Superb. The quality of your content is worth millions of views, keep it up and you'll earn it. This is one of the best Economics TH-cam channels in this style without a doubt. Cheers from Brazil!
If the Netherlands & Germany are exporting to the US in excess each year and investing this excess in the US; then it seems that each year increasingly the Netherlands & Germany become dependant on the economic performance of the US; this seems like an unstable system, does this not have potential adverse consequences? Or perhaps I am understanding wrong? Is the alternative a stronger Euro with less favorable export competitiveness?
Indeed. While the export oriented model can work wonders, two downsides are that it cannot last forever (but maybe still long enough) and that you become very dependent on the political decisions of other for growth.
The domestic currency (Euro) would naturally strengthen. That’s what I understand too. The reaction is for the exporting country to lower rates and/or devalue to keep the exporting position competitive and avoid currency strength. Or the importer (US) to raise rates giving its currency some attraction. I think this is why the US has always had slightly higher rates the last few decades and the other developed nations at zirp/nirp to push deflation to the US. Now what happens when the US goes negative on the next downturn?
@@ffernand1230 isnt big part of US that their currency is global use, so demand of USD is much higher than domestic demand, causing imbalance in that side... this also allows longterm import, but ofc it cannot last forever without drastic consequences I understood euro trade across EU border isnt nearly as big, so situation isnt same, but it could be in next decades if trade gets stronger(non-US/EU trade).
But doesn't US trade deficit have something to do with the fact that the world is trading in dollars and someone has to create those dollars (at the very least sum required to cover inflation)?
well it is a prominent theory that its world currency status has increased its value, making American industry less competitive and providing it with the investment to finance this trade deficit.
I don't understand. Why does importing more than you export have to be 'paid for' in some way - for instance, by there being foreign demand for bonds. Are you saying this must be the case if, say, exchange rates were to remain constant, or what?
Your videos are always fantastic!!! But I have a question, how do the economists get all this information. How do the economists or the gov't know about the 10 million dollar payment for the chip maker? I guess those kinds of big payments are registered, but how about smaller payment. E.g. I send my family in Canada x yen per month.
Banks likely classify your payments and then report it to the central bank or statistics agency. In South Africa, I had to give the proper Balance of Payments code to the bank whenever I made an international payment. This made me suspect that e.g. European banks do it for you.
mind dissecting Turkey's BOP? found that both current and financial accounts are in deficit due to the high trade deficit and dollarization of the economy (ie. capital investments)
Did you make a mistake around 5:00? Assuming "inflows" mean capital account surpluses, I think it should be the other way around with Saudi Arabia and the USA.
Fantastic video. Did you mean to say if a country export more than it imports this must be funded by other countries? You seemed to say the opposite right afterwards at 3:40
It was a slip of tongue, check subtitles they are correct. What he meant was If US imports more than it exports then it needs to be funded by other countries.
Why is the capital account a "mirror image" of the current flow account? With the example of the dollar, I (as a foreigner) might not invest my newly acquired dollars in the US, but I might buy some oil for it in Saudi Arabia (where they gladly take it as a means of payment), and create stuff from it in e.g. Germany. Then the 2 accounts will be different, and not a mirror image of each other. Am I missing something?
The transfer of your dollars to Saudi Arabia is still an outflow. It would still show as an outflow on the capital account. In other words, it does not matter if you invest your newly acquired dollars back in the U.S. or some other country. All that matters is if your dollars leave your country.
@@MoneyMacro I will definitely watch it. Always have heard of 'current account' and 'capital account' in business news commentary without actually understanding it does not feel good
Does the current account balance roughly mean "net exports - net imports" and "net money transfers into the country - net money outflows out of the country"?
You are changing the examples. in 2:55 you argue the US Imports more than it exports (wich is the case in the real world) in 3:30 you are changing the example "if the US exports more than it imports"....wouldn't it be better to stay with one argument?
4:08 Too many "they" and "them": Netherlands and Germany has consistent Current Account surpluses so Netherlands and Germany are lending out money to other countries so that other countries can keep importing goods from Netherlands and Germany.
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Superb. The quality of your content is worth millions of views, keep it up and you'll earn it. This is one of the best Economics TH-cam channels in this style without a doubt. Cheers from Brazil!
Thank you for this video. It helped me a lot. Cheers from Brazil!
Glad I could be of service!
Thank you for this. I'm a portfolio manager and you made this very easy to understand
YOU ARE A PORTFOLIO MANAGER AND YOU DONT KNOW BASIC ECONOMICS?
If the Netherlands & Germany are exporting to the US in excess each year and investing this excess in the US; then it seems that each year increasingly the Netherlands & Germany become dependant on the economic performance of the US; this seems like an unstable system, does this not have potential adverse consequences? Or perhaps I am understanding wrong? Is the alternative a stronger Euro with less favorable export competitiveness?
Indeed. While the export oriented model can work wonders, two downsides are that it cannot last forever (but maybe still long enough) and that you become very dependent on the political decisions of other for growth.
The domestic currency (Euro) would naturally strengthen. That’s what I understand too. The reaction is for the exporting country to lower rates and/or devalue to keep the exporting position competitive and avoid currency strength. Or the importer (US) to raise rates giving its currency some attraction.
I think this is why the US has always had slightly higher rates the last few decades and the other developed nations at zirp/nirp to push deflation to the US.
Now what happens when the US goes negative on the next downturn?
@@ffernand1230 isnt big part of US that their currency is global use, so demand of USD is much higher than domestic demand, causing imbalance in that side... this also allows longterm import, but ofc it cannot last forever without drastic consequences
I understood euro trade across EU border isnt nearly as big, so situation isnt same, but it could be in next decades if trade gets stronger(non-US/EU trade).
But doesn't US trade deficit have something to do with the fact that the world is trading in dollars and someone has to create those dollars (at the very least sum required to cover inflation)?
well it is a prominent theory that its world currency status has increased its value, making American industry less competitive and providing it with the investment to finance this trade deficit.
This is a severely underrated channel!
Please make a series on what are the economic factors that currency rate depends on in both long term as well as short term
I don't understand. Why does importing more than you export have to be 'paid for' in some way - for instance, by there being foreign demand for bonds. Are you saying this must be the case if, say, exchange rates were to remain constant, or what?
Super clear and useful video!
Your videos are always fantastic!!!
But I have a question, how do the economists get all this information. How do the economists or the gov't know about the 10 million dollar payment for the chip maker? I guess those kinds of big payments are registered, but how about smaller payment. E.g. I send my family in Canada x yen per month.
Banks likely classify your payments and then report it to the central bank or statistics agency.
In South Africa, I had to give the proper Balance of Payments code to the bank whenever I made an international payment. This made me suspect that e.g. European banks do it for you.
@@MoneyMacro thank you for that. I guess in Japan it's the same when we make international remittances.
your show is great
Can you talk about MMT ?
I heard about a guy who took that once, his whole heaf basically exploded
Птн пнх
Nooo DMT is Pscycadelic Substance found in Ayahuasca plant in South America
mind dissecting Turkey's BOP? found that both current and financial accounts are in deficit due to the high trade deficit and dollarization of the economy (ie. capital investments)
what balances it out then? Loss of reserves? (I haven't checked yet). Would sure like to at some point though.
Did you make a mistake around 5:00? Assuming "inflows" mean capital account surpluses, I think it should be the other way around with Saudi Arabia and the USA.
Fantastic video. Did you mean to say if a country export more than it imports this must be funded by other countries? You seemed to say the opposite right afterwards at 3:40
It was a slip of tongue, check subtitles they are correct.
What he meant was If US imports more than it exports then it needs to be funded by other countries.
Nice russian imperial bond on the wall, defaulted I guess)
Please continue to do more videos like this?!
Very insightful
02:40 Capital account
This is very informative
thank you for pointing out the credit creation part and how that has net zero effect.
Thank you! Great lesson. It would be great a video about target balances
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Why is the capital account a "mirror image" of the current flow account? With the example of the dollar, I (as a foreigner) might not invest my newly acquired dollars in the US, but I might buy some oil for it in Saudi Arabia (where they gladly take it as a means of payment), and create stuff from it in e.g. Germany. Then the 2 accounts will be different, and not a mirror image of each other. Am I missing something?
The transfer of your dollars to Saudi Arabia is still an outflow. It would still show as an outflow on the capital account. In other words, it does not matter if you invest your newly acquired dollars back in the U.S. or some other country. All that matters is if your dollars leave your country.
Very informative video.
But I'm most impressed with your sweater ☺️
😁
This is a great video, something people need to know. Thanks for posting it...
Well explained! Thank you!
Watching the video from Eindhoven, love you ASML exemple ;)
Haha you found it 😉
Great stuff. This channel is like small uni for me.
done.
Do US states keep track of current account balances or is it only nations? Why does Germany need to reduce its CA surplus?
Nice
Great videos man, keep em up
I feel like a more comprehensive video on the balance of payments would really hit the spot.
I'm working on a course on international finance to flesh this out more
@@MoneyMacro is it out yet?
@@sahilingale3280 no. I am trying to finish and publish it in the first half of 2023
@@MoneyMacro I will definitely watch it. Always have heard of 'current account' and 'capital account' in business news commentary without actually understanding it does not feel good
@@MoneyMacro Is it out yet?
I really like economy that explains in a basic matter
Does the current account balance roughly mean "net exports - net imports" and "net money transfers into the country - net money outflows out of the country"?
How does the Black Market affects the balance of payments? Or even those simple transactions that are on cash?
yes for sure. They should be recorded. But, typically they are not. So, they distort the measure.
You are changing the examples. in 2:55 you argue the US Imports more than it exports (wich is the case in the real world) in 3:30 you are changing the example "if the US exports more than it imports"....wouldn't it be better to stay with one argument?
3:30 was just an honest speaking mistake on his part. the subtitles corrected it to imports>exports
Can you do a video on shadow banking?
4:08 Too many "they" and "them": Netherlands and Germany has consistent Current Account surpluses so Netherlands and Germany are lending out money to other countries so that other countries can keep importing goods from Netherlands and Germany.
ok
Great
You professor should do a collab with professor kipping from Cool Worlds
Presumable AI technology and CBDC's will help central banks to have better quality data on which to base their rate decisions?