An introductory guide to understanding exchange rates through the lens of Modern Monetary Theory (MMT). Foreign trade, currency speculation, fixed and floating exchange rates, and More
I’m new to Substack and you are the first page/person/stack (whatever it’s called here) I’ve come across, and this is the first blog post I’ve read so far. I started on my MMT learning kick relatively recently, but it seems like a very reasonable way of viewing the economic world through a different lens. I will be coming back for more 👍
I agree that businesses have very little control over the exchange rate. However, governments can, and do, set, or at least manipulate deliberately, their exchange rates through industrial policy and their reliance on and balance of, imports/exports. I think their is maybe a substantial factor of political choice at work at the macro level?
You might be right - not sure what levers you are thinking of - but I suppose they could push up interest rates to attract foreign investment - though I can't see a US or UK adopting that kind of policy for that reason. And - any policy that is perceived to be strengthening the economy could catch the attention of currency speculators. There are a lot of variables at play - and currency issuers/floating exchange rate countries are operating in a different world from those with fixed exchange rates and no currency of their own to issue.
No doubt about that final part of your reply, Jim. There’s been a lot of discussion on this topic since Steve Keen’s paper on the trade/exchange / import thing last week. Very topical piece to put out just now and very informative.
I’m new to Substack and you are the first page/person/stack (whatever it’s called here) I’ve come across, and this is the first blog post I’ve read so far. I started on my MMT learning kick relatively recently, but it seems like a very reasonable way of viewing the economic world through a different lens. I will be coming back for more 👍
Thanks JMirrer. Very generous of you to say.
Love this newsletter. Thanks for all the links to definitions, explanations etc. Really helpful to understanding the full scope of lots of topics.
Thanks Sandra.
It's great to hear that. :-)
I agree that businesses have very little control over the exchange rate. However, governments can, and do, set, or at least manipulate deliberately, their exchange rates through industrial policy and their reliance on and balance of, imports/exports. I think their is maybe a substantial factor of political choice at work at the macro level?
You might be right - not sure what levers you are thinking of - but I suppose they could push up interest rates to attract foreign investment - though I can't see a US or UK adopting that kind of policy for that reason. And - any policy that is perceived to be strengthening the economy could catch the attention of currency speculators. There are a lot of variables at play - and currency issuers/floating exchange rate countries are operating in a different world from those with fixed exchange rates and no currency of their own to issue.
No doubt about that final part of your reply, Jim. There’s been a lot of discussion on this topic since Steve Keen’s paper on the trade/exchange / import thing last week. Very topical piece to put out just now and very informative.
Thanks D.C.Murray.