Re: Imposing the US Dollar on Canada

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Trade weighted index, thought valid in principle, is inadequate when trade is
measured exclusively by merchandise exchange.  But if trade is defined
comprehensively to include flow of funds, including capital and credit flow, then
trade weighted index will reduce foreign exchange distortions.  The foreign
exchange market (more than $2 trillion per day) is much bigger that the
merchandise trade sector.  This is a financial issue more than an economics
issue.

Henry C.K. Liu

Juan Jose Barrios wrote:

> I would say that he acts as if he believes that exchange rates are determined
> by portfolio managers who hold assets and money in two currencies: dollars
> and euros. If we were to construct a trade-weighted index for Argentina, we
> should include the brazilian real with a 36% weight, more or less. So I dont
> think Cavallo thinks trade flows are important for e.r. determination, so
> far....juan
>
> Christopher Niggle wrote:
>
> > Barkley, others interested:  I should probably know the answer to this,
> > but how would you peg a domestic currency to two other currencies which
> > float against each other?  Construct a trade-weighted index?  Chris
> >
> > On Sun, 22 Apr 2001, J. Barkley Rosser, Jr. wrote:
> >
> > >       In the Washington Post two days ago it was
> > > reported that Cavallo, the new "super economics
> > > minister" in Argentina, has pulled Argentina back
> > > from dollarization.  Apparently the peso will now
> > > be pegged 50-50 to the US dollar and the euro.
> > > I do not know if they are still maintaining some kind
> > > of currency board arrangement or not.
> > >       There are some in Argentina who are upset at
> > > this move, fearful that it signals a return of hyperinflation,
> > > the defeat of which the currency board with the dollar
> > > was associated with.  Certainly this is a defeat for
> > > those who wanted full dollarization, which a major
> > > faction did, probably including the "comprador" elements,
> > > but probably not consisting only of them.
> > >       BTW, I think that Argentina is making a wise move
> > > in this regard.  Clearly the currency board has not worked
> > > out well for them.  I wish to make it clear, since I see below
> > > that I am getting bashed on this issue, that I do not in
> > > general support dollarization in most countries.
> > > Barkley Rosser
> > > ----- Original Message -----
> > > From: "J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>
> > > To: <phillp2@xxxxxxxxxxxxxxx>
> > > Cc: "Post Keynesian Thought" <pkt@xxxxxxxxxxxxxxxx>
> > > Sent: Friday, April 20, 2001 5:52 PM
> > > Subject: Re: Imposing the US Dollar on Canada
> > >
> > >
> > > > Paul,
> > > >       Well, it is not at all clear that the US gains
> > > > very much from having other countries get
> > > > dollarized.  Thus, although it has not fully
> > > > dollarized, Argentina has a currency board,
> > > > the next "best" thing to it.  Right now Argentina
> > > > is in about its third year of recession, clearly
> > > > not good for Argentina.  Is it good for any group
> > > > in the US?
> > > >      Well, there was a column in the
> > > > Washington Post a few days ago by Robert
> > > > Samuelson forecasting that Argentina is on
> > > > the verge of having a full blown foreign exchange
> > > > and debt crisis given its inability to service its
> > > > $140 billion foreign debt.  Samuelson predicted
> > > > that a bellyup by Argentina could trigger a full
> > > > scale global financial collapse.  This is in the
> > > > interests of US capitalists or anybody else?
> > > > Even without a full-blown crash, recession in
> > > > Argentina is not good for US capitalists because
> > > > their companies there are losing money and it is
> > > > difficult to export anything to them.
> > > > Barkley Rosser
> > > > ----- Original Message -----
> > > > From: <phillp2@xxxxxxxxxxxxxxx>
> > > > To: <pkt@xxxxxxxxxxxxxxxx>
> > > > Sent: Thursday, April 19, 2001 11:43 PM
> > > > Subject: Re: Imposing the US Dollar on Canada
> > > >
> > > >
> > > > > I am quite amazed at the discussion of this topic.  It could only
> > > > > occur on list that was dominated by  Americans who don't have the
> > > > > slightest knowledge of, or appreciation of, dependent economies.
> > > > > Poor Keynes must be rolling over in his grave in the utmost pain of
> > > > > despair.  Alan's post was unbelievable.  Henry did something to
> > > > > redress the balance but if this is the level of understanding of
> > > > > monetary and macro economics, we must all weep and wail.
> > > > >
> > > > > Is this really the level of economic analysis and understanding of
> > > > > PKT?  God!, I hope not.
> > > > >
> > > > > Paul Phillips,
> > > > > Economics,
> > > > > University of Manitoba
> > > > >
> > > >
> > > >
> > >
> > >