Re: Soros & immiseration

[Daniel Davies <dsquared@xxxxxxxxxxxxxxxx>]

hmmmm I see what you mean ... but battles to defend a currency are the sort
of thing that you find yourself drifting into, not the sort of thing you
make a decision to do.  The speculators have the advantage of choosing the
ground.  As a central banker, you don't get any declaration of war from
Soros ... you just think you're bumbling along, minding your own business
and administering a fixed exchange rate, then after a while you notice that
all the other buyers seem to be disappearing in the money market, then the
short positions start building up.

I've never actually lived through one first hand - I worked for the BoE
starting in 1994, two years after the ERM fiasco - but the people there who
remembered it seemed to remember it as a horrible panicky mess rather than a
battle (admittedly they lost).  Are there any Latin American or Asian
central bankers on the list?

dd

-----Original Message-----
From: PEN-L list [mailto:PEN-L@xxxxxxxxxxxxxxxx]On Behalf Of Doug
Henwood
Sent: 07 September 2004 20:58
To: PEN-L@xxxxxxxxxxxxxxxx
Subject: Re: Soros & immiseration


Daniel Davies wrote:

>It's the most unconscionable waste of money (I would suggest that the
>incidence of the losses is taxpayers, to the tune of the interest which
>would have been earned on the reserves).  But I think that regarding the
>flaw in central bankers which leads to these fiascoes as machismo is the
>wrong psychology.  It's more like Nick Leeson syndrome (btw, "Rogue Trader"
>was on telly in the UK a couple of weeks ago and confirmed me in my view
>that it's a fantastic and wholly underrated movie; definitely better than
>"Wall Street" and much truer as a picture of what life's like in financial
>markets).  You start out believing that the peg can be defended, then
things
>start going against you, but by now the position you've built up is so big
>that you can't countenance failure, so you keep on buying in the hope that
>you can drive the speculators away, and so on ... it's a psychology of fear
>of being found out rather than defiant belief in one's abilities.

I meant the impulse to defend the currency, which seems imbued with
dick-waving bravado.

Doug