Police, on 19 April 2012 - 12:41 PM, said:
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
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.
This post has been edited by Bloo Loo: 19 April 2012 - 12:50 PM