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mundell strikes
"Disinflation under inflation targeting
works by
monetary restriction,
higher interest rates,
returning confidence,
capital inflows, current account deficits,
and an appreciating currency.The appreciating currency
then fosters more disinflation
and helps
the country to meet its new inflation targets.But after the new low-inflation equilibrium
has been reached,
the currency is overvalued
and recognition of this
brings on a speculative crisis."or better yet given a sinkless credit like uncle's
just a protracted trade raid
destroying
our industrial basebob paraphrased
--not by moi---on a single world currency
political rivalries make it difficult for this to happen
because a necessary condition
for the creation of a monetary union
—global or otherwise—
is the creation
of a security area.in a world where war is a possibility,
an international monetary system
based on a fiat world currency
wouldn't work
unless it were backed
by one or more of the precious metals
---------------my solution
bullion island
where all the globe's monetary union members keep their precious reserves
and the imf issues
bancor notes
to maintain steady and adequate liquiditybullion island should have a dooms day device
to ptrotect itself
and its bullion during major
inter empire warsbut back to todays driving
------------------
brad writes"not entirely sure they apply now
to us "
just add good credit
to the last step
and instead
of a "sudden" monetary cave in
you get
a long bleed
of better paid jobsWritten by Gcs on 2006-09-27 08:07:12
Gcs,
Mr. Mundell's precis
might just as well apply to the US
(on the brink of a currency crisis)
as EM's,
who've been through the process earlier
already in Asia. Or not?Written by OldVet on 2006-09-27 08:56:04
old vet....
my deepest intuition
sez
imperial currencies
don't have EM moments
so long as they remain a top dog
ex imperial currencies do however
vide uk pound pounding
circa late 1940's
all the way to early 1990's
reason
--in my estimation--
a hyper share sized reserve currency
will always be saved form its own folly
by its fellow CBers
why?
for their own self interest of course
preserving the system after all
is on the table a that point
reviewing the early 70's
and how the globe's leading CBs
stood for
first the Nixon gangs
gold toggling
and then their window slamming
confirms this i believe
-------------------------
whats unclear to me:
are we in a binary reserve system now ???
the euro and the us dollar
a fiat equivalent
of the bimetalism
of the late 19th century
if so
could the system shed one of it's
main reserves
in a sudden cave in
and still keep right on ticking away
i very very much doubt it's
worth anyone's risk to chance finding out
and so the imperial hyper dollar
may no longer reign alone
but like the austrian empire
forced to become
austro hungarian
if your a south slav
or an every day austrian german
it don't look like much
is changing
till august 1914 that is
then who cares anyway
we're all on a hand basket ride
Posted by pinky at September 26, 2006 10:21 PM