The USA gives China billions of dollars for goods,it seems like everything is made in China.Is that money lost

Question

How does the whole currency system work? Is new money made to compensate for the money that is now overseas? Does China just give it back, or do they eventually just own the USA? I am having a bit of trouble trying to understand how that whole process is supossed to work.

Answer 1

All that China gets is bits of paper (US dollars) and the US gets real goods. It sounds to me like the US is getting the best end of the deal.

US$ have no value to Chinese unless they can buy things with them. If they are, then the $ go back to the US and it is just as if they had swapped one set of goods for another. In reality, it is more complicated because US$ are used for lots of international trade and so it could be that what happens is that teh Chinese use the US$ to buy raw materials from Australia, so Australia then has the US$, which it uses to buy machinery or whatever from the US.

Another complication is that some of the US$ that China receives, it lends back to US banks or the US government to finance its budget deficit, as well as others who want to borrow US$.

If China still has US$ left over, then it needs to decide to either store them because it wants to use them to buy something from the US at some time in the future (ie it saves them just like any other person, just not in a jar under the bed). If not, it will sell them for some other currency that it needs such as Japanese Yen so that it can buy things from Japan. Ultimately, this forces the exchange rate to adjust so that in the long-run and keeps everything in balance.

Answer 2

Economic relations between countries are obviously very complex. Nevertheless, the unequal exchange of goods between the U.S and China results in a net trade deficit. This has built up China's natonal treasury. In fact The eastern economic power houses of China, Japan and South Korea hold most of the worlds supply of dollars.

" As a result of many years of persistent trade surpluses with the United States, the Japanese government holds dollar reserves of approximately $1 trillion. China’s accumulation of dollars is approximately $600 billion. South Korea holds about $200 billion."

In comparism to the above numbers, the US only has about $67 billion in the "legendary" US Federal Reserve. Needless to say, if either of these countries decided to sell their stockpiled dollars and move over to another currency e.g Euro, the surplus dollars in the world market would drive the value of the dollar down and shake up the world market. (Japan or South Korea would not do this because they are dependent on the US military as a deterent to aggression from North Korea).

Answer 3

Yes, in fact the money goes straight to China. It's one of the reasons people worry that the USA is not the preimenant superpower; the USA might be on the decline and China might be on the rise.

Answer 4

how can it be lost if you got the goods,that is called trade
and has satisfied people eversince they have traded
and what is paper money really ,a promise to own somebody money ,what if you dont keep your promise.
paper money is a fantasy that only works as long as you believe in it
that is how the banks who print money can lend money that does not exist
and all of the money ,all of it ,in the end is controlled by the same bank (of Rothchild)
if they decide that the dollar is worth nothing china is the big looser not the winner ,that is the USA they got the goods.remember

Answer 5

exchange of goods for currency...

just like in a store.. the customers arent "losing" the money, they trade it for items... and they dont eventually own the store, they just own the items they bought

Answer 6

nonsense