One of the points that comes out of MMT's floating rate analysis is that when export-led nations and import-led nations trade with each other there is a tendency for the export-led central banks to accumulate net-savings in the import-led government sectors. This is due to liquidity action and intervention by the export-led nations in support of their exporters....3spoken
More support for MMT's external sector analysis
Neil Wilson
4 comments:
I changed that to 'export led government sectors' to cover the Special Purpose Vehicles that seem to get created (Sovereign Wealth Funds, etc).
Here is the accounting record of what Neil points out here:
http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt
See note at the bottom on 'Foreign Official'... 3.962T out of 5.482T total...
The 'exchange rate' is the ratio that the Central Banks agree to exchange their exporters out of their USD balances for their domestic currency balances... ie as usual it's not a "free market"... and as for any monopolist it is again about "price not quantity".
for instance right now, the BoJ has agreed to give Japanese exporters above 88 yen per USD where not too long ago they would only give them 80, so the yen is priced accordingly....
doesnt have anything to do with the balance of payments or the amount of govt securities that Japan has issued vs gdp, etc...
rsp,
I was trying to comment on another article, but enjoyed this one as well.
Ambrose Evans Pritchard gets things wrong in general, but seems to often touch on interesting topics.
You note "...unlikely to see the light of day again...these financial assets essentially become 'prisoners of war' - held in Stalag Central Bank Ledger and out of circulation."
What DOES eventually happen in this situation? Just long term balance through floating Fx?
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