An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Friday, December 26, 2014
Yanis Varoufakis — The euro’s first inkling – a piece in lieu of Best Wishes for 2015
"explained what Giscard had meant by “exorbitant privilege”:
“…[W]hen a country with a key currency runs a balance-of-payment deficit – that is to say, the United States, for example – it pays the creditor country dollars, which end up with the latter’s central bank. But the dollars are of no use in Bonn or in Tokyo or in Paris. The very same day, they are re-loaned to the New York money market, so that they return to the place or origin. Thus the debtor country does not lose what the creditor country has gained. So the key-currency country never feels the effect of a deficit in its balance of payments. And the main consequence is that there is no reason whatever for the deficit to disappear, because it does not appear.” Rueff (1971) p.78
'the debtor country never feels the effect of A DEFICIT...'
??????
How can a country "feel an effect" of an accounting abstraction?
This is way confused from Rueff here:
ReplyDelete"explained what Giscard had meant by “exorbitant privilege”:
“…[W]hen a country with a key currency runs a balance-of-payment deficit – that is to say, the United States, for example – it pays the creditor country dollars, which end up with the latter’s central bank. But the dollars are of no use in Bonn or in Tokyo or in Paris. The very same day, they are re-loaned to the New York money market, so that they return to the place or origin. Thus the debtor country does not lose what the creditor country has gained. So the key-currency country never feels the effect of a deficit in its balance of payments. And the main consequence is that there is no reason whatever for the deficit to disappear, because it does not appear.” Rueff (1971) p.78
'the debtor country never feels the effect of A DEFICIT...'
??????
How can a country "feel an effect" of an accounting abstraction?