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What is a Dollar Drain?

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What is a Dollar Drain?

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The term “dollar drain” is used to refer to a situation in which a nation is importing more than it is exporting, causing a net transfer of its assets overseas. The “dollar” is often taken to be a reference to the United States dollar, although technically any country can experience a currency drain. As a general rule, a prolonged dollar drain is viewed as a bad thing, and many countries will take steps to correct a currency drain if necessary. A number of situations can lead to a dollar drain. For example, a country with prohibitive labor laws might import large amounts of cheap consumer goods from countries with more lax laws which permit the cheap production of such goods. A dollar drain can also occur when a country’s infrastructure is limited, making it difficult to manufacture goods or produce food domestically. Dollar drains also occur when a nation has a surplus of something the rest of the world wants, like oil, along with extensive infrastructure which allows it to produce th

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