| W R E Reynolds on Sun, 21 Jul 2002 19:33:45 +0200 (CEST) |
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| RE: <nettime> Re: Deflation, anyone? |
> These falls directly reflect capital flight > from the US, principally the US stock markets. While this may have been accurate at one point, the changing nature of currency markets means it is no longer so. While there may well be substantial capital leaving the US today, it is incorrect to link currency values with capital flows. I recent years I have researched the currency markets extensively for articles I wrote for Mother Jones, The Globe and Mail and Shift magazine. These markets have become even more speculative than equity (stock) markets. Such capital flows may impact on the markets, but the overwhelming majority of transactions in the currency markets are purely speculative. Sentiment also plays a huge role, as it does in any large market system. Over $1 trillion in currency is traded each day. When the market is hopping, as it is right now, the value of those trades can exceed $2 trillion/day. Actual requirements (for bank settlements and other tangible needs) rarely exceed $50 billion. The value of these trades has increased so dramatically in the past decade they can no longer be taken as an indicator of anything but the nervousness of currency traders. The value of currencies is as speculative as those of stocks and do not reflect underlying economic realities. Witness the overvalued Asian currencies prior to their crash in the fall of '98, and their incredible devaluation (some by as much as 70 per cent) within a matter of days - a period when little changed in their economies, but when sentiment amongst traders changed dramatically. Also witness the fact that the Canadian dollar has dropped almost four per cent in the past week relative to the US dollar, while Canada possesses the strongest economy (in terms of GDP growth) is the OECD, and has strong positive inflows of capital from the US and large and growing trade surplus with the US - both of which have been true for years and, in theory are sucking capital out of the US. W R E Reynolds # distributed via <nettime>: no commercial use without permission # <nettime> is a moderated mailing list for net criticism, # collaborative text filtering and cultural politics of the nets # more info: [email protected] and "info nettime-l" in the msg body # archive: http://www.nettime.org contact: [email protected]