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Originally Posted by Tiwaz
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Originally Posted by pest
Maybe they can spend them in a few places, but for the most part those dollars will make their way back to the US, mostly thru trade.
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Err, do you think the pay in paper dollars? Maybe they pay in dollars, but in the currency dollar. For example: They pay like 1 million dollars, but the Japanese business man receives x million yen on his bankaccount. Depends on the rate, of course.
No way they're sending a man with twelve suitcases full of dollars, man. |
No, its not a large suitcase, there are clearing houses and deposits with the federal reserve bank. Banks are required to have certain levels of cash reserves. If someone deposits a huge sum electronically, there is a required amount of cash reserves that need to be associated with it. Thats where the fed comes in. They have these huge piles of paper (used to be gold) that never move, they just get new account numbers associated with them.
The money supply is finite. They cant keep converting yen to dollars forever. At some point they would have to pay in yen if they want to continue to buy. Where are we going to spend yen? Possibly anywhere, but most likely in japan.
I am sure some of this is technically incorrect, but that how I remember it.