Market Curiosity: Exploring Markets And Systems

February 11, 2013

Divine right of kings in 2 silly currency actions

Filed under: Castpoints, Editorials — Tags: , , — Jeff Fitzmyers @ 10:52 am

Hollande warns on euro strength, denounces markets for currencies Francois Hollande has issued a clear warning…”

Backed by what? Nothing, other than his say so? How is something clear if there are no details?

“…that the current strength of the euro…”

What strength? The weekly EUR has been in a trading range for at least 5 years.

EUR weekly Feb 11 2013

The monthly chart supports the idea that the EUR is not at obvious extremes.

EUR monthly feb 11 2013

“…could damage the fragile economic recovery in Europe…”

How so? Because he says so?? Could the issue really be they need to devalue the currency to pay off all the debt they have created via the hidden tax of inflation? Probably the most damaging thing is politicians changing rules to bail out favorites, which costs money, and increases uncertainty, and therefore makes capital reluctant to be deployed and create wealth.

“…calling for international action to stem currency distortions…”

  • Why should I be tasked (pay money) to fix a problem that is only a problem because some guy thousands of miles away asserts it’s a problem? Projecting power is costly.
  • How would I know what kind of distortion to add to an already supposedly distorted currency? That’s ripe for unintended consequences. Who suffers the consequences?
  • Why would distorting and already distorted currency work? Are there any examples in history of this working long term?
  • What’s in it for me?

“…The euro should not fluctuate…”

All fait currencies fluctuant — especially in relationship to asset backed currencies, because they are backed by what suits the divine rights of kings. When they want money they just print it up. If you want less fluctuation, back your currency by something: stable, does not spoil, is semi rare, is divisible, is fungible, and has value that is readily accepted worldwide. Oh, you don’t like that because you can’t just print it up every time you want something for nothing. Like promising entitlements, that grandchildren will have to pay for in exchange for votes (control).

“…according to the mood of the markets…”

It’s not a capricious “mood”. (I love how “markets” are denigrated!) It’s simple supply and demand, constantly messed with by on purpose “distortions”. Oh, you mean currencies should only fluctuate based on the divine right of king’s mood? I’ll stop here.

Many welcome departure of pesky penny The [Canadian] penny is on the way out, and that’s good news for people tired of dealing with the nuisance coin…”

It’s only a nuisance because the currency has been debased enough to make the metal worth more than the hidden tax of seignorage. Funny how the opening line makes 2 kinds of theft, the hidden taxes of inflation and seignorage, seem like gov is on top of things, helping people out, with good news. Although the whole article never talks about why the penny has become a nuisance, 3 of the 6 commenter’s apparently do. The penny is 94% steel. Iron costs money to “print”.

There would be no problem if the coin was valued in grams of steel. Instead politicians decided to define the value of a resource by fiat (probably to accrue seigniorage). Has there ever been a case where a fiat currency worked in 5,000 years of economic story? Not that I know of.

GDP only doubles…
canada-gdp-per-capita

Yet money supply up “a lot”…
canada-money-supply-m3

Update February 13 2013

The Great Lie That Will Bankrupt America The world’s money system – the scales upon which the world’s market functions – is being deliberately destroyed. And so, the monetary signals that guide the markets – which are supposed to represent the supply and demand decisions of billions of people – have become distorted…

[Edward Gibbon] …when the freedom they wished for most was freedom from responsibility, then Athens ceased to be free and was never free again.

Free competition among currencies minimizes mal-investment.

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