Posts Tagged ‘currency’
“The almighty dollar, that great object of universal devotion”*…
The reigning global financial regime, at the center of which sits the U.S. Dollar, was first formalized at the 1944 Bretton Woods Conference. While the rules have evolved since then, the Dollar remains by far the world’s leading reserve currency and is routinely used to price/settle international transactions around the world.
While there are concerns in the U.S. that a strong dollar can hurt U.S. exports and costs jobs, high global demand for dollars allows the United States to borrow money at a lower cost and amplifies the power of its sanctions.
So recent talk of “the decline of the dollar” (c.f., e.g., here) has concerned many. Not to worry, Noah Smith suggests…
Saudi Arabia recently announced that it’s open to settling trade (i.e., oil sales) in currencies other than the U.S. dollar. This has provoked a fair amount of consternation about the potential end of dollar dominance. This fear has been intensified by all the Bitcoin people who are screaming that the banking system is going to collapse and that this is going to spell the end of the U.S. dollar.
In fact, people shouldn’t be concerned at all. I’ve written two posts — one last year and one this February — explaining why A) de-dollarization is extremely unlikely to happen anytime soon, and B) some degree of diversification away from the dollar would actually be good for the United States. Both posts were paywalled, but I decided to unpaywall them, so that everyone can enjoy the peace of mind of not having to worry about the death of the dollar…
Read them at “Unpaywalled: Two posts about de-dollarization,” from @Noahpinion.
Then contemplate this analysis (by economists at the Federal Reserve Bank of New York) of the consequences of that continuity…
The importance of the U.S. dollar in the context of the international monetary system has been examined and studied extensively. In this post, we argue that the dollar is not only the dominant global currency but also a key variable affecting global economic conditions. We describe the mechanism through which the dollar acts as a procyclical force, generating what we dub the “Dollar’s Imperial Circle,” where swings in the dollar govern global macro developments…
Worth reading in full and pondering: “The Dollar’s Imperial Circle,” from @LibertyStEcon (a newsletter of @NewYorkFed).
* Washington Irving
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As we contemplate currency, we might spare a thought for Leonid Kantorovich; he died on this date in 1986. An economist and mathematician best known for his theory and development of techniques for the optimal allocation of resources, he is regarded as the founder of linear programming— for which he received the Nobel Memorial Prize in Economic Sciences in 1975.
“When somebody says it’s not about the money, it’s about the money”*…
Further to yesterday’s post (about the relevance of Edith Wharton’s observations of her Gilded Age to ours), Dorinda Evans takes a look at rough contemporary of Wharton’s, and at his (similarly relevant) work…
After supposedly stealing 500,000 francs from his bank, the mysterious Victor Dubreuil (b. 1842) turned up penniless in the United States and began to paint dazzling trompe l’oeil images of dollar bills. Once associated with counterfeiting and subject to seizures by the Treasury Department, these artworks [are nowconsidered] unique anti-capitalist visions among the most daring and socially critical of his time…
The fascinating story of Victor Dubreuil’s cryptic currencies and the questions they raise about value and values: “Illusory Wealth,” in @PublicDomainRev.
For an illuminating look at Dubreuil’s spiritual successor, see Lawrence Weschler’s wonderful Boggs: A Comedy of Values.
For a loosely analogous artist: “Nobody knows what a dollar is, what the word means, what holds the thing up, what it stands in for… what the hell are they? What do they do? How do they do it?”
And for an appreciation of trompe l’oeil (and its influence on Cubism), see “Feinting Spells.”
* H.L. Mencken
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As we contemplate currency, we might pour a cup of birthday tea for English mathematician, logician, photographer, and Anglican cleric, Charles Lutwidge Dodgson– better known as the author Lewis Carroll– born on this date in 1832.
“There is no use in trying,” said Alice; “one can’t believe impossible things.”
“I dare say you haven’t had much practice,” said the Queen. “When I was your age, I always did it for half an hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.”
– Alice in Wonderland (nee “Alice’s Adventures Underground,” then “Alice’s Adventures in Wonderland”)
Oh, and… Happy Mozart’s Birthday!
“Virtue is more to be feared than vice, because its excesses are not subject to the regulation of conscience”*…
Regulation often addresses real public needs/concerns. But the costs of compliance often favor the largest players in a regulated market– which can lead to consolidation. From the Oxford Martin School, a current example…
Exploiting the timing and territorial scope of the European Union’s General Data Protection Regulation (GDPR), this paper examines how privacy regulation shaped firm performance in a large sample of companies across 61 countries and 34 industries. Controlling for firm and country-industry-year unobserved characteristics, we compare the outcomes of firms at different levels of exposure to EU markets, before and after the enforcement of the GDPR in 2018. We find that enhanced data protection had the unintended consequence of reducing the financial performance of companies targeting European consumers. Across our full sample, firms exposed to the regulation experienced a 8% decline in profits, and a 2% reduction in sales. An exception is large technology companies, which were relatively unaffected by the regulation on both performance measures. Meanwhile, we find the negative impact on profits among small technology companies to be almost double the average effect across our full sample. Following several robustness tests and placebo regressions, we conclude that the GDPR has had significant negative impacts on firm performance in general, and on small companies in particular…
“Privacy Regulation and Firm Performance: Estimating the GDPR Effect Globally,” from @oxmartinschool via @benedictevans
[Image above: source]
* Adam Smith
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As we seek balance, we might recall that it was on this date in 1969 that the U.S. officially withdrew $500, $1,000, $5,000, and $10,000 bills from circulation, pursuant to an executive order by President Richard Nixon. The larger bills had been used by banks and the government for large financial transactions, but had been rendered obsolete by the electronic money transfer system.
Those large-denomination bills were last printed on December 27, 1945 and are still considered legal tender. Indeed, (a version of) the $500 is still used in the game of Monopoly.
“Count my own money, see the paper cut fingers?”*…
A fascinating look, from The Pudding, at who’s on those banknotes…
If you open your wallet right now, who do you see there? You’re probably looking at people who made history in your country. Without even noticing, you’re always carrying around reminders of prominent people in your wallet, but have you ever wondered, who gets to be on banknotes?
In many places, paper money still fails to represent a portion of the population it serves, with many countries preferring to showcase people (usually men) in positions of power or of national acclaim on their banknotes. However, money can also be a platform to uplift the unsung leaders who deserve our gratitude for making our countries what they are. We decided to investigate this imbalance. We gathered data about the people who appear on banknotes around the world, to see what we could learn about them and their countries.
We wanted this analysis to be as international as possible so we inquired into 38 countries from all 22 sub and sub-subregions of the world, based on the United Nations’ Statistics Department geoscheme. Our dataset represents [236 unique banknotes and 241 unique individuals].
The majority of the individuals depicted on banknotes are male [79%].
We looked at their professions and accomplishments, among other characteristics, to understand who is featured on the banknotes of the world, and what it took to get there…
A visual essay about the famous figures who represent today’s currencies around the world: “Who’s in Your Wallet?,” from @puddingviz.
* Drake
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As we count ’em, we might recall that it was on this date in 1863 that Congress passed the Coinage Act of 1864, which changed the composition of the one-cent coin and authorized the minting of the two-cent coin– the first piece of U.S. currency to bear (as a result of this legislation) the legend “In God We Trust.”
“Anyone who lives within their means suffers from a lack of imagination”*…
A remarkable true tale from the always-illuminating folks at Planet Money…
This is a story about how an economist and his buddies tricked the people of Brazil into saving the country from rampant inflation. They had a crazy, unlikely plan, and it worked.
Twenty years ago, Brazil’s inflation rate hit 80 percent per month. At that rate, if eggs cost $1 one day, they’ll cost $2 a month later. If it keeps up for a year, they’ll cost $1,000…
“How Fake Money Saved Brazil,” from @planetmoney and @NPR.
For an even more complete telling, listen to the podcast: “How Four Drinking Buddies Saved Brazil.”
* Oscar Wilde
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As we follow the money, we might recall that it was on this date in 1941, in his State of the Union Address, the president Franklin D. Roosevelt outlined the Four Freedoms— the fundamental values of democracy: freedom of speech, freedom of worship, freedom from want, freedom from fear. These precepts were furthered by Eleanor Roosevelt, who incorporated them into the Preamble to the United Nations Universal Declaration of Human Rights.
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