But selling Treasuries isn't "selling a product" - it's signing an I.O.U. And in a world with completely rigid capital controls (probably not desirable, but useful as an example), Farawaystan wouldn't be sitting on a vault full of cash. It would be sitting on a pile of stuff - because if capital can't move from one country to another, you'd have to eventually buy stuff with your export earnings.

Of course, from the US point of view, balanced trade would be a disaster, because it would mean having to pay in real stuff - ball bearings, rubber, steel, integrated circuits - instead of just blithely issuing I.O.U.s. But that doesn't make it "protectionist."

OTOH, it's entirely possible that I simply don't get it - I find the whole monetary system pretty confusing, which is why I like to think of the economy in terms of stuff getting produced, moved around and used.

- Jake

Friends come and go. Enemies accumulate.