tag:blogger.com,1999:blog-5908830827135060852.post4579097701216327010..comments2024-03-01T02:40:14.946-05:00Comments on Bond Economics: How Can A Floating Currency Sovereign Default? Brian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-5908830827135060852.post-48021153987513071742018-11-22T17:34:21.264-05:002018-11-22T17:34:21.264-05:00I had a reply, but it got eaten. Oops.
A “non-flo...I had a reply, but it got eaten. Oops.<br /><br />A “non-floating currency soveriegn” is not an obvious definition, but one thing to disqualify countries is borrowing in a foreign currency - even if the currency value floats.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-46146985062517080902018-11-21T17:55:18.837-05:002018-11-21T17:55:18.837-05:00I think 'floating currency sovereign' mean...I think 'floating currency sovereign' means the currency is not 'pegged' or promised by the issuer to exchange for a certain amount of another currency or commodity. If it was pegged and the peg was abandoned, that by itself would constitute a form of 'default' and I think Brian was trying to rule that form of default out.Jerry Brownnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-69114521887675086942018-11-20T23:10:03.701-05:002018-11-20T23:10:03.701-05:00"How Can a Floating Currency Sovereign Defaul... "How Can a Floating Currency Sovereign Default?"<br /><br />What does "floating currency" have to do with "sovereign default"? The two terms apply to entirely different economic events.<br /><br />"floating currency" applies to a relationship between different currencies. Each currency is judged for trade value against other currencies. This judgement depends not only upon real product exchanges but also upon the perceived future value of each currency for it's 'gift certificate' potential. (This explains why Japan and China (as saving nations) are willing to hold such large quantities of U.S. debt.)<br /><br />On the other hand, "sovereign default" refers to a government (who issues currency) actually defaulting on it's debt. I would agree with you that this would always be a political decision, no matter what the citizenship of debt holders might be.<br /><br />Your proposed title is a teaser, for sure. Might be a clever segue into a revealing discussion.Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-17555951668920609062018-11-20T07:04:53.050-05:002018-11-20T07:04:53.050-05:00The risks posed by banks is probably the biggest w...The risks posed by banks is probably the biggest weakness in the “it’s all political” argument. In a sense, it is, since politics led to bad regulation. It’s entirely possible that governments made bad decisions where the path of least resistance is to default, and one such decision would be to stupdly bail out the banking system. Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-79008342487242850902018-11-19T17:03:26.767-05:002018-11-19T17:03:26.767-05:00Hi
Just to say that I’ve dipped into Michael Petti...Hi<br />Just to say that I’ve dipped into Michael Pettis’ Volatility Machine’ tho before getting a stronger sense of what MMT offers to guard oneself against the knee jerks & the what-ifs that lead discussions about finance, create confusions between commodities, money, net worth, trade balances, political victimisation across borders etc etc.<br /><br />In Pettis’ book volatility is about economies that don’t float, and your last blog about MMT reminded me of this. I found Pettis’ examples useful so for me please do get bogged down a little in examples that illustrate some of the general finance/accounting principles involved. <br /><br />Today’s blog includes the political and I don’t think the Pettis book did. This question really does raise the spectre of Death Star US and I can understand that some people need to get to understand the financial/accounting before they can understand how money sovereignty works. <br /><br />Observing how my small country New Zealand can respond politically to believed in threats from outside sees NZ being situated economically at the bottom of the pecking order of most other foreign predators. All it takes is for commentators to mention the reserve currency status of the US$ and the fact of NZ running a trade deficit for this instantly to get a Pavlov tremble. So discussing not only a trade deficit but also the running of a carefree gov deficit in addition creates loads of bowing & scraping to presumed risks like a catechism gets worshipers automatically chanting their learned economist replies. <br /><br />Actually it’s the private banks that have borrowed big abroad & gov propping them up with government sanctioned mortgage lending seems to be NZ’s political curse though not understood properly in its financial/economic dimension.<br /><br />So, I look forward to you giving this all an airing ASAP :)<br /><br />Thanks<br />JimAnonymoushttps://www.blogger.com/profile/12072111230113935984noreply@blogger.com