For sure. Monetary imperialism in its most aggressive form.
American Economics Thread
- Thread starter Bernard
- Start date
The factual problem in this feud is another. They take the coins out of circulation rather than expanding. It is the inverse MMT. hahahahaha
Seriously answering your question. The net effect is the same. It matters little if a country has its currency as the currency of world circulation or if its currency is undervalued in the international market with low demand.
This is called the Cantillon Effect.
The US with its world currency has the natural advantage that no other country has, they are the last to suffer from monetary expansion.
The cantillon effect states that coin printing creates uneven inflation, benefiting the first people who come into possession of the newly created coin, as inflation destroys the value of coin over time, the sooner a person has access to that coin. , the more you will benefit. But over time, even that person benefited will also suffer from the late effects of this expansionist monetary nature, everything will depend on the progression of the circulation of this new currency created.
As all currencies today are fiat currency, there is no escape even for those at the top, but they will suffer less than ordinary people.
The inflationary effects that we are witnessing today in the US only confirm this statement. Since 2020, the US has printed trillions of dollars incurring unimaginable budget deficits, the world still felt the inflationary effects of this expansion in 2020, but now Americans are feeling the permanent inflationary effects of this monetary policy. As I said, there is no escape.
In 20XX not using dollar in daily life is a microagression and having saving accounts (instead of spending them all) is anti-poor and will be canceled by woke.
Call it avant garde monetary theory.
You mean inverted yield curve. It means when short term yield is higher than long term yield as investors prefer liquidity because they foresee a pending recession.
Textbook definition:
My understanding:
If you take out a short term loan, the expectation is that it will be paid back quickly, so it's not too risky. Let's say you loan a friend 10000 USD for 1 week with 3% interest. It is very unlikely that your friend will suffer a massive life changing event that makes him/her unable to repay you (accident, birth of a child, getting laid off from job) in that 1 week. All risks would've been already priced into your decision to lend.
If you take out a long term loan, the expectation is that it is going to take a long time to pay off, which is risky. That same friend lending that same money for 5 years could have any amount of things happen that make repayment difficult: maybe they have a child, or they get hit in an accident, or they get laid off. 5 years is a long time. You take a higher risk on it. So you should be getting paid more in interest.
But what if lenders decide, we are going to charge lower interest rates to long term borrowers, and higher interest to short term borrowers? That implies that they believe short term borrowers are higher risk OR that the predetermined short term interest rates will fall in the near future (a loose monetary policy) OR that they see other asset prices falling and want cash in hand as fast as possible. Why would short term borrowers be a higher risk? Well if there are bad signs of a recession on the horizon that lenders and regulators see, but ordinary people can't see (since we don't have same data access), then the lenders will act on that data to get as much money as possible out of short term lenders before the recession hits.