Questions on how international trade with currency works
smithaa022
data on how often the currency must be bought before the commodity
bought? Amounts? Per country? Does this explain dollar hegemony?
Is their detailed information on the balance statements of each
country's central bank in comparison format?
When a central bank expands their M0, do they buy their own M2/M3 or
other's M2/M3(like dollars/Euros/gold). What is a peg? The
alternative to a peg? What is a speculative attack?
How did the gold standard work? What percentage of the time were the
various countrys' currencies fractionally backed with gold, (as
opposed to 100% backed with gold). How did Bretton Woods determine
the price of gold? Did the gold to gold claim ratio have anything to
do with determining price?
In the Civil War of the US, what determined the value of the
confederate's currency? Did the South steal wealth from the North, by
not burning all dollars in their possession, when they introduced
their own currency? (Since they could acquire northern goods, with
nothing in return.) Would/did this cause massive inflation in the
north? Was Southern currency fractionally gold based?
When country's have historically expanded has there ever been the
option for the acquired lands to trade in their old currency? How
often have seceding countries been able to unload the old country's
money, while issuing their own money?
When the Euro joined currencies, who got to determine whose currency
was worth relative to the other currencies? Was the Mark to compose
90% of Euro M0 or 20%? Is the Euro currency going to include new
countries soon? When a country is added do the citizens have to
acquire Euro's or can they convert the old currency to Euro's. Are
there any other feasible plans for currency unions elsewhere in the
world?
For that matter, what determines any currencies worth relative to
other's if they are both intrinsically worthless pieces of paper that
can(?) be replaced with each other?
Does the US share seignorage profits with any other dollarized nation?
Thanks in advance for any replies!
William F Hummel
wrote:
>What determines if the buyer or seller's currency is used?
The seller normally indicates which currency is to be used, but that
is always subject to negotiation. Almost all trade with the US is
done in USD because it is the world's primary reserve currency.
>Is their
>data on how often the currency must be bought before the commodity
>bought? Amounts? Per country? Does this explain dollar hegemony?
No.
>Is their detailed information on the balance statements of each
>country's central bank in comparison format?
If you mean the central banks' balance sheets, you can probably find
some on http://www.bis.org/cbanks.htm.
>
>When a central bank expands their M0, do they buy their own M2/M3 or
>other's M2/M3(like dollars/Euros/gold).
No.
>What is a peg? The
>alternative to a peg? What is a speculative attack?
A peg is maintaining a fixed exchange rate between two currencies.
The alternate is a float. A speculative attack is short-selling a
pegged currency that appears too weak to sustain the peg.
Tim Worstall
Rather than write your entire thesis for you I'll just answer this
last question.
Seignorage profits come from being the ones to print the currency. The
US is the only one that actually prints greenbacks ( all the others
who try get called counterfeiters ). So the US gets all of the $
seignorage profits. And no, they don't share them with other
dollarised nations ( of which there are very few....Ecuador perhaps ?
Panama ? ). They keep them. Gleefully.
Tim Worstall
Lantern
answer to your many good questions is to imagine you have a good product you
want to sell overseas somewhere. One poster wrote of wanting to sell his custom
made bikes in another country. There are many, many businessmen out there and
many will aggressively deal. Which currency(s) will you be willing to take?
Why?
William F Hummel
>smith...@yahoo.com (smithaa022) wrote in message news:<2295d680.03082...@posting.google.com>...
>>
>> Does the US share seignorage profits with any other dollarized nation?
>
>Rather than write your entire thesis for you I'll just answer this
>last question.
>Seignorage profits come from being the ones to print the currency. The
>US is the only one that actually prints greenbacks ( all the others
>who try get called counterfeiters ). So the US gets all of the $
>seignorage profits. And no, they don't share them with other
>dollarised nations ( of which there are very few....Ecuador perhaps ?
>Panama ? ). They keep them. Gleefully.
There are some in Congress who favor promoting dollarization and
returning most or all of the seigniorage benefits to the dollarizing
nation. So far that hasn't happened.
Dollarizing creates both benefits and problems for a dollarizing
nation. In my view, the most serious problem is that a dollarizing
nation gives up its lender of last resort power. It has no central
bank capable of providing liquidity to support its banking system in
emergencies.
smithaa02
news:rb9skvcdat8b98knp...@4ax.com...
> On 27 Aug 2003 21:14:06 -0700, smith...@yahoo.com (smithaa022)
> wrote:
>
> >What determines if the buyer or seller's currency is used?
>
> The seller normally indicates which currency is to be used, but that
> is always subject to negotiation. Almost all trade with the US is
> done in USD because it is the world's primary reserve currency.
selling oil in dollars?
Doesn't this mean (world's primary reserve currency) the US can create
money, and the rest of the world can create things money can buy? Shouldn't
exports only be sold in the domestic country's denomination?
>
> >Is their
> >data on how often the currency must be bought before the commodity
> >bought? Amounts? Per country? Does this explain dollar hegemony?
>
> No.
So you aren't aware of publications that show which countries tend to export
in their own currencies vs others? Which currencies tend to circulate
outside of a country without never coming home to roost?
No, as in exporting value to an alien currency doesn't create hegemony? What
does create dollar hegemony?
>
> >Is their detailed information on the balance statements of each
> >country's central bank in comparison format?
>
> If you mean the central banks' balance sheets, you can probably find
> some on http://www.bis.org/cbanks.htm.
Thanks for the link. Unfortunately, it still seems difficult finding
individual balance statements...
> >
> >When a central bank expands their M0, do they buy their own M2/M3 or
> >other's M2/M3(like dollars/Euros/gold).
>
> No.
What do they do with their newly created M0? Peru/Thailand/China/whatever
expands M0... They can buy domestic denominated bonds, domestic cash,
foreign bonds, foreign cash, gold, stocks, whatever... Correct? Or do most
banks issue M0 debt free and give it to their equivalent of the treasury
department to be worked in to the budget as miscellaneous revenue?
>
> >What is a peg? The
> >alternative to a peg? What is a speculative attack?
>
> A peg is maintaining a fixed exchange rate between two currencies.
But how does the peg manifest. If my currency is pegged at 3X dollars, what
does that mean? That my citizens can give me my domestic currency and I will
give them 3 dollars (like a traditional bank)? Will they play in the market,
using their dollar reserves to try to level the price such the last buyer
for a certain currency trading organization will always equal to the peg? Do
they regulate currency traders, to keep their peg? Are their advantages to
pegs?
> The alternate is a float. A speculative attack is short-selling a
> pegged currency that appears too weak to sustain the peg.
So a speculative attack absolutely can not occur on an unpegged currency?
smithaa02
news:825e2890.03082...@posting.google.com...
> last question.
> Seignorage profits come from being the ones to print the currency.
the exclusive ability to create currency, but also the inability of others
to create their own currency? It's the same in reverse, such that if all
pounds were burnt, and they used dollars, American dollar sellers would get
rich, just as American dollar creators could get rich... Am I incorrect?
> US is the only one that actually prints greenbacks ( all the others
> who try get called counterfeiters ). So the US gets all of the $
> seignorage profits. And no, they don't share them with other
> dollarised nations ( of which there are very few....Ecuador perhaps ?
> Panama ? ). They keep them. Gleefully.
>
> Tim Worstall
But many countries are stock full of dollars besides such a literal
dollarization policy, correct? Are there figures on this? If true, isn't
this essentially the same thing, where the US enjoys sole control over M0
(and M1 if only domestic banks can expand M0)...?
smithaa02
Lantern <gchan...@aol.com> wrote in message
news:20030828134139...@mb-m25.aol.com...
what everybody else is using. Self-defining nonsense. Surely there is
something greater at play...
Lantern
>What is a peg? The alternative to a peg?>
Interesting side-subject, now under debate in Congress...What to do about China
who is rigidly pegged to USD, and some say, benefitting excessively from an
undervalued yuan in international trading.
Les Cargill
I say massive tarriffs, removal of which to be contingent on
equalization. This isn't protectionism, it's tit-for-tat
against an agressive currency manipulation.
And by massive, I mean on the order of 100-1000%.
--
Les Cargill
William F Hummel
wrote:
>William F Hummel <wfhu...@comcast.net> wrote in message
>news:rb9skvcdat8b98knp...@4ax.com...
>> On 27 Aug 2003 21:14:06 -0700, smith...@yahoo.com (smithaa022)
>> wrote:
>>
>> >What determines if the buyer or seller's currency is used?
>>
>> The seller normally indicates which currency is to be used, but that
>> is always subject to negotiation. Almost all trade with the US is
>> done in USD because it is the world's primary reserve currency.
>Do the big sellers determine which currency will be top dog? Like OPEC
>selling oil in dollars?
Big sellers usually have better facilities for exchanging currencies
at reasonable rates. They can also more easily hedge in the futures
market. So big sellers shouldn't care about how they invoice their
sales. Small sellers probably tend to prefer invoicing in their own
currency.
>Doesn't this mean (world's primary reserve currency) the US can create
>money, and the rest of the world can create things money can buy?
If the US just created money and produced nothing to sell, how long do
you think foreigners would accept dollars for their goods?
>Shouldn't exports only be sold in the domestic country's denomination?
>
For what reason? The forex market is the most active financial market
in the world.
>>
>> >Is their
>> >data on how often the currency must be bought before the commodity
>> >bought? Amounts? Per country? Does this explain dollar hegemony?
>>
>> No.
>So you aren't aware of publications that show which countries tend to export
>in their own currencies vs others? Which currencies tend to circulate
>outside of a country without never coming home to roost?
The major currencies: dollar, euro, yen, and pound probably all have
lost some of their currencies to foreign lands where they become a
store of value and a medium of exchange.
>No, as in exporting value to an alien currency doesn't create hegemony? What
>does create dollar hegemony?
If that's what creates hegemony, then there is a world full of
hegemonies, which is almost a contradiction in terms, right?
>>
>> >Is their detailed information on the balance statements of each
>> >country's central bank in comparison format?
>>
>> If you mean the central banks' balance sheets, you can probably find
>> some on http://www.bis.org/cbanks.htm.
>Thanks for the link. Unfortunately, it still seems difficult finding
>individual balance statements...
>
>> >
>> >When a central bank expands their M0, do they buy their own M2/M3 or
>> >other's M2/M3(like dollars/Euros/gold).
>>
>> No.
>What do they do with their newly created M0? Peru/Thailand/China/whatever
>expands M0... They can buy domestic denominated bonds, domestic cash,
>foreign bonds, foreign cash, gold, stocks, whatever... Correct? Or do most
>banks issue M0 debt free and give it to their equivalent of the treasury
>department to be worked in to the budget as miscellaneous revenue?
Can't make much sense of this. Who is "they"? What is "debt free"
M0? etc.
>>
>> >What is a peg? The
>> >alternative to a peg? What is a speculative attack?
>>
>> A peg is maintaining a fixed exchange rate between two currencies.
>But how does the peg manifest. If my currency is pegged at 3X dollars, what
>does that mean? That my citizens can give me my domestic currency and I will
>give them 3 dollars (like a traditional bank)?
A peg means that the monetary authority stands ready to exchange a
unit of its own currency for a specified amount of the reference
currency. That means it must hold a sufficient amount of the
reference currency to meet all demands for such exchange.
A "currency board" tries to hold 100% of the reference currency
against its own currency, so there is little question about its
ability to meet that commitment. But that is difficult to do, and
currency boards sometimes come under attack and fail, as in Argentina.
>Will they play in the market,
>using their dollar reserves to try to level the price such the last buyer
>for a certain currency trading organization will always equal to the peg? Do
>they regulate currency traders, to keep their peg? Are their advantages to
>pegs?
Pegs are usually done by governments with weak currencies. The
advantage of a peg over outright dollarization (assuming the USD as
reference currency) is that the country can earn interest on its
dollar holdings which are usually kept in US Treasury securities. In
the case of outright dollarization, there is no such earning.
>
>> The alternate is a float. A speculative attack is short-selling a
>> pegged currency that appears too weak to sustain the peg.
>So a speculative attack absolutely can not occur on an unpegged currency?
>
Speculative attacks do not normally apply to a fully floating
currency. However speculators can and do make a killing by playing
games with a fully floating currency.
smithaa02
> On Thu, 28 Aug 2003 19:45:55 GMT, "smithaa02" <mal...@chorus.net>
> wrote:
> >Do the big sellers determine which currency will be top dog? Like OPEC
> >selling oil in dollars?
>
> Big sellers usually have better facilities for exchanging currencies
> at reasonable rates. They can also more easily hedge in the futures
> market. So big sellers shouldn't care about how they invoice their
> sales. Small sellers probably tend to prefer invoicing in their own
> currency.
markets, and they could get profits from currency speculation, could they
not?
>
> >Doesn't this mean (world's primary reserve currency) the US can create
> >money, and the rest of the world can create things money can buy?
>
> If the US just created money and produced nothing to sell, how long do
> you think foreigners would accept dollars for their goods?
What if foreigners are making a mistake? Is not the dollar the international
reserve currency? Are not central banks hoarding the stuff to prevent
speculative attacks, to which they can only acquire through purchase on the
dollar seller's terms? Doesn't direct seignorage only go to the US
government as opposed Panama which circulates dollars, but doesn't benefit
from M0 growth?
> >Shouldn't exports only be sold in the domestic country's denomination?
> >
> For what reason? The forex market is the most active financial market
> in the world.
What is the forex market and what does that have to do with anything? If not
using your currency to export goods, made no difference, then it should make
any difference if Saudi Arabia sells their oil to South Africa in Euro's as
opposed to Dollars, and yet surely there exist some income changing results
with such an activity.
I bring this up, because of the Revolutionary War. From
http://www.fourwinds10.com/news/10-peace-freedom/B-patriotic-statements/2003
/10B-11-14-02-words-from-benjamin-franklin.html :
*****************************************************
Interest payment on debt is not necessary and that perhaps the greatest
terrorism in the world is perpetrated quite quietly by the worlds bankers.
The following words are from Benjamin Franklin:
"There was abundance in the colonies, and peace was reigning on every
border. It was difficult and even impossible, to find a happier and more
prosperous nation on all the surface of the globe. Comfort was prevailing in
every home. The people, in general, kept the highest moral standards, and
education was widely spread."
Franklin, visiting England and seeing all the terrible poverty there was
asked by authorities in England how this could all be so, how could he
explain the remarkable prosperity of the Colonies. Franklin replied: "That
is simple. In the colonies, we issue our own paper money. It is called
'Colonial Script'. We issue it in proper proportion to make the goods pass
easily from the producers to the consumers. In this manner, creating
ourselves our own paper money, we control it's purchasing power and we have
no interest to pay to no one."
The English bankers immediately took the necessary steps to have the British
Parliament pass a law that prohibited the colonies from using their 'Script'
money, and then ordered them to use only the Gold and Silver money that was
provided in insufficient quantity by the English bankers. Then began in
America the plague of debt-money.
The first law was passed in 1751, and then completed by a more restrictive
law in 1763. Franklin reported that one year after the implementation of
this prohibition on Colonial Money, the streets of the colonies were filled
with unemployed and beggars, just like in England, because there was not
enough money to pay for the goods and work. The circulating medium of
exchange had been reduced by half.
Franklin added that this was the original cause of the American
Revolution--and not the tax on tea nor the Stamp Act, as it has been taught
again and again in history books. The bankers seem to have managed to have
removed from the school books all of this.
Interesting, no wonder some and famous!
*********************************************************
Another way of thinking about it is if two Pilgrim groups go to the new
world to start new colonies... (The Pilgrims will only trade inside of their
colonies.) Pilgrim group A acquires gold from England to trade amongst
themselves, while B comes up with an intermediary of exchange within. Surely
A got ripped off, for they had no need (although they did anyways) to
acquire gold (or whatever else currency), and they lost good intrinsic
wealth to acquire such that they didn't need.
Surely, therefore bringing in an external currency, for what could be done
internally is wrong, no?
> >>
> >> >Is their
> >> >data on how often the currency must be bought before the commodity
> >> >bought? Amounts? Per country? Does this explain dollar hegemony?
> >>
> >> No.
>
> >So you aren't aware of publications that show which countries tend to
export
> >in their own currencies vs others? Which currencies tend to circulate
> >outside of a country without never coming home to roost?
>
> The major currencies: dollar, euro, yen, and pound probably all have
> lost some of their currencies to foreign lands where they become a
> store of value and a medium of exchange.
A good thing for the US, eh? Send them worthless pieces of paper, and they
will send you chairs, electronics, rubber, and whatnot. Win, win, for the
US! Trade deficit here we come! Haven't there been other currencies that
have international reserve favor (although not as much as the dollar) like
the Mark?
> >No, as in exporting value to an alien currency doesn't create hegemony?
What
> >does create dollar hegemony?
>
> If that's what creates hegemony, then there is a world full of
> hegemonies, which is almost a contradiction in terms, right?
Not a contradiction. But a hierarchy of hegemonies that prey on smaller
ones...
> >What do they do with their newly created M0? Peru/Thailand/China/whatever
> >expands M0... They can buy domestic denominated bonds, domestic cash,
> >foreign bonds, foreign cash, gold, stocks, whatever... Correct? Or do
most
> >banks issue M0 debt free and give it to their equivalent of the treasury
> >department to be worked in to the budget as miscellaneous revenue?
>
> Can't make much sense of this. Who is "they"? What is "debt free"
> M0? etc.
Is this how government creates M0?: They flick their fingers and out of
nowhere a source of financing (liability) comes into existence (like reserve
account). Like any good balance statement, liabilities are balanced by
assets, so they use their phantom source of financing to acquire X to place
in their asset column. The Fed acquires X as in dollar bonds, and I'm
assuming other countries acquire things as well... Do most countries acquire
their own bonds, foreign bonds, foreign high powered money, gold, stocks,
cars, whatever...? Or do they leave their balance statement in limbo and
give their newly created money straight to the national budget (as opposed
to buying bonds, and giving the interest profits to the national budget.)
This is what I mean when I say debt free, to which I was curious if you knew
any countries that did this...
> >>
> >> >What is a peg? The
> >> >alternative to a peg? What is a speculative attack?
> >>
> >> A peg is maintaining a fixed exchange rate between two currencies.
>
> >But how does the peg manifest. If my currency is pegged at 3X dollars,
what
> >does that mean? That my citizens can give me my domestic currency and I
will
> >give them 3 dollars (like a traditional bank)?
>
> A peg means that the monetary authority stands ready to exchange a
> unit of its own currency for a specified amount of the reference
> currency. That means it must hold a sufficient amount of the
> reference currency to meet all demands for such exchange.
So a peg does not necessitate capital controls or direct cashing service to
the public at large? How does the peg country's central bank, know the
'right price'? Is the last transaction at X time and X place? Is currency
trading centralized? If the traders know the peg will be involved in the
market, can't the pegged country be fleeced even if their reserves don't run
dry?
> >Will they play in the market,
> >using their dollar reserves to try to level the price such the last buyer
> >for a certain currency trading organization will always equal to the peg?
Do
> >they regulate currency traders, to keep their peg? Are their advantages
to
> >pegs?
>
> Pegs are usually done by governments with weak currencies. The
> advantage of a peg over outright dollarization (assuming the USD as
> reference currency) is that the country can earn interest on its
> dollar holdings which are usually kept in US Treasury securities. In
> the case of outright dollarization, there is no such earning.
Why must a country peg itself or choose dollarization? Can't they let their
currency float and avoid dollarization?
> >> The alternate is a float. A speculative attack is short-selling a
> >> pegged currency that appears too weak to sustain the peg.
>
> >So a speculative attack absolutely can not occur on an unpegged currency?
> >
> Speculative attacks do not normally apply to a fully floating
> currency. However speculators can and do make a killing by playing
> games with a fully floating currency.
How is this possible?
William F Hummel
wrote:
In your last message, you declare that the dollar is a worthless piece
of paper. The corollary must be that those accepting such paper for
their goods must be stupid. That's quite a lot of stupid people. The
largest component of stupid people must be the Chinese and the
Japanese who hold an enormous amount of dollar equivalent paper.
Why does the US have such a huge trade deficit? Could it just be that
its trading partners have done a better job of promoting their trade
surpluses to support their domestic economies? Have you given any
thought to what would happen to the world's economies if the US raised
barriers sufficient to drive the trade imbalance to zero?
It's interesting that all of the US trading partners bemoan the large
US trade deficit because of what that might do to the value of their
dollar assets. Yet not a single one of them has offered a bilateral
remedy to the problem. On the contrary they work hard to maintain
their own surpluses, and to prevent their own currencies from gaining
relative to the US dollar. It's always a case of let the other guy
take the hit. Is there some sort of disconnect here?
Peter Lawrence
>
> smith...@yahoo.com (smithaa022) wrote in message news:<2295d680.03082...@posting.google.com>...
.
.
> > Does the US share seignorage profits with any other dollarized nation?
>
> Rather than write your entire thesis for you I'll just answer this
> last question.
> Seignorage profits come from being the ones to print the currency. The
> US is the only one that actually prints greenbacks ( all the others
> who try get called counterfeiters ). So the US gets all of the $
> seignorage profits. And no, they don't share them with other
> dollarised nations ( of which there are very few....Ecuador perhaps ?
> Panama ? ). They keep them. Gleefully.
Almost a complete answer. The missing bit that matters to non-Americans is
this: the USA is actually profit taking, mostly. What it could do is buy up
existing assets elsewhere with the debased currency, e.g. Australia. This
would look like investment, but would actually be a wealth transfer not a
creation of new investment (an old colonialist trick).
What is actually happening is that such dummy foreign "investment" really is
happening, only the acquisitions are being made by yet other countries as
they recycle dollars they get from the USA. These investors really are paying
fair value, only they aren't paying it to the Australias of the world, it's
going to the USA as that profit taking. The effect is one of the things
making countries stay willing to export to the USA and be paid in dollars;
they can at present literally pass the buck, and when the buck stops they
will not be out of pocket.
There's another effect, internal to the USA. If the USA did what (say)
Britain did for Argentina, it would really be investing rather than
nominally. That would involve building up actual industries at the other end,
so there wouldn't be any slow but cumulative wealth transfer and acquisition
of existing revenue streams; it would be creating the revenue streams in the
first place. But to do that real capital goods and services would have to
leave the USA to keep the currency out of deficit. That means better trickle
down inside the USA; at the moment the beneficiaries in the USA do not
include anyone making capital goods etc. as what is physically being made is
the fiat currency. PML.
--
GST+NPT=JOBS
I.e., a Goods and Services Tax (or almost any other broad based production
tax), with a Negative Payroll Tax, promotes employment.
See http://users.netlink.com.au/~peterl/publicns.html#AFRLET2 and the other
items on that page for some reasons why.
William F Hummel
<pet...@netlink.com.au> wrote:
>Tim Worstall wrote:
>>
>> Seignorage profits come from being the ones to print the currency. The
>> US is the only one that actually prints greenbacks ( all the others
>> who try get called counterfeiters ). So the US gets all of the $
>> seignorage profits. And no, they don't share them with other
>> dollarised nations ( of which there are very few....Ecuador perhaps ?
>> Panama ? ). They keep them. Gleefully.
>
>Almost a complete answer. The missing bit that matters to non-Americans is
>this: the USA is actually profit taking, mostly. What it could do is buy up
>existing assets elsewhere with the debased currency, e.g. Australia. This
>would look like investment, but would actually be a wealth transfer not a
>creation of new investment (an old colonialist trick).
The usual sour US grapes from the Lawrence. Declare the dollar to be
a "debased currency" and everything flows from there. The truth is
that very few countries don't jump at the chance to acquire US dollars
and dollar-denominated assets, and for good reason. They represent an
investment in the strongest economy in the world.
>
>What is actually happening is that such dummy foreign "investment" really is
>happening, only the acquisitions are being made by yet other countries as
>they recycle dollars they get from the USA. These investors really are paying
>fair value, only they aren't paying it to the Australias of the world, it's
>going to the USA as that profit taking. The effect is one of the things
>making countries stay willing to export to the USA and be paid in dollars;
>they can at present literally pass the buck, and when the buck stops they
>will not be out of pocket.
The Australians of the world are happy to promote their trade
surpluses with the US because of the world-wide glut in productive
capacity. The real problem they face is finding a market to buy their
goods in order to support their own domestic employment. The US
market happens to be easy pickings for the most part. Without it,
most economies would soon be basket cases.
>
>There's another effect, internal to the USA. If the USA did what (say)
>Britain did for Argentina, it would really be investing rather than
>nominally. That would involve building up actual industries at the other end,
>so there wouldn't be any slow but cumulative wealth transfer and acquisition
>of existing revenue streams; it would be creating the revenue streams in the
>first place. But to do that real capital goods and services would have to
>leave the USA to keep the currency out of deficit. That means better trickle
>down inside the USA; at the moment the beneficiaries in the USA do not
>include anyone making capital goods etc. as what is physically being made is
>the fiat currency. PML.
Nonsense. Capital goods flow out of the USA at a substantial rate.
Caterpillar, Boeing, oil production tools, high tech manufacturing
tools, you name it. Strange how myopic some become when they have
acid stomachs.
smithaa02
> On Thu, 28 Aug 2003 23:52:47 GMT, "smithaa02" <mal...@chorus.net>
> wrote:
>
> In your last message, you declare that the dollar is a worthless piece
> of paper. The corollary must be that those accepting such paper for
> their goods must be stupid.
>That's quite a lot of stupid people.
> The
> largest component of stupid people must be the Chinese and the
> Japanese who hold an enormous amount of dollar equivalent paper.
total amount isn't so important per se..
> Why does the US have such a huge trade deficit? Could it just be that
> its trading partners have done a better job of promoting their trade
> surpluses to support their domestic economies?
little in return. That isn't trade. It is because of dollar hegemony and
indirectly Bretton Woods that the US acquired its empire status.
> Have you given any
> thought to what would happen to the world's economies if the US raised
> barriers sufficient to drive the trade imbalance to zero?
factories, and currency control aren't really trade. If the US tried to only
take, what it gave, (kill the trade deficit), interesting things would
happen...
Tim Worstall
> Tim Worstall <t...@2xtreme.net> wrote in message
> news:825e2890.03082...@posting.google.com...
> > smith...@yahoo.com (smithaa022) wrote in message
> news:<2295d680.03082...@posting.google.com>...
> > Rather than write your entire thesis for you I'll just answer this
> > last question.
> > Seignorage profits come from being the ones to print the currency.
> Technically shouldn't there exist seignorage profits stemming not only from
> the exclusive ability to create currency, but also the inability of others
> to create their own currency? It's the same in reverse, such that if all
> pounds were burnt, and they used dollars, American dollar sellers would get
> rich, just as American dollar creators could get rich... Am I incorrect?
That's not seignorage.
Think about what the Treasury actually does ( I think it's the
Treasury that prints dollars....is it the Fed ? ). They take 1 cents
worth of paper and ink, combine them and call is a dollar. The 99 cent
profit is seignorage.
This profit exist for the printer whether that dollar is then used by
an American or a foreigner.
However, if that dollar goes out of the US, and never comes back,
circulating around, say, Russia ( there are regular flights of tens of
millions of dollars in bank notes to Russian banks....when the new $
20 bills came out Russia was almost the first country to get them ) as
part of their money supply.....then the US Govt doesn't have top worry
about it coming back.
The Fed does have estimates of how much of the US currency has left
the US in this way.....some hundreds of Billions from meory.
But strictly speaking, whether it is a foreginer or a US national who
has the note doesn't change the seignorage profit.
>
> > US is the only one that actually prints greenbacks ( all the others
> > who try get called counterfeiters ). So the US gets all of the $
> > seignorage profits. And no, they don't share them with other
> > dollarised nations ( of which there are very few....Ecuador perhaps ?
> > Panama ? ). They keep them. Gleefully.
> >
> > Tim Worstall
> But many countries are stock full of dollars besides such a literal
> dollarization policy, correct? Are there figures on this? If true, isn't
> this essentially the same thing, where the US enjoys sole control over M0
> (and M1 if only domestic banks can expand M0)...?
It is true that the US controls MO for USD $ .....but that's not
seignorage.
Tim Worstall
Tim Worstall
Why should there be anything greater at play ?Money may be all sorts
of things.....the root of all evil, store of value, you pick your
commentator. But at root it is just a means of exchange. It's just
more conventient than straight barter. All of the rest of it flows
from that simple fact.
And yes, a currency is widely used precisely becasue it is widely
used....what is known as positive feedback. It really is that
simple.....
There is one more reason why dollar bills ( not money in banks, but
the actual pieces of paper ) are so widely regarded as a store of
value, and thus desired. Every greenback issued ( well, at least
everything since the Civil War.....I'm a little hazy on exactly when
the greenback became the currency ) is still valid. You can use a
1920's note to buy groceries if you wish. The same cannot be said of
just about any other currency. Too many changes of design, with notes
being declared no longer legal tender. As an example, France has had
at least three currencies in the past 50 years, and I think 5 in a
century, and 4 of those can no longer be used.
Tim Worstall
Peter Lawrence
>
> On Fri, 29 Aug 2003 02:47:38 GMT, Peter Lawrence
> <pet...@netlink.com.au> wrote:
>
> >Tim Worstall wrote:
> >>
> >> Seignorage profits come from being the ones to print the currency. The
> >> US is the only one that actually prints greenbacks ( all the others
> >> who try get called counterfeiters ). So the US gets all of the $
> >> seignorage profits. And no, they don't share them with other
> >> dollarised nations ( of which there are very few....Ecuador perhaps ?
> >> Panama ? ). They keep them. Gleefully.
> >
> >Almost a complete answer. The missing bit that matters to non-Americans is
> >this: the USA is actually profit taking, mostly. What it could do is buy up
> >existing assets elsewhere with the debased currency, e.g. Australia. This
> >would look like investment, but would actually be a wealth transfer not a
> >creation of new investment (an old colonialist trick).
>
> The usual sour US grapes from the Lawrence. Declare the dollar to be
> a "debased currency" and everything flows from there.
Eh? What "sour grapes"? I am describing an actual documented mechanism. If
you debase the currency, you can get something in exchange for the cheat. I'm
not "declaring" the dollar debased, I am describing what happens when you
debase a currency - and, as it happens, the historical examples that tell us
the mechanisms are mostly not the dollar (unless you count various US
experiments over 150 years ago, before the present dollar). Things like the
Dutch in the East Indies, or the French in the Revolutionary Wars.
The truth is
> that very few countries don't jump at the chance to acquire US dollars
> and dollar-denominated assets, and for good reason.
I didn't say there wasn't a good reason. In fact I gave a good reason - the
chance to pass the buck further on. That doesn't mean the process is making
more where there was less, true investment.
They represent an
> investment in the strongest economy in the world.
No, they do not - merely a stake in whichever game the dollar is playing.
> >
> >What is actually happening is that such dummy foreign "investment" really is
> >happening, only the acquisitions are being made by yet other countries as
> >they recycle dollars they get from the USA. These investors really are paying
> >fair value, only they aren't paying it to the Australias of the world, it's
> >going to the USA as that profit taking. The effect is one of the things
> >making countries stay willing to export to the USA and be paid in dollars;
> >they can at present literally pass the buck, and when the buck stops they
> >will not be out of pocket.
>
> The Australians of the world are happy to promote their trade
> surpluses with the US because of the world-wide glut in productive
> capacity.
DON'T misstate what I put. I put Australias, i.e. countries.
Individuals within the countries have no effective choice. And, what counts
for us here is mainly our trade with those same middlemen countries, not with
the USA.
The real problem they face is finding a market to buy their
> goods in order to support their own domestic employment.
RUBBISH. You should never put things like "the real problem...", even if it
is a real problem (and that isn't our current problem anyway, since quite
other things are eroding our employment). The problem I was talking about was
another one, the slow leak of ownership of revenue streams and underlying
resources.
The US
> market happens to be easy pickings for the most part. Without it,
> most economies would soon be basket cases.
That's the chutzpah of those claiming that, e.g., Palestinians need Israelis
to provide jobs; it forgets that without them there in the first place, there
would be other ownership of the strategic heights and just as much provision
of demand.
> >
> >There's another effect, internal to the USA. If the USA did what (say)
> >Britain did for Argentina, it would really be investing rather than
> >nominally. That would involve building up actual industries at the other end,
> >so there wouldn't be any slow but cumulative wealth transfer and acquisition
> >of existing revenue streams; it would be creating the revenue streams in the
> >first place. But to do that real capital goods and services would have to
> >leave the USA to keep the currency out of deficit. That means better trickle
> >down inside the USA; at the moment the beneficiaries in the USA do not
> >include anyone making capital goods etc. as what is physically being made is
> >the fiat currency. PML.
>
> Nonsense. Capital goods flow out of the USA at a substantial rate.
> Caterpillar, Boeing, oil production tools, high tech manufacturing
> tools, you name it. Strange how myopic some become when they have
> acid stomachs.
Strange how myopic some become when they misread a comment about the effect
of the deficit financing as a claim that there is NO other effect. Who said
there were no capital goods going out at all? I merely pointed out that if
enough MORE were going out to clear the shortfall, that would automatically
involve more trickle down as more work would be going on in those sectors.
What's really weird is the chain of reasoning that goes from seeing fair
comment to supposing prejudice, and then from supposing prejudice to assuming
that the comment ought to be ignored as anything except evidence of
prejudice. With that attitude you wouldn't accept a warning of a hazard ahead
as anything except a reason to accelerate - it seems to prove someone wants
you to stop. PML.
smithaa02
news:825e2890.03082...@posting.google.com...
> "smithaa02" <mal...@chorus.net> wrote in message
news:<eFt3b.3589$cQ1.9...@kent.svc.tds.net>...
> > Tim Worstall <t...@2xtreme.net> wrote in message
> > news:825e2890.03082...@posting.google.com...
> > > smith...@yahoo.com (smithaa022) wrote in message
> > news:<2295d680.03082...@posting.google.com>...
> > > Rather than write your entire thesis for you I'll just answer this
> > > last question.
> > > Seignorage profits come from being the ones to print the currency.
> > Technically shouldn't there exist seignorage profits stemming not only
from
> > the exclusive ability to create currency, but also the inability of
others
> > to create their own currency? It's the same in reverse, such that if all
> > pounds were burnt, and they used dollars, American dollar sellers would
get
> > rich, just as American dollar creators could get rich... Am I incorrect?
>
> That's not seignorage.
is the same as Y's inability to create. In this sense, profits can maximized
by externalizing cost, while internalizing profits. You always want to
internalize your intermediary of exchange, else you are having to pay in
real wealth to those who can export worthless pieces of paper, while you
export land and/or stored labor. Think about it...
> Think about what the Treasury actually does ( I think it's the
> Treasury that prints dollars....is it the Fed ? ).
I believe the Treasury prints (specifically the Bureau of Engraving and
Printing) dollar bills, but only at the direction of the Fed. The ?treasury,
I do believe, does receive (?)1% (that's quite a bit!) fee to 'cover cost'.
> They take 1 cents
> worth of paper and ink, combine them and call is a dollar. The 99 cent
> profit is seignorage.
Remember... M0 exist in two formats! It can either be a reserve account
liability at the fed, or it can be a federal reserve note liability. A bank
can request their fed account be converted to dollar bills, to which the Fed
will clean their account and send them physical greenbacks. If the physical
supply of dollar bills is low, the Fed will put in an order to the Bureau of
Engraving and Printing and they will do their thing. This has NOTHING to do
with changing the money supply (M0). If a bank has a wad of dollar bills,
then can send them to the Fed, where they can be figuratively shredded, and
presto, the bank has the equivalent in their federal reserve account. The
Fed could earn substantial seignorage without printing one dollar...
> This profit exist for the printer whether that dollar is then used by
> an American or a foreigner.
> However, if that dollar goes out of the US, and never comes back,
> circulating around, say, Russia ( there are regular flights of tens of
> millions of dollars in bank notes to Russian banks....when the new $
> 20 bills came out Russia was almost the first country to get them ) as
> part of their money supply.....then the US Govt doesn't have top worry
> about it coming back.
Like any confidence game, a scare could pop the bubble. Faith could be lost
in the dollar, which would depreciate it against other currencies and this
would feedback on itself as dollars came rushing home (hyper inflation),
demanding their long overdues be paid up in land/stored labor, which would
break the US's back.
> The Fed does have estimates of how much of the US currency has left
> the US in this way.....some hundreds of Billions from meory.
> But strictly speaking, whether it is a foreginer or a US national who
> has the note doesn't change the seignorage profit.
If I am a dollar seller and demand materializes out of nowhere, I am in a
better position then they are. If you really think about, this isn't very
different then your version of seignorage.
> > > US is the only one that actually prints greenbacks ( all the others
> > > who try get called counterfeiters ). So the US gets all of the $
> > > seignorage profits. And no, they don't share them with other
> > > dollarised nations ( of which there are very few....Ecuador perhaps ?
> > > Panama ? ). They keep them. Gleefully.
> > >
> > > Tim Worstall
> > But many countries are stock full of dollars besides such a literal
> > dollarization policy, correct? Are there figures on this? If true, isn't
> > this essentially the same thing, where the US enjoys sole control over
M0
> > (and M1 if only domestic banks can expand M0)...?
> It is true that the US controls MO for USD $ .....but that's not
> seignorage.
>
> Tim Worstall
What's a good way then to call the profit that stems from sending worthless
dollars to Panama in exchange for tropical fruit or other real wealth?