Wednesday, May 23, 2018

Ramanan — Contrasting Joan Robinson And Paul Krugman’s Views On The Global Rules Of Trade

Interesting quote from Joan Robinson.

The Case for Concerted Action
Contrasting Joan Robinson And Paul Krugman’s Views On The Global Rules Of Trade
V. Ramanan


Bill Mitchell competed on the Joan Robinson quote.

While Bill is obviously correct, the world continues to operate as if still on Bretton Woods, with the resulting being neo-mercantilism.


Footsoldier said...


I need some help here....

You know how Mike looks at the Fed's (Forex) liquidity swaps as one of the tools he uses to guage $ stess.

I was reading this paper - The global dollar footprint – larger than you think?

That says most central banks are using repo's now instead of swaps and that by using repo's it won't show up on the balance sheet the same way as a swap does.

Is this correct ? Is this why swaps hace been low for so long now ?

Nick Edmonds in the comments dosen't think so. Nick says...

The investor’s liquidity is substantially the same under either the FX swap arrangement or the repo arrangement. In the first cash, she holds unencumbered yen cash; in the latter unencumbered treasuries.

It is not necessary for the investor to enter into a new repo arrangement in order to undertake new investment. She simply has to sell the treasury outright.

It is true that this has different consequences. It involves unwinding a long position in treasuries (which a new repo wouldn’t), whereas making a new investment in the FX swap scenario requires unwinding a long position in yen cash. These are indeed different in terms of the consequences for exposures going forward, but this has nothing to do with liquidity or leverage.

I think your argument assumes that a long position in yen cash is a nothing, so spending it on new investment has no consequences, unlike an outright sale of the treasuries. I don’t think that is correct – holding yen cash is a position, just like holding a treasury is. It’s simply a different one.

Thanks in advance.

Bloggerfive said...