Discussion
9 min
Richard goes on to mention the practice of borrowing money to buy equities (abroad). The yen carry trade has been mentioned reasonably frequently of late. It doesn’t seem like this practice makes any sense in terms of a macro economic policy. Money is being created for the sole purpose of speculating abroad. There’s no economic activity generated inside the nation where the loan is taken out.
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@GhostOnTheHalfShell @economics_that_works
Indeed; this is what happens when financial services are treated as an 'industry' in themselves rather than being seen merely as a service sector to facilitate 'real' industry & services businesses....
@ChrisMayLA6 @economics_that_works
Well, right because if I take out a loan to buy a new espresso machine, say if own coffee shop, then the thing I purchased in this particular case partially covers the loan taken out. Added this extremely simple case immediately goes Into a revenue selling cup of coffee.
For carry trades in particular, where is the tangible economic commercial value in the nation of loan origin? For that nation wears “the profit in it”? Why take on the risk?
@ChrisMayLA6 @economics_that_works
And by this, I mean at the government level as a matter of financial risk to the nation of origin. What’s the benefit to the nation of origin systemically and what’s the risk systemically?
@GhostOnTheHalfShell @economics_that_works
What the financiers will tell you is such trades support (enhance) the liquidity of foreign exchange markets & by doing so offer some value to the real economy... which is a sense *is* true, but such speculative financial instruments & practices have grown out of all proportion to their practical utility - as I have said before, in the end its the tail wagging the dog
@ChrisMayLA6 @GhostOnTheHalfShell @economics_that_works
a system is what a system does, especially if it does or did that consistently since forever and has never done it in any other way one might naively expect
one can also summarize it as money printers working for the billionaire class and always have, at least since 1971, but technically aince forever, because any other limitation that existed was just on paper - some kind of self imposed limits that go out the window when inconvenient
@serapath @GhostOnTheHalfShell @economics_that_works
The innovation of paper money lies behind much of the development of then modern world.... and while yes it has always been to the advantage of the rich, we should also accept that if we think the human race has made progress since the C14/15th centuries then some of that general progress has been facilitated by an economic expansion built on the foundations of paper money (and therefore credit creation).... just sayin'
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