This is Called "Capital Flight"

https://www.noahpinion.blog/p/this-is-called-capital-flight

by nabla9 • 1 year ago

35 41 1 year ago

neilwilson13• 1 year ago

No it isn't 'capital flight' Noah - that's a fixed exchange rate concept. There are no fewer dollars in the US dollar currency area after the sale than before.

Specifically "Normally, when Treasuries get sold off, people park their money in cash, instead of moving it overseas. This time, a bunch of investors actually pulled their money out of America entirely."

They didn't, because to get out you require a bunch of other investors putting their money into America, otherwise there would be no exchange in the first place.

It's a fallacy of composition. Individual investors can sell their dollars and buy euros, but investors overall cannot. Somebody has to be selling euros and buying dollars, and the question has to be asked "what did they do with those dollars when they got them, and why were they coming in that direction in the first place?".

Liquidating static savings and pushing them back into the flow tends to cause more physical transactions to occur. It's taking money out of a drawer and spending it. That's likely stimulative.

dave44203• 1 year ago

There are no fewer dollars in the US dollar currency area after the sale than before… but those dollars are worth less than before. If capital has not left the area, it has been destroyed. That’s not to say that the US economy is inevitably doomed… but you sound very bullish.

neilwilson13• 1 year ago

They are not worth less in dollar terms. The same number of dollars will still settle next months mortgage bill, or tax bill regardless of what it may or may not exchange into Euros.

And the exchange rate of barrels to tomatoes hasn’t changed as that is a productivity issue.

There is no universal chart against which value is determined. Instead there are ever moving currency zone orbits, possibly shifting financial savings around.

What there won’t be is any “shortage of capital”

argsnd• 1 year ago

"They didn't, because to get out you require a bunch of other investors putting their money into America, otherwise there would be no exchange in the first place."

And when those other investors bought those dollars they did so for a lower price in another currency than they previously would have, which results in the overall value of the total dollars to fall. This alone does not signify capital flight, but the combination with rising yields does. There's simply less demand both for US dollars and all dollar-denominated assets.

neilwilson13• 1 year ago

It doesn’t cause the value of dollars to fall in dollar terms.

Again you’re implying a fixed exchange and there isn’t one. The exchange rate of barrels to tomatoes hasn’t altered since that is a matter of productivity

This is why “devaluations” in the fixed exchange rate period didn’t work

ksec• 1 year ago

Was thinking of roughly in the similar line as with your other reply. But you worded it much better than I could. Thank You.

silverpepsi• 1 year ago

Can someone explain why it isn't disingenuous to look at Euros?

Firstly, euros cost now as much as they did three years ago. So that is clearly a price that can be reached with any number of causes. Then, UK pounds cost only what they did last September. And other world currencies? Values vs the dollar are all over the map, up, down, and nearly unchanged. No clear trend at all.

I had heard a good way to check the absolute value of dollars is to google USDX. Guess what? It's not particularly low, well within the normal range of ups and downs.

nabla9• 1 year ago

Because Capital flight is the problem, not declining value of USD.

The fall of dollar was caused by capital flight. Money is moving mainly into Euro-area. Not UK, not elsewhere.

Investors are taking money out from the US. They sell assets, get dollars, then covert them to other currencies and take them out of country.

testing223213• 1 year ago

Suddenly, the world is treating the US like a Developing country

It’s pretty clear trump himself is doing that, playing pump and dump with the entire economy.

ZeroGravitas• 1 year ago

This is paywalled but his earlier piece from the 9th has been opened to all:

"All the arguments for Trump's tariffs are wrong and bad"

https://www.noahpinion.blog/p/all-the-arguments-for-tariffs-...

From it I learned that only 60% of Americans disagree with the statement "Tariffs are Tax Cuts".

And also that the chaos in the markets was muted because only 15% of traders even believed the tariffs would be in place for more than 6 months.

I'm somewhat saddened that this opportunity to touch the stove has not been fully utilised and so we are doomed to repeat it.

jmcgough• 1 year ago

Several people within the administration (particularly Stephen Miran) are highly in favor of dropping the value of the USD, as they believe it's about 25% higher than it should be due to being used as the international reserve currency: https://www.hudsonbaycapital.com/documents/FG/hudsonbay/rese...

This is Called "Capital Flight"

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