Re: Danby seminar -- Mahathir vs. currency traders

[Warren Mosler <mosler@xxxxxxxx>]

Colin Danby wrote:
>
> I just received an interesting off-list query about my
> notes on SE Asian currency and financial crises (in the
> Thirlwall post).  The query noted the obloquy that
> Malaysian PM Mohamad Mahathir has recently heaped upon
> currency traders, blaming them for Malaysia's if not the
> whole region's recent troubles.  The query also suggested
> that the main alternative explanation for those troubles,
> that these economies' "funadamentals" were weak, did not
> seem compelling.
>
> In response:
>
> I'm not sympathetic with Mahathir's comments.  I don't find
> currency traders terribly attractive people, but they're
> opportunists and the opportunity has to be made first.  The
> opportunity I think has a lot to do with financial structure,
> and in particular overborrowing in dollars.  Once a lot of
> firms have accumulated dollar debt to finance local-currency-
> earning assets, there is a terrible instability built into the
> system because the moment the currency starts to slide those
> firms will try to buy dollars to cover their positions,
> worsening the slide.  You have in essence a run on the central
> bank.

With a floating currency?

Warren Mosler