Comment by gasull | Hacker News Reader

Comment by gasull | Hacker News Reader

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Unemployment happens because:

1. Producing in China is cheaper, so companies move production and jobs there.

2. China sells to the US while the US sells nothing to China but dollars.

3. This is possible because the US can print as many dollars as it pleases.

4. And that is possible because we left the gold standard in 1971 and unemployment has been growing since then, along with our trade and fiscal deficit.

If we had gold standard:

1. The US wouldn't print as many dollars as it pleases. and we wouldn't carry a trade deficit.

2. China wouldn't be able to sell so much to the US without buying something back.

3. Production and jobs would move back to the US because without trade imbalance it wouldn't be possible to export so much from China.

If we had gold standard: 1. There would be deflation. 2. Deflation would mean that rich investors would hoard dollars instead of spending them, meaning that very little investment would be done. 3. China wouldn't be able to produce as much, meaning that they wouldn't be able to build many factories, etc. 4. China would be a subsistence farming economy. America would be the source of computer manufacturing, but only the rich could buy them.

> 2. China sells to the US while the US sells nothing to China but dollars.

The US sells plenty to China. Besides the odd cases like Chinese-made Apple products that are sold for a premium in China (after being shipped back and forth to the US), there are tons of things like cars, planes, food and medical equipment that add up to over $90b annually. They're one of our largest trading partners.

It gets better.

  3. The Chinese use the money we give them to buy gvt bonds.
  4. The gvt bonds are spent by the gvt.
  5. This spending is added to GDP.
  6. GDP appears to have gone up. 
     Without gvt debt, GDP is the same it was in 1998.

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