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the basis of international trade is actually the mutual agreement that money actually does represent value, and thus, wealth.

No, the basis of international trade is comparative advantage. International trade does not require that money retain its purchasing power any longer than it takes the exporter to exchange his foreign currency with the importer's domestic currency.

For the purposes of foreign trade, you only need money to retain its value for longer than that if you want to run an aggregate current accounts surplus. Which your trading partners have no particular obligation to support or encourage.

Running a trade surplus is a form of industrial subsidy. Other people don't have any obligation to pay your industrial subsidies.

And your proverbial Swabian Housewife does not have the money in her basement - she has it in the bank. Where she gets decent interest.

In other words, the state pays her a subsidy for doing fuck all with her money. That policy creates no wealth. Not a single meter of railway is built because she has money in the bank. Not a single ball bearing is cast because she has money in the bank. Not a single ship is launched because she has money in the bank. Money in the bank has, quite literally, no economic function until it is spent.

Tell me again why money in the bank should pay interest at all?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Feb 14th, 2012 at 05:51:39 PM EST
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