[A-List] Finance query

[Rob Schaap <bantam@xxxxxxxxxxxxxxxx>]

Hi again,

As this list seems relatively polite to its economic ignoramuses ...

Let's say I'm short greenbacks (I've sold greenbacks I don't yet own, in the
hope that on the date I'm contracted to cough up said greenbacks, they'll be
cheaper than they are now relative to the currency I do currently own).
Absent regulatory risk (eg persistent US government's commitment to low gold /
high dollar), that's hardly a ridiculous position, after all.  The US current
account is a persistent menace and we're seeing investment and profit
shortfalls in the US economy.

Now, regulation could be such that I'd have to prove I possess the money to
buy the sold greenbacks were the greenback to appreciate.  But such regulation
would be profoundly problematic, no?  I mean, no-one'd know how much I'd need
in reserve, would they?  The Aus$ has plummeted 60% against the greenback over
the last 20-odd years, for instance.  Who coulda seen that coming in 1980,
when wool, steel, uranium and food still looked to be prime
currency-sustaining commodities?  Who coulda seen I'd need reserves exceeding
double the contract just to meet that contract?  How dead would you kill the
finance sector if you were to require that kind of cover for every contract?
And the Turkish Lira plummeted that far in the single year up to June 2001!
And then there's the Argentinian Peso ...

And what if I was big enough to control the share value of salient domestic
stocks (you effectively control the Australian stock market if you own, say,
15% of each of NewsCorp, Telstra and BHP - and there are entities big enough
to do just that).  What if I short the Aus$ and then promptly sell my 15%
parcels?  Wouldn't I seriously lessen the worth of the productive assets that
underpin the value of the Aus$?  Wouldn't capital flight (some of it to my own
prettily positioned company) undermine the currency I'd shorted?  Wouldn't I
have committed a fraud on (a) the entity who bought my contract, and (b) the
Australian people?

Is this what happened in SE Asia in '97?  Is this how Big Finance might
protect its currently dodgy positions?  Would Australia then be paying for,
indeed perpetuating the price of the greenback and the gambling of the big
Wall St houses?  Is this how core-induced crises are geographically deflected
- are imposed on the periphery?

Apologies if I'm talking bollocks.

Cheers,
Rob.