THREAD. These massive trade deficits weren't supposed to even exist. Prof Freidman advised the Nixon Whitehouse in 71, "Market forces would eliminate the incipient trade deficit by price discovery of the correct market clearing exchange rate"
: https://www.audible.ca/pd/B071498WN3?source_code=AOSGBOR0531170000

Freidman " a global variant of Adam Smiths unseen hand would supplant the trade settlement function of the old gold standard system. Intl markets would be cleared by continuing repricing of exchange rates" This seemingly enlightened, pragmatic & market driven arrangement>>

> didn't work in practice. As it turned out, Adam Smiths unseen hand never even reported for work after Freidmans floating rate contraption was put into operation. Instead of floating w/ market forces, exchange rates have be chronically manipulated by GOVERNMENTS.

Since Adam Smiths unseen hand was pushed away with government force, no trade accounts have ever even settled since 1971. Therefore all currencies & especially the USD are all synthetic freaks of economic nature. Yet most people reading this believe we live in Adam Smiths world>>

In pegging their currencies at far below market clearing levels, Japan, China, S. Korea & the caravan of imitators on the east Asian rim, accumulated more and more US dollars. They then parked these $ in tsy bills & bonds. Over the years, these staggering accumulations >>

> of dollar liabilities have been labeled as foreign exchange reserves. In deference to the wholly archaic notion that the USD is a "reserve currency". These are not proper monetary reserves at all. They are vendor supplied export loans to the US economy.

This freakish central bank accumulation of USD liabilities in turn, was the result of the greatest money printing spree in world history. The US printed, then the world printed. & the cycle never stopped repeating. American politicians thus found themselves in the great fiscal >>

> sweet spot of world history. For decades to come, they would have the unique privilege to issue bonds notes & bills from the US Treasury without limit. Only in the foggy future when foreign governments stopped swapping the sweat of their own ppl for Washingtons debt emissions>>

> would fiscal limits reemerge. As it happened, it took time for American politicians to realize that they had died and gone to fiscal heaven.

Milton Freidman was a committed anti statist who had low regard for politicians & justifiably so. Yet, in pushing the gold standard onto the scrap heap of history, the modern day godfather of free markets helped foster the greatest project of statist intervention ever conceived.

The financial deformation that the end of Bretton Woods gave rise -massive creation of financial futures, speculation & options- was born largely unnoticed, in the humble bacon trading pits of Chicago. In due course, all monetary hell broke loose. Radical fluctuations in >>

> exchange & interest rates became routine occurances. Charting swings of magnitude never experienced in peace time history.

The USD against the Dmark fluctuated 400% up/down in the 15 years after Bretton Woods ended. Businesses in the US & Germany had no choice but to purchase costly hedging protection against exchange rate volatility.

In the 1/2 century prior to 1914, there was continual monetary progress & enlightenment. There was uniform consumer prices & wages throughout the developed world. Late 19 century wages in Manchester, Munich, Barcelona, Milan, Pittsburgh & Chicago were closely aligned.

"Americans can get into debt for free. At the expense of other countries" - Charles de Gaulle