Countries that sell goods don't profit?
USA buys 1,000,000 watermelons from Mexico for $500m USD.
USA prints $500,000,000, so it's like the money never left and their economy is the same.
Also they now have lots of watermelons.
Mexico's economy is inflated and they just lost a ton of fruit.
How does countries that sell goods profit then?
- simplicitusLv 78 years agoFavorite Answer
1. Obviously countries do profit from selling goods. Japan has nothing but goods to sell and still makes enough of a profit to buy all the energy (coal, oil, natural gas) it needs plus half the food it eats.
And by the same logic, when China, Germany, the U.S., etc. sell to other countries, they don't benefit either.
Hard to believe all those people going to so much trouble for no gain.
So since reality trumps theory every time, there must obviously be something wrong with your logic.
So why haven't you bothered trying to figure out what it is?
2. Even with your example, in the end, Mexico does end up with $500,000,000 for its watermelons. That means it can buy $500,000,000 worth of stuff from the U.S. The fact that the U.S. can also buy lots of stuff from itself doesn't mean that Mexico can't and hasn't benefited from selling its watermelons.
3. It isn't Mexico's economy that has been inflated, it is the U.S. economy. With the printing of the $500,000,000 there is now more U.S. money chasing the same amount of of U.S. goods. U.S. prices just went up and the dollar is worth less.
That's why the U.S. does NOT print money when it buys from other countries. (The U.S. imported about $1.9 trillion in 2010
the Fed did creae some money in 2010, but nowhere near that much.)
- 8 years ago
Please read about international trade and macroeconomics.
Many more. Wiki is free. Hopefully it's correct.
Alright, maybe I should explain a little. When you print 500 mil and buy something, that's what you call IOU. Well, there is so called currency valuation as well so you pay based on value any ways. But there are so many trades out there between countries that it can only be measured in trade gaps. But either way, if you print out 500 mil then you better sell some bonds to support that or else you cannot pay out within your own economic capacity. You are basically borrowering other nations capacity to produce.