Yea if they buy Chinese goods instead there is no significant strain on US resources at all. Chinese labor and resources will be used and Americans will be unaffected.

Real repearations are paid in real goods like how Weimar Germany was forced to pay up in gold which it didn’t have, forcing the Government to bid up prices by dumping local currency to markets which no one wanted resulting in hyperinflation.

The US is not at all in such a position.

Ah, piles, very briish.

I don’t understand how any American family would be helped if Iran didn’t get $300b.

Will Congress appropriate $300b as stimmy checks if Iran didn’t get $300b in private funds?

Congress can do so anyway regardless of whether Iran gets money or not, it is the very act of appropriation that creates Government money.

Also, export lovers should love Iran getting dollars to buy American goods. It’s “good for jobs”.

he only way they will be able to reverse that is through crushing austerity against the working class.

will not work. the only way to re-industrialize is using state capacity. that isn’t possible given ‘sound’ finance so all they can do is shit on China.

Countries that are sanctioned by the U.S. don’t have much to lose fighting the U.S. It’s why most global south leaders (socdem, right, liberal) don’t want to upset the U.S. too much. Ofc, the right wing regimes do outright glaze unlike the socdem ones which at least posture against U.S. actions.

Iran had nothing much to lose by attacking the U.S, Israel and the Gulf. If its forex reserves are unblocked, it’ll have more to worry about wrt upsetting the U.S. I hope they know better to not throw Lebanon under the bus for a bit of one-off foreign exchange.

It’s very unfortunate that some leftists are comparing Elon Musk’s trillion dollar “net worth” to GDP of entire countries. The comparison is very sloppy:

1. Spacex free float ie shares that are being actively traded and not hoarded by people like Musk is mere 5%, and the supposed trillion dollar net worth is inferred from this number.

2. GDP is a flow measure, its measure of mostly real things (services makes it complicated) a country produces in a year. Net Worth is a stock measure and for individuals, it includes “market value” of financial claims.

3. A better comparison would be capital stock of a country. But again, Elon Musk net worth is mostly fictitious capital.

Eg. Taiwan/ROC’s capital stock is roughly $7 trillion. This is the value of all monetized assets of a country. It includes all the chip fabs, all the real stuff a country has.

Much of a country isn’t monetized, how do you put a $ value on a mountain or a forest? It’s not traded on the market at all.

Elon Musk net worth far exceeds the book value of assets held by his companies plus any possible cash flows for the foreseeable future.

4. My point is not to say Elon Musk being a trillionaire is good, it’s not. He shouldn’t exist. But comparing whole countries to someone who has lots of illiquid financial claims is ridiculous.

5. Elon Musk basically issued magic tokens he himself created, with no future obligations like with bonds, got people to buy only a small supply of it (5%) and now claims to be a trillionaire. That’s close to what Sam Bankman Fried did with the FTT token.

Still don’t see the point of gold here other than may be sanctions evasion. The exporting nations have to accumulate Dollars first to buy gold.

And central banks buy gold off budget unlike most spending which has to be debated and appropriated by the legislature.

Central banks hoard it and pump up the price. If a central bank bought up real estate and didn’t even rent it out, it’ll raise questions from the public on why cb is hoarding homes. Yet no one cares when it’s gold. People even call gold hoarding to be prudent.

Heck, even copper buying by a central bank using its infinite local currency capacity or using limited foreign currency reserves would be scrutinised heavily. Yet gold is fine. Palladium has similar properties to gold, why not hoard palladium?

China will accept palladium as collateral and give you Yuan for it. You ultimately pay in Yuan or similar currencies if you are a sanctioned country.

And gold itself is marked in $ terms in the books so the more gold CBs lock up the higher the % due to valuation effect even though nothing was created.

Yea it’s very clear Israel isn’t reliant on US public funds directly. It has a large export surplus with the US, and embedding themselves more directly will raise dependence.

In fact the aid is probably hurting their export competitiveness. This way they can get their currency weaker and make others dependent on them.

Most of the dollars Israel receives is private sector financial wealth.

For all the handwringing from the West abt Chinese “overcapacity”, it is Israel that’s pursuing a neo-mercantilist policy.

they’re enshittifying index funds now 😭

China also has storage, they’ll also try keep the global economy holding as long as they can.

https://www.vortexa.com/insights/chinese-stock-draws-cap-spot-crude-rally

Retvrn to monke

If fuel is supplied through state enterprises, the state can essentially set prices and recapitalize from budget as needed.

The supply shock then manifests as the currency weakening and other imports becoming pricier. This works as long as the country has sufficient foreign currency sources (exports, capital flows, remittances).

Foreign currency reserves can help outbid other countries too for existing oil without affecting exchange rate.

Unfortunately, even in countries where oil corps are owned by the state (e.g. India), the state is unwilling to allow these enterprises to run losses in local currency (“sound” finance). Good to see Malaysia is holding the line for now.

The state can do this even without nationalizing but theres greater risk of fraud, arbitrage if private sector is involved.

Though at the aggregate subsidies doesnt create more oil, countries outbid one another, if all countries do this, oil prices get pushed up in Dollar terms too.

I’ll say it’s a good thing the US isnt doing this since its one of the largest consumers and US in particular can outbid countries without worrying about exchange rates, large countries should let fuel prices go up slowly and compress demand instead of keeping it fixed.

Yep. I’ve found MMT to be most realistic descriptor of money, it says that logically the state must spend or the central bank must lend before you are able to pay taxes with state money instead of money dropping from a helicopter.

You can read after it’s fine. It’s only tangnetially related

The Elgar Companion to Modern Money Theory

https://annas-archive.pk/md5/ff80a02620353f7ff665bdc2298ed2e7

Yep it creates a lot of bad incentives. For example, corps and individuals borrow in Euros or Dollars at 5-10% or whatever hoping the Central Bank will pick up the rest by maintaining crawling peg to help pay back the debt.

When it turns out the central bank can’t and the exchange rate crashes, the debts become unservicable ie currency mismatch.

So never raise rates to higher double digits especially when you have loose capital controls and fixed exchange rates.

And the typical solution of “just lower rates” becomes more complicated too since private sector is still stuck with massive foreign currency debt even if Turkish central bank lower rates. And because a lot of Lira was created due to high rates which now flood the foreign exchange market.

In case of Turkey, the >100% then 70-80% rates of the 2000s destroyed Lira credit market that makes it very difficult to switch back to low rates (that’s why Erdogans low rate experiment failed). In an economy with low stock of foreign currency debt, floating exchange rates, low interest rates wouldn’t cause runaway depreciation like what happened in Turkey.

India is one of the few developing countries which has a low interest rate (5.25%), floating currency. And now they are planning some stupid nonsense like Dollar indexed Rupee bonds to curb depreciation (not even that high) which is happening due to a supply shock it has little control over.

https://z-lib.gd/book/WAqqEkJ0AE

Chapter 21,22,23

Yes Turkish Lira deposits get you ‘free’ (in Lira terms) 37%, also the rate Government has to pay on its bonds (which adds more free money to private sector rentiers). And yep it destroys local credit and promotes foreign currency borrowing. 1 year depreciation is 16% or so but Turkish Lira exchange rate isn’t market determined, central bank maintains it with crawling peg (so it can only depreciate a few % every day before central bank steps in and buys up lira using $).

Turkish Lira is absolutely cooked. They are drawing upon all their $ reserves to keep the Lira crawling peg stable. They’ll be forced to accelerate the crawl if they don’t want to go into foreign debt.

Turkey and India are the two countries whose currencies are being cooked by this shock. Many commodity exporters including those in the AI supply chain are doing relatively fine because value of their exports rose quite a bit. But Turkey and India aren’t commodity exporters in the way Brazil is for example. There’s still a difference, India has minimal foreign currency debt, their interest rates are set fairly low. So, the Rupee will absorb most of it. Turkey depends on foreigners holding Lira for high interest rates (37% rate!), but when expected depreciation of Lira is higher than the interest, foreigners don’t want to hold it.

Inflation expectations cause uncertainty abt Fed raising short term rates, and that shows up as lower prices for existing long term bonds.

In case the UK, the BOE is working against the Government too by dumping their stock of bonds into the market causing even more temp dislocation away from expected future short term rates.

Its happening with almost all the markets even outside the US.

But again, a policy choice, Congress can implement a permanent yield curve control program so all the points along the curve becomes a policy variable like short term rates.

And it can also make a law so Treasury’s account at the Fed can go into negative so all the accounting gymnastics of issuing Treasuries for capitalists to speculate on goes away