Sunday, October 9, 2022

Questions Related to International Trade & Currencies — Clint Ballinger

The currency of international trade has been on a lot of peoples’ minds in the last few years. The hierarchy of currencies literature, the related questions of reforming the international monetary and financial system (IMFS), the effects of US monetary policy on the rest of the world (ROW). Add to that the war in Ukraine and Chinese trade-related discussion on the role of the ruble, dollar, yuan, oil and natural gas, wheat etc. 
These issues can easily lead to rethinking about the bancor or the role of SDR as a possible solution to some of these issues....
Questions Related to International Trade & Currencies
Clint Ballinger


Clint Ballinger said...

BaLLinger :)

Clint Ballinger said...

And thanks for posting! Complex topic and I am keeping the posts short to stay readable.

NeilW said...

All supranational currencies are unworkable for the fairly obvious reason that you can't force an entity to spend its surplus, and no country will sign up to a plan where en external entity is allowed to decided whether a surplus shrinks or expires.

And for every surplus there is a deficit...

Countries obtain surpluses to make it look like they are not creating money out of nothing, ie discounting the state's power to tax. It's a PR wash.

Surplus acquirers are the new form of mercantilism. They are policed by the 'default' police who foretell of terrible circumstances that will occur if a sovereign nation tells foreign holders to spend up or else.

Clint Ballinger said...

Neil, so any suggestions as to the problems using the $ poses for ROW?
(and do you think this causes problems for the US?)
And what do you think of the hierarchy of currency literature, specifically the problems least developed resource poor countries face?

Tom Hickey said...

Profuse apologies. Fixed now.

NeilW said...

"Neil, so any suggestions as to the problems using the $ poses for ROW?"

I think that is a function of the view people have of the US dollar, rather than the operational reality. In reality the customer uses the currency they have and the supplier receives the currency they want to hold. The finance industry makes a turn creating the interlinks - which has involved hopping via the US dollar infrastructure but only because it was cheap and convenient, not because it was required. The Russian event makes Western infrastructure less cheap and less convenient.

I think the hierarchy of currency literature is flawed and again comes from the 'silver coin' vantage point rather than the 'credit economy' vantage point. Therefore it offers no solution for places like Turkey and Zimbabwe because it is based upon fixed exchange rate thinking and the usual economist obsession with interest rates.

The currency is there so the currency issuer can provision themselves - if they have the political power to enforce their taxes. Generally in less developed nations that is the problem, not the money system. The country has been colonised financially, and those colonisers have to be driven out like the ones before them.