@politicalmath This is a self-correcting problem, as we learned in 1989 with Japan. Sometimes a foreign country, for its own reasons, agrees to ship us lots of great consumer goods in return for nothing but pieces of paper good primarily for purchasing our domestic assets. (1/x)
@politicalmath Eventually, that foreign country has no choice but to cash in those pieces of paper in return for our domestic assets. This bids up the price of those assets, causing everyone--including the foreign country--to overpay for them. This is annoying, but has a happy ending. (2/x)
@politicalmath At some point the foreign country's supply of pieces of paper depletes, and they can no longer keep bidding up the price of our domestic assets. The bubble bursts, prices return to normal, and the net price of all those consumer goods ends up being very cheap indeed. (3/x)
@politicalmath This is very bad for the foreign country, which has spent decades shipping us all those great consumer goods in return for a bunch of now-heavily-discounted assets. Their economy tanks. Ours takes a brief hit, but quickly recovers, now that those assets are fairly priced. (4/x)
@politicalmath With our economy revived, we go looking for a new country to sucker into shipping us a whole lot of great consumer goods in return for pieces of paper good for purchasing our domestic assets. And wouldn't you know it, there's always another one ready to do it...(5/5)
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