollars, let’s say to make expenditures in the underground economy, it would have no effect on production in America. It would merely make the purchasing power of the dollar higher than otherwise in America. That is, the prices of everything would be lower than otherwise in America. Most people don’t realize that nearly 2/3 of all dollar currency is held overseas. And foreign holding of dollars increased dramatically in the prosperous 1990s.