if you look at the net movements of currency, whether the buyer exchanges or the seller, or some third party or central bank, the net movement is the same and what I said is correct. When analyzing math problems you simplify things to be able to see what is happening more clearly; you are introducing complications as if they change what is happening, but they don't.
I minored in Econ at a top tier university. There is indeed math you need to know to understand economics, but economics is not a branch of mathematics. There’s also behavioral understanding as well as practical knowledge.
I would advise you to kindly take the L here and please stop trying to weasel your way around being wrong. People make mistakes; it’s how they respond when being confronted with their errors that demonstrates their character.
>>me: when you import, you send your currency overseas to pay for the goods.
>you: As a general rule, this is false. Mexican importers do not pay for U.S. goods in pesos
initial conditions: americans have only dollars. mexicans have only pesos.
american sellers demand to be paid in dollars. any mexican who wants to buy american goods must convert their pesos to dollars. where do they get dollars? see initial conditions, they must get them from americans by sending their pesos overseas.
it's that simple.
now, when you run these economies with several million people importing and exporting in both directions, sure, there would be dollars in mexico and pesos in america. but why would you complicate a simple analysis with all of those other transactions when the simple case influences the outcome in the right direction and makes it easy to see what's happening?
> any mexican who wants to buy american goods must convert their pesos to dollars. where do they get dollars? see initial conditions, they must get them from americans by sending their pesos overseas
This thread is over. I asked you to come back armed with references to support your claims and instead you continue to spout nonsense. Currency exchange simply doesn’t work the way you describe, full stop.
>Currency exchange simply doesn’t work the way you describe
currency exchange can work many different ways, but it can't violate thermodynamics or fundamental laws of physics. It also cannot violate the axioms of math, which is what I described.
If a Mexican wants dollars, they need to buy them from somebody who has them. Even if there are billions of dollars in Mexico, if Mexico is exclusively importing from the US forever (which are the conditions of the question above) those billions of dollars will be transferred to the US and Mexico will run out of that supply of dollars and will have to find some new way to get them from the US.
The exporter will acquire dollars from a currency trader who will sell dollars to them in exchange for pesos at the current market rate plus some premium. The currency trader will then find a buyer who wants pesos in exchange for some other currency. It’s all market based today, after the fall of Bretton Woods, which came after gold exchange as the basis of international payments for trade.
It might be that what you’re talking about is the balance of trade, which is related to, but not the same as currency exchange. But if that’s what you’re talking about, those are the words you should be using.
>It might be that what you’re talking about is the balance of trade, which is related to, but not the same as currency exchange. But if that’s what you’re talking about, those are the words you should be using.
it's not that I am talking about balance of trade, it's that the orignal question was about balance of trade:
>and what does Milton Friedman say about a country having enough money to import without export?
he didn't say "a person", he said "a country", that's balance of trade.
so I explained why, by looking at currency exchange, we see that a country cannot engage in perpetual importing without export
you say:
>The exporter will acquire dollars from a currency trader who will sell dollars to them in exchange for pesos at the current market rate plus some premium.
if a country contains no exporters, only importers, the market for dollars or pesos will continue to tilt more and more in one direction. You don't need to model a world market of currency trade to see this, imagine a market with no currency traders (a service industry) but instead a market where you have to do-it-yourself exchange of currency. you will see the same impossible situation of currency flow all in one direction that it essentially consists of printing money till it's worthless
we don't even need currency at all, I could base my argument on barter, but he said "a country having enough money" and money brings currency into the question.
