Opinion

Emanuel Derman

Mysteries of macro

By Emanuel Derman
January 27, 2012

1. Consider two countries, America and China. Suppose (only suppose) China manipulates its currency to keep it low, thereby making exports cheaper and imports expensive, benefiting its balance of payments and mercantile ambitions, harming America’s.

2. Now consider America alone, with two subpopulations: borrowers and savers. Suppose someone at the top manipulates T-bill prices, keeping them high (i.e. keeping interest rates low), benefiting the borrowers and harming the savers.

My question:

Why is 1. often considered reprehensible and unfair, while 2. is merely business as usual and unremarkable, even praiseworthy? Is there something fundamentally different about 1. when compared with 2.? Are bonds fundamentally different from currencies, stocks, real-estate, other assets?

Or does it just depend on who you are?

 

 

Comments
2 comments so far | RSS Comments RSS

Brilliant!
Economics of course is not science, it is merely posturing by ideologues on behalf of vested interests.
Agree with Krugman that the Austerians are outta their minds? That is merely agreeing that demand should be inflated to provide jobs for the working classes. But inflation is bad for creditors, for the interests of capital, who care not a jot about the unemployed. Austerity, even deflation is good … if you’re a net creditor, a money man.
Read Murray Rothbard’s histories of panics and depressions in the 19th century and the painstaking presentation of the various ideological viewpoints (surprisingly presented without any editorializing by Rothbard) and the conflict between the hard money and soft money interests. Are we not having the same arguments today? The language is a little different, the concepts are a bit fancier. But there is nothing essentially different. Where is the progress?

Posted by sleepydozey | Report as abusive
 

Why is 1. often considered reprehensible and unfair ? This is an example of double think, it viewed as unfair (since many Chinese are effectively slaves – like the ones working in factories on site woken up at midnight because Apple wants to change a screw size). But we love to buy the products cheaply and enjoy a better ‘quality of the physical’ life than our parents. But this is a fools game long term.

Posted by LA2.0 | Report as abusive
 

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