[ExI] undercover at Walmart

[Rafal Smigrodzki]

On Wed, Feb 25, 2009 at 1:17 AM, Stathis Papaioannou <stathisp at gmail.com> wrote:
> 2009/2/25 Rafal Smigrodzki <rafal.smigrodzki at gmail.com>:
>
>>> 2. Sustained and increasing trade deficits will ultimately be resolved
>>> by transfer of real capital from the deficit state to the surplus
>>> state, once the latter gets nervous and calls in the IOU's. This will
>>> also be associated with a crash in the exchange rate as no-one will
>>> want to hold any more of the deficit state's currency, or as the
>>> deficit state attempts to inflate away the debt by printing money.
>>
>> ### Let the chairman of economics dept at GMU (a hotbed of
>> anarchocapitalism) answer this objection:
>>
>> http://www.cafehayek.com/hayek/2009/02/everyone-has-a-favorite-horse-to-beat-mine-is-not-dead.html
>
> That article simply repeats what I said. The trade deficit results in
> transfer of capital from the deficit nation to the surplus nation, and
> whether you think this is OK or not is a matter of opinion.

### Not capital. Fiat money.

--------------------------------------------
 Perhaps
> "debt" is not the term we commonly use, but cash is debt in the final
> analysis: if I buy an apple from you and give you an IOU for one
> apples' worth of goods, in the end I have to cough up the goods if you
> demand it of me.

### Jeesus H Christ. An American dollar is *not* an IOU. It is not a
promissory note, it is not backed by any physical object. The holder
of an American dollar does not have a legal claim to anything except
the dollar itself. It is only legal tender which must be accepted by
vendors inside the US. Accumulation of legal tender outside of this
country does not represent accumulation of debt.

---------------------------------

 On the other hand if you give me an apple and I give
> you two oranges, assuming apples and oranges are of equivalent value,
> then I get an IOU from you for an orange's worth of goods. So there is
> an implicit net debt if there is a trade imbalance. It is further
> complicated in international trade in that the exchange rate between
> IOU's and goods and one state's IOU's and another state's IOU's is
> determined by market mechanisms, depending on such factors as
> perceived risk of default and the quantity of circulating IOU's.

### I despair.

Paper cash is not debt of any kind.

Rafal