Modern Monetary Theory

Discussion in 'Markets & Economies' started by mmm....shiney!, Sep 14, 2019.

  1. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    @JulieW, or the possible increase in M1 will be helicopter money:

    This is from an article in April this year, keywords mentioned in the article include inflation, unemployment, apartment construction... That’s about the limit of RBA vocabulary.

    https://www.abc.net.au/news/2019-04...opters-for-a-money-drop-on-australia/11048102

    This will make riveting listening:
    Speech by Philip Lowe, Governor – Unconventional Monetary Policy: Some Lessons from Overseas – at Annual ABE Dinner, Sydney
    26 November 2019, 8.05 pm AEDT

    Hopefully we’ll get it live somewhere.
     
  2. JulieW

    JulieW Well-Known Member Silver Stacker

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    LOL.

    It's quite a question to ponder. Rudd's terrified 'what-now' helicopter drop at the behest of RBA, along with, presumably, the parallel industry drop into the pink batts story, appeared to be a last resort action with not much thought beyond "Help!!" at top volume. That pump into the economy is credited in certain quarters as the 'saving' moment, and the actions that saved Oz making it the only western economy to avoid recession.

    So I suppose one could argue that such a basic 'Keynesian' solution worked. No doubt some of the sharp minds at the RBA have dissected that action and the actual effect, not just the noisy pink batts 'scandal'. Perhaps this current M1 bump up is a more sophisticated approach to the same concept, after all they've had 10 years to refine the way they turn the handle.
     
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  3. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    They have mentioned the benefits gained from learning how UMPs have been implemented in other countries. If I was Goldstackers or Ainslie I'd be "C'mon helicopters, c'mon helicopters!". But then Harvey Norman would be screaming the same thing.

    Pop-up economies.
     
  4. Silver260

    Silver260 Well-Known Member Silver Stacker

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    Howard saved it, in the good times, and Rudd spent it.

    I saw an interview a few years ago where Howard said he would have done the same thing, as in spend the surplus. But he would have given it to businesses through tax breaks and direct subsidies , like the other countries ...... o_O
     
    Last edited: Nov 20, 2019
  5. JulieW

    JulieW Well-Known Member Silver Stacker

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    Howard was a disaster and the luckiest PM ever. I've no doubt he'd have done the same thing and he'd have handed out the cash just like Rudd. When would a politician turn down an opportunity to buy votes! :D
     
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  6. leo25

    leo25 Well-Known Member Silver Stacker

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    I talked about this 2 months ago. Apparently they just changed the way they define M1, so no new money was created. Well that's what the RBA is saying...

    https://www.silverstackers.com/forums/index.php?threads/australia-money-supply-m1.92981/

    https://www.rba.gov.au/publications...dates-to-australias-financial-aggregates.html
     
    Last edited: Nov 20, 2019
  7. Lovey80

    Lovey80 Well-Known Member

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    If the demand for USD all of a sudden drops dramatically. With America importing huge amounts of goods and importers to the US wanting ever so many more USD to sell their goods to the US (if trillions of dollars are floating around the worlds banks and treasuries because they are needed to trade in oil and they suddenly can’t use them for that purpose) they will have no need of USD. Americans will require bucket loads more of them to receive the goods they want. This will effectively create huge inflation through that devaluation.

    Right now the US hasn’t seen the inflation any other country in the world would see if they printed so much money (even relative to their own economies) purely because the rest of the world needs them to trade in oil and other goods. If over night that demand globally evaporated the inflation would come flooding home.
     
  8. Lovey80

    Lovey80 Well-Known Member

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    Take steel alone. The US is the worlds largest importer of steel. If steel makers suddenly want 10times the amount of USD per ton than they did yesterday. Or even if OPEC would only trade euros/gold for oil in the immediate aftermath all the worlds USD in circulation would be suddenly hugely devalued. Why would a steel maker then still accept USD for steel? Or of they did how expensive in USD terms would that steel immediately become? How much USD would it take to buy euros to trade for that steel that’s needed?

    inflation inflation inflation.......inside America.
     
  9. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Thanks, I'd done a search on this forum but couldn't find the thread. Looks like no secret QE then.
     
  10. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Why would producers prefer gold/Euro over USD? Because they would value it more than USD. Producers/nations will trade their steel for whatever unit of currency is used, whether it's USD, Euro, gold or paperclips but they'll save what they value. In other words what they transact in is irrelevant, it's what they choose to accumulate and hold that is important. They will save what they value the most and exchange what they value the least.

    In a post-USD-world-reserve-currency economic environment, the USD will still be highly valued simply because it is the world's largest, wealthiest, stable economy.
     
  11. alor

    alor Well-Known Member Silver Stacker

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    first USD as reserved, where countries keep them
    second weaponized USD, where countries cannot transact in USD as they would have to go through the US processing/jurisdiction and got confiscated
    so this created a rejection for USD, countries under sanctions have to find Euro/gold etc to transact outside the USD
    they created a work around the USD and transacted in domestic currencies and made currencies agreement pacts etc
     
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  12. leo25

    leo25 Well-Known Member Silver Stacker

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    Good video where the Malaysia's Prime Minister, Mahathir Mohamad talks about using the USD. What will happen to all those USDs if/when other countries are no longer forced to use/save them.

    Watch from 7:07 - 12:00


    Some quotes from Mohamad;
     
    Last edited: Nov 21, 2019
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  13. alor

    alor Well-Known Member Silver Stacker

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    ^ last time there was no leaders, but today Russia a military power got sanction by USA, sure the treasuries got sold down substantially... China an economic power, they together in BRICS are working on the opposite side
    Saudi had some RMB in their balance sheet, they only sell one product, ie oil
    so there is Trump trade wars
     
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  14. sgbuyer

    sgbuyer Well-Known Member Silver Stacker

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    I'm quite surprised with this interview. Mahathir was very anti-US in the 90s but his tone has changed. When he said he wants the US to have a strong economy, this betrays his worry that a declining US will give rise to "neo-colonialism" which is what is happening right now.

     
    Last edited: Nov 21, 2019
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  15. alor

    alor Well-Known Member Silver Stacker

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  16. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    On world reserve currency, Mark Mobius is of the opinion that the RMB will challenge the USD but it will take many many years. In order for that happen though it's necessary for the RMB to become stable, this means no playing silly buggers with the value of the currency.

    Now when central banks don't play silly buggers with currencies they become more valuable from a saver's perspective, and this is the important point, value will be determined by demand by savers, not by traders. Savers hold currencies, and if enough USD are held offshore by savers then the number of USD flowing back into the US is reduced and potentially, even driving up value.
     
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  17. Silver260

    Silver260 Well-Known Member Silver Stacker

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    Ironically, I was just reading the passage below, when I checked into here. I believe they'll do more than just challenge, in the long run.

    IMG_20191123_144629_compress48.jpg
     
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  18. sgbuyer

    sgbuyer Well-Known Member Silver Stacker

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    I remembered when I was younger, Japanese tourists were flooding Singapore, and they were the biggest spenders. Relatively speaking, the Japanese tourists then had an overwhelmingly bigger spending power than the Chinese tourists today because in those days, they really dominated the market unlike today where there are a lot of wealthy Indian and ASEAN tourists so that there is no one country that really dominates the market.

    In my opinion, the 21st century is really starting to look like an Asian century with no single dominant country.
     
    Last edited: Nov 23, 2019
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  19. leo25

    leo25 Well-Known Member Silver Stacker

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    Once the USD stops becoming a global reserve currency I highly doubt we will see a countries currency being used again. It will most likely be something like an SDR (a basket of many things)

    Also stability played no role in the USD being the reserve currency, rather it was due to pure force and a lie that it was backed by gold. So if somehow the RMB did become the next reserve currency it will also be because of force and a lie.
     
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  20. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Same in Oz.

    “The Princes of Yen”, Japan’s wartime economic model applied to the consumer market.
     
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