JP Hochbaum
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Hold on ... I'm rather confused. What does he mean by "today's floating fx/non convertible currency"?
A nonconvertible currency wouldn't even have the option to be floating.
/notaneconomist
Non convertible means you can only exchange a USD with the government for another USD, you can no longer convert into gold.Hold on ... I'm rather confused. What does he mean by "today's floating fx/non convertible currency"?
A nonconvertible currency wouldn't even have the option to be floating.
/notaneconomist
(T)he notion of a reduction of govt reserves (again, gold, fx, etc) is inapplicable to non convertible currency.
Russia was on a fixed exchange rate and had declining production. I don't see how this comes close to being comparable to the US?I take issue with this statement. Although the value of a currency in a floating rate system fluctuates, a nation or central bank may find it beneficial to keep its currency at a certain value relative to other currencies. It does this buy selling forex reserves, not more debt. I mean, if anyone really thinks reserves are inapplicable to a "non-convertible" currency they should just ask the Russians.
http://research.stlouisfed.org/publications/review/02/11/ChiodoOwyang.pdf
JP Hochbaum said:This terminology may go over many heads...
He's talking about a floating exchange rate system in which the value of the currency is determined by allowing it to float against other currencies in the foreign exchange (fx) markets as opposed to a fixed exchange rate system in which the currency's value is pegged (i.e., convertible at a fixed rate) to precious metals or another, presumably stable, currency.
So he's using "nonconvertibility" to mean non gold/silver standard currencies rather than a currency that's outright restricted from from being traded on a forex market?Non convertible means you can only exchange a USD with the government for another USD, you can no longer convert into gold.
So you have nothing to add except calling me an elitist?Elitism; gotta love it.
Economics, contrary to what many would like us to believe, is not a dark science. One does not need to obtain a PhD to understand the underlying mechanics of the economy. The claim of complexity is simply the attempt of shallow men to make themselves feel more important. The unfortunate aspect is that politics and economics are joined at the hip in an ever expanding bid for power which makes it extremely difficult to learn about opposing views in government schools. So much for learning from history...
So he's using "nonconvertibility" to mean non gold/silver standard currencies rather than a currency that's outright restricted from from being traded on a forex market?
OK ... that would make a lot more sense.
For example, the North Korean won is a nonconvertible currency. You cannot go onto the open market and legally attain it. Saying that it could be floated against other currencies to determine its value is odd, because it cannot be traded on a forex market in the first place.
Russia was on a fixed exchange rate and had declining production. I don't see how this comes close to being comparable to the US?
If you define a "nonconvertible" currency as one that is not pegged and convertible to gold, then the ruble was a nonconvertible currency. You couldn't walk into the CBR (the Russian central bank) and say, "Here are your rubles. Gold, please." There was a peg, but it was against other currencies, and as investors bailed out of Russia and wanted their coin the CBR was forced to sell foreign currency reserves until it finally threw in the towel and devalued the ruble. So your author's contention that "reserves are inapplicable to a nonconvertible currency" is nonsense.
Pegging a currency to another currency is just like pegging it to gold.
That's true only if both currencies are pegged to each other and at least one is convertible to gold. Otherwise, you'd be arguing that a currency that was pegged to, say, the Zimbawean dollar was as good as gold, and that clearly was not the case. But my point is that even if a nation permits its currency to float, it may find it desirable to defend it from speculation or manipulation in the currency markets, and the only way it can do that is by buying it. In order to buy it, it needs something to sell, like other currencies.
That's true only if both currencies are pegged to each other and at least one is convertible to gold. Otherwise, you'd be arguing that a currency that was pegged to, say, the Zimbawean dollar was as good as gold, and that clearly was not the case. But my point is that even if a nation permits its currency to float, it may find it desirable to defend it from speculation or manipulation in the currency markets, and the only way it can do that is by buying it. In order to buy it, it needs something to sell, like other currencies.
This is a common misconception. Our government doesn't need tax revenues to pay any bill, ever. Thus no reason to kick it down to future generations.Government deficits should be renamed to...
"Hey grandkids...**** you! You know why? Because **** you...thats why!"
or
"Eat it bitches!!!!"
or
"Lets continue to live irresponsibly and dump **** on future generations!"
or something else similarly appropriate.
Your knowledge of the economy and government debt is stunning. You should go to work for a progressive newsletter or something.This is a common misconception. Our government doesn't need tax revenues to pay any bill, ever. Thus no reason to kick it down to future generations.
Your knowledge of the economy and government debt is stunning. You should go to work for a progressive newsletter or something.
Knowledge of economics doesn't have any particular political lean. Unless you are suggesting the less I know the more conservative I would be?
I have never advocated any such thing.You advocate rampant and irresponsible spending without regard to debt, deficit, creditors, interest rates...what could POSSIBLY go wrong.
But notice that in the Russian case their reserves were demanded to be paid in other currencies that weren't their own. When a country does that it puts them at a default risk. A monetarily sovereign country never has that risk.
Knowledge of economics doesn't have any particular political lean. Unless you are suggesting the less I know the more conservative I would be?
I have never advocated any such thing.
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