Re: The Euro vs Dollar Conspiracy Theory: part II - "T
Stop, when Iraq converts the USD to their money, who gets the USD?
Huck said:
Stop, when Iraq converts the USD to their money, who gets the USD?
The Euro vs Dollar Conspiracy Theory: part II - "The P
- Thread starter Huck
- Start date
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
no one, the USD 'transforms' into the other currency.
it is the same money, jsut in another form.
I think not said:
no one, the USD 'transforms' into the other currency.
it is the same money, jsut in another form.
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
That is only correct when a country mops up the excess liquidity in its financial system by tightening its own monetary policy. But often that does not happen. What I mean by this is when that transaction occurs, and the company exchanges its currency, say yuan (because this is most prevelent in China today), for dollars, the central bank has now increased the money supply of its own currency. So it is inflationary, unless a country sells its own bonds, which increases interest rates and takes money out of circulation. (Hint, that's an answer to the question I asked earlier.) This is called "sterilization". What should then happen is that the Chinese central bank should sell an offsetting position in the US bond market, which has the effect of increasing interest rates and decreasing the money supply in the United States. However, the Chinese government has chosen not to, and to keep the value of the yuan lower than it otherwise should be. This means that there is too much money in the United States because the Chinese government has elected to hold US bonds rather than sell them. Selling US bonds increases interest rates and has the effect of pulling money out of the economy since, on the margin, other investors will exchange cash for bonds because the interest rate is higher. So, in fact, holding reserves, which are bonds, is inflationary, Huck.
And that's the answer to your question. If central banks started de-investing dollar bonds, the effect is de-flationary, not in-flationary, because selling bonds increases interest rates and takes money out of the economy. Interest rates would rise in the United States, unless the Federal Reserve opted to buy back the bonds, which is inflationary. Its one of the things those of us in the know worry about, since if central banks stopped buying US government bonds, interest rates would rise.
Macro 101 stuff.
My bet is that you were going to tell me that central banks dumping dollars is inflationary. Maybe you were, maybe you were not. But I've seen that argued elsewhere by the conspiracy theorists, and its why they don't understand how this all works.
Huck said:toro:
The inflation for the US money printing happens only if the money goes back into circulation. If it is stocked up by a country in it's reserve, devaluation does not occur. As long as it remains in the countrie's safe, the devaluation will not happen.
...
... If a country usues it's USDs from its reserve back on the market, yes it will dilute the USDs. To buy bonds, they must pay in USD toro. banks hold the bonds, but they dont get paid in maple syrup, they get paid with USDs(for US bonds)
That is only correct when a country mops up the excess liquidity in its financial system by tightening its own monetary policy. But often that does not happen. What I mean by this is when that transaction occurs, and the company exchanges its currency, say yuan (because this is most prevelent in China today), for dollars, the central bank has now increased the money supply of its own currency. So it is inflationary, unless a country sells its own bonds, which increases interest rates and takes money out of circulation. (Hint, that's an answer to the question I asked earlier.) This is called "sterilization". What should then happen is that the Chinese central bank should sell an offsetting position in the US bond market, which has the effect of increasing interest rates and decreasing the money supply in the United States. However, the Chinese government has chosen not to, and to keep the value of the yuan lower than it otherwise should be. This means that there is too much money in the United States because the Chinese government has elected to hold US bonds rather than sell them. Selling US bonds increases interest rates and has the effect of pulling money out of the economy since, on the margin, other investors will exchange cash for bonds because the interest rate is higher. So, in fact, holding reserves, which are bonds, is inflationary, Huck.
And that's the answer to your question. If central banks started de-investing dollar bonds, the effect is de-flationary, not in-flationary, because selling bonds increases interest rates and takes money out of the economy. Interest rates would rise in the United States, unless the Federal Reserve opted to buy back the bonds, which is inflationary. Its one of the things those of us in the know worry about, since if central banks stopped buying US government bonds, interest rates would rise.
Macro 101 stuff.
My bet is that you were going to tell me that central banks dumping dollars is inflationary. Maybe you were, maybe you were not. But I've seen that argued elsewhere by the conspiracy theorists, and its why they don't understand how this all works.
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
Hold on a minute Huck, you have to explain this transformation to me. If Iraq recieved USD and converts it to local currency, something has to be happening.
Huck said:
Hold on a minute Huck, you have to explain this transformation to me. If Iraq recieved USD and converts it to local currency, something has to be happening.
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
ok, lets say you have 100$, i have 100 euros.
if i sell you my bike for 50$, the you give me your money and you have a bike and 50$ left. Me i have either:
100 euros + 50$, or
160 euros.
its the same, just a different form
ok, lets say you have 100$, i have 100 euros.
if i sell you my bike for 50$, the you give me your money and you have a bike and 50$ left. Me i have either:
100 euros + 50$, or
160 euros.
its the same, just a different form
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
You mean I have $100 you have 100 Euro + bike and you sell it to me for $50 which leaves us with:
Me: $50 + bike
You: 100 Euro + $50
Huck said:
You mean I have $100 you have 100 Euro + bike and you sell it to me for $50 which leaves us with:
Me: $50 + bike
You: 100 Euro + $50
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
ITN: yup
but i can tranform the USDs into euros at the running rate.
ITN: yup
but i can tranform the USDs into euros at the running rate.
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
So you still haven't explained where the USD goes when converted into Iraq currency, is it held in reserve?
Huck said:
So you still haven't explained where the USD goes when converted into Iraq currency, is it held in reserve?
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
well, there the country may have a choice. I may need to reinvest it in its country (this is a gain, so the country is richer). But, most likely the country accepts euros, so they must convert it to euros. But, they could also add it to their reserves, to repay loans or for the valuation of their own currency.
The gains from the sells basically strike a balance between stocking the reserve and reinvesting in the country.
I think not said:
well, there the country may have a choice. I may need to reinvest it in its country (this is a gain, so the country is richer). But, most likely the country accepts euros, so they must convert it to euros. But, they could also add it to their reserves, to repay loans or for the valuation of their own currency.
The gains from the sells basically strike a balance between stocking the reserve and reinvesting in the country.
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
Sorry I'm not following, you said the USD is transformed into the local currency, I want to know how this transformation takes place.
Huck said:
Sorry I'm not following, you said the USD is transformed into the local currency, I want to know how this transformation takes place.
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
well, i i can make an 'image', the USD is destroyed, and the equivalent in the other currency is created.
well, i i can make an 'image', the USD is destroyed, and the equivalent in the other currency is created.
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
:?
Destroyed? Iraq would destroy USD? What on earth for?
Huck said:
:?
Destroyed? Iraq would destroy USD? What on earth for?
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
well, because the local contractor may accept to get paid only in dinar becasue the super market accepts only dinars. But, they could maintain it in USD too.
well, because the local contractor may accept to get paid only in dinar becasue the super market accepts only dinars. But, they could maintain it in USD too.
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
OK, so i guess toro has abandoned. Olé!
Up to now, the model remains unshaken. Why is that? because it is the truth.
I hooe you all learn a lot from this, i surely do!
OK, so i guess toro has abandoned. Olé!
Up to now, the model remains unshaken. Why is that? because it is the truth.
I hooe you all learn a lot from this, i surely do!
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
One second Huck, you said the USD is destroyed and the local currency is created, which would mean, that the local currency being created is just being printed. Right?
Huck said:
One second Huck, you said the USD is destroyed and the local currency is created, which would mean, that the local currency being created is just being printed. Right?
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
ITN: i goes down to: Why would i want canadian dollars
ITN: i goes down to: Why would i want canadian dollars
Re: The Euro vs Dollar Conspiracy Theory: part II - "T
yes. I see that will will try to link it to inflation. But you need to see how it works. A devalued cuirrency does not cause the inflation directly. If the money devalues with no reason, this will scare investors and they will become reluctant to invest in your country. TO attract them, banks will raise interrest rates. High interrest rates means less loans, etc. which causes the prices to rises in the country: inflation.
But, if you create money that correlates USDs you had, the economic balance is maintained, as you are not cheating and investors see your country is doing well, becuase you are selling your stuff. Hence, they keep investing, in fact,m they may invest more...
I think not said:
yes. I see that will will try to link it to inflation. But you need to see how it works. A devalued cuirrency does not cause the inflation directly. If the money devalues with no reason, this will scare investors and they will become reluctant to invest in your country. TO attract them, banks will raise interrest rates. High interrest rates means less loans, etc. which causes the prices to rises in the country: inflation.
But, if you create money that correlates USDs you had, the economic balance is maintained, as you are not cheating and investors see your country is doing well, becuase you are selling your stuff. Hence, they keep investing, in fact,m they may invest more...
