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Debt Is Money! ....until It's Not.


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#166 Bloo Loo

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Posted 19 April 2012 - 12:04 PM

You seem a bit confused on this.

Pounds can only be stored in the british banking system. They can't leak out. Liquidity is cash.

If I receive pounds in return for goods sold in britian and I repatriate my capital to the eurozone - I need to find someone willing to accept pounds in exchange for their euros. My "capital" leaving is someone's capital returning.

Nothing is leaking out of the currency zone.

You may however have to offer more pounds for the euros to entice people to make that trade.

Bid and ask.


we are not spending pounds. Its a DEFICIT...we are buying Dollars, Yen, seashells.

Edited by Bloo Loo, 19 April 2012 - 12:05 PM.

WARNING

Your
country is at risk
if you
do not keep up repayments
on a gilt or other loan secured on it





#167 Police

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Posted 19 April 2012 - 12:10 PM

we are not spending pounds. Its a DEFICIT...we are buying Dollars, Yen, seashells.

A trade deficit is importing more that you export. Period.

The foreign currency buy and selling is irrelevant to this with regards to liquidity in a currency zone.

You buy foreign goods - you either have the fx already, or you buy the fx using your own currency, or you buy the goods in your home currency allowing the seller to do his own fx.

It's irrelevant to discussing monetary flows - because they are not monetary flows - they are capital flows.

The only body which can influence the amount of liquidity in a currency zone is the central bank.

Edited by Police, 19 April 2012 - 12:12 PM.


#168 Bloo Loo

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Posted 19 April 2012 - 12:15 PM

snip because they are not monetary flows - they are capital flows.

snip


tell that to the importer who pays the bill.

And tell that to the bankers doing the payment guarantees at either end when there was a serious threat at the start of the credit crisis when this whole system was itself about to collapse.

Money is moved.. there is a conversion along the way, but it is moved.
WARNING

Your
country is at risk
if you
do not keep up repayments
on a gilt or other loan secured on it





#169 Police

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Posted 19 April 2012 - 12:20 PM

snip

Money is moved.. there is a conversion along the way, but it is moved.

No. Money doesn't move.

It never does.

It stays in the same place it was created. In the central bank.

You cannot send money down copper wires. Can't be done.

What moves - or appears to move - is capital.

Public capital in the banking system is the debt of the banking system.

One bank says they no longer owe you - The other bank says that they now owe you instead.

This is the "movement".

Edited by Police, 19 April 2012 - 12:21 PM.


#170 Bloo Loo

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Posted 19 April 2012 - 12:31 PM

No. Money doesn't move.

It never does.

It stays in the same place it was created. In the central bank.

You cannot send money down copper wires. Can't be done.

What moves - or appears to move - is capital.

Public capital in the banking system is the debt of the banking system.

One bank says they no longer owe you - The other bank says that they now owe you instead.

This is the "movement".


either way you slice it, the "spender" ends up with less....that is the importer...he has goods instead.

to say nothing has moved is, I think, being little pedantic.
WARNING

Your
country is at risk
if you
do not keep up repayments
on a gilt or other loan secured on it





#171 Police

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Posted 19 April 2012 - 12:41 PM

either way you slice it, the "spender" ends up with less....that is the importer...he has goods instead.

to say nothing has moved is, I think, being little pedantic.

Not at all.

You are saying that liquidity can disappear abroad. It cannot - evidenced by the fact that money doesn't move.

If a bank obtains funding from markets denominated in foreign currency - then it can have a problem if those markets freeze up and it needs to roll over its foreign denominated liabilities - but this has nothing to do with a trade deficit. Can happen to a bank which has funded itself in such a way - in a trade surplus country. The location of the bank is irrelevant.

#172 Bloo Loo

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Posted 19 April 2012 - 12:43 PM

Not at all.

You are saying that liquidity can disappear abroad. It cannot - evidenced by the fact that money doesn't move.

If a bank obtains funding from markets denominated in foreign currency - then it can have a problem if those markets freeze up and it needs to roll over its foreign denominated liabilities - but this has nothing to do with a trade deficit. Can happen to a bank which has funded itself in such a way - in a trade surplus country. The location of the bank is irrelevant.


something is moving

http://en.wikipedia....of_credit_3.png

Liquidity can disappear anywhere in the system.

It did so in 2007.

A trade deficit on its own might not cause it, but again, too many commitments for the speed of the available funds will cause it.....meanwhile, the wealth of the country, from which money can be originated, is draining away.

The thread is about debt being money....no, money is born from debt based on an ability to pay....while the country leaks wealth abroad in the form of balances moved, the creation of money becomes harder, until, at some point, there is nothing already hocked to the bankers. Securitization gives another throw of the die as the loans themselves are lent upon.

Edited by Bloo Loo, 19 April 2012 - 12:50 PM.

WARNING

Your
country is at risk
if you
do not keep up repayments
on a gilt or other loan secured on it








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