Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
A while ago you posted an example about stocks which showed that they were not fungible beyond certain levels. I'd guess the same goes for reserves? You have a stock of reserves same way as you can have company stocks, but if you start spending significant amounts the value you get out of it declines.
by nanne (zwaerdenmaecker@gmail.com) on Sat May 31st, 2008 at 12:26:37 PM EST
I'm wondering if it may be more illuminating to consider reserves as formalised political and economic relationships rather than piles of cash with a nominal value, and a also rudimentary type of international credit rating.

Declining value may not matter if you get benefits in kind - e.g. China and the US.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat May 31st, 2008 at 12:52:16 PM EST
[ Parent ]
there is the same sort of supply-and-demand dynamic - an actual market. That is one of them contradictions-of-capitalism that you hear so much about (well - not so much these days, but we used to hear about them). The contradiction in large terms is that, as the ruling class works to consolidate control (stifle competition) in one bailiwick, it sharpens competition between ruling groups. (I love Marxist terminology.)

When you get to the level of foreign reserves, the games become quite serious. China is allowed to build up U.S. dollars, then the Feds unleash inflation at a level that reduces their international value by about half (see the last three years). Then the myriad ramifications of that policy have all of their effects, such as a pissed-off U.S. populace and a pissed-off Chinese ruling class. Interesting times, indeed.

paul spencer

by paul spencer (paulgspencer@gmail.com) on Sun Jun 1st, 2008 at 11:13:57 AM EST
[ Parent ]


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