Abolishing Cash

Bigus Dickus · Subject: Abolishing Cash Sat Jun 20, 2009 3:35 am

yeah yeah it's on lewrockwell I know

http://business.timesonline.co.uk/tol/business/economics/article6531299.ece

but seriously, wtf are these people thinking? I hope they do it, and wreck that shitty country even further.

vichy · Subject: Re: Abolishing Cash Sat Jun 20, 2009 4:50 pm

yeah, abolishing cash is about the most direct way to cause social chaos.

Guest

How does Japan perpetuate %0 interest rates? Do they just keep expanding the money supply (buying bonds and whatnot)?

NonEntity · Number of posts: 2594 Registration date: 2007-11-08

ReIgNoFrAdNeSs wrote:

How does Japan perpetuate %0 interest rates? Do they just keep expanding the money supply (buying bonds and whatnot)?

Note: Speculation from my large pool of ignorance...

I think that part of the situation is that the Japanese culture tends to eschew borrowing in the first place, tending more towards personal savings instead. It's therefore easy to have 0% lending rates with no increase in the monetary base if no one is actually borrowing that money.

- NonE

vichy · Subject: Re: Abolishing Cash Mon Jun 22, 2009 8:17 pm

NonEntity wrote:

ReIgNoFrAdNeSs wrote:

How does Japan perpetuate %0 interest rates? Do they just keep expanding the money supply (buying bonds and whatnot)?

Note: Speculation from my large pool of ignorance...

I think that part of the situation is that the Japanese culture tends to eschew borrowing in the first place, tending more towards personal savings instead. It's therefore easy to have 0% lending rates with no increase in the monetary base if no one is actually borrowing that money.

- NonE

But why wouldn't foreign investors take out credit and use it for projects in Japan or abroad?

NonEntity · Number of posts: 2594 Registration date: 2007-11-08

vichy wrote:

But why wouldn't foreign investors take out credit and use it for projects in Japan or abroad?

Well, unless I'm mistaken, that is exactly what "the carry trade" is. You borrow money in Japan at very low interest, invest it in another country at a higher rate of return and pocket the difference.

So I guess this just goes to prove that I'm clueless as to the answer. scratch

- NonE

Static4367 · Subject: Re: Abolishing Cash Wed Jun 24, 2009 9:21 pm

Exchange rates, inflation rates, and interest rates all modulate each other such that the arbitrage opportunities you suggest disappear.

For example if country A has inflation of 2% and country B has inflation of 4% then the exchange rate of country A should appreciate by 2% to equalize the two time periods.

Of course in the real world you can't split observed interest rates into the real rate and the inflation rate. But, you can bet that if a significant arbitrage opportunity did exist then some trader would be exploiting it and by doing so pushing everything back into balance.