When you hear in news that our jobs are taken away and outsourced them to Asia, you are not told everything. Sure, telephone customer service is often outsourced to India because labor is cheaper there. The cars are made in Japan, and many other products are made in China. But all this does not in itself cause unemployment in a developed countries. First, what is taken away by imports is brought back by exports.
When Americans buy cars from Japan, they only print colored paper in return without wasting a lot of valuable domestic resources to produce them home. But the dollar will not stay in Japan. The dollar is the currency of the United States only. The Japanese therefore buy American products by USD that are manufactured by Americans. As result they create American jobs with doing this.
One thing is essential to understand. Just as jobs cannot be taken out of the country, the same rules apply to profit in the age of national currencies. Foreign companies generate profits in the currency of that country they operate in. This can be converted to any other currency, and taken out. But the consideration remains domestically in the original currency. Even if a given national currency is taken abroad, it cannot stay there forever. They can only be spent where the official currency is that.
Of course, it can be said that foreign companies are reducing the country’s foreign exchange reserves. What they forget, however, is that a country has foreign exchange reserves at all because there is a need to exchange it. Not least due to foreign companies. With the presence of a foreign company, domestic GDP grows.
The logic of this is infinitely simple, but to understand it we must forget all axioms and prejudices what we’ve heard in our entire lives. The value of a given product in a virtually infinite number of currencies can be printed simultaneously. There are a lot of conversions between currencies for the same product. But the product itself does not multiply just because of this.
Let this product be a microwave oven for instance. Its value is printed by the European Central Bank in Euro. At the same time the American Federal Reserve prints the value of the same product in Dollar. And, at the same time the Bank of England prints the same value of the same product in Pound. Three currencies are printed so far, representing the same product. After that, there is nothing to wonder why there has been a thousand percent inflation in the countries of the earth for the past hundred years.
There is no real money in the world economy, only symbolic, token money. This is because we are too modern for real money. And there is no real value and collateral behind the token money only the promises of the governments. Thus the current global monetary system is nothing else just a barter based on U.S. Dollar. And what we believe to be money is an illusion only, the illusion of value. And the system only works as long as the masses believe in this illusion.
The whole global monetary system is a bubble based on pure faith. But the faith alone no matter how strong does not save the currency from inflation, as the system from collapse. One and a half to two percent inflation is not much, but if we multiply by a hundred we get the result. Our work will be inflated by two hundred percent in one hundred years, ideally. But there is no guarantee that inflation will remain low. There could be an pandemic, war, or whatever.
The peculiarity of bubbles is that they always pop. This will inevitably happen because it has always happened so far. See: Hyperinflation in the Roman Empire and the Fall of Rome.
If you’re interested in this topic please visit my previous post:
Thanks for reading me!