Bill writes >Yeah, you Heartless Bastards. I might have to read Krugman if nobody helps out!< That's a fate worse than death; I wouldn't even wish it on Max Sawicki or Louis Proyect (who I suspect are really the same person, based on the pictures at their web pages). >Actually, I think I have satisfied myself that, in theory, things are >as I depicted them. [skipping the diagram] > >Are the monetary results the following, waving our magic ceteris >paribus wand?: > > o Supply of Yen drops in Japan, causing an interest rate rise > o Supply of Yen rises on exchange, causing price of Yen to drop > o Supply of Pound drops on exchange, causing price of Pound to rise > o Supply of Pound rises in England, causing an interest rate drop I think the problem here is there's a confusion of the supplies of money and loanable funds, which help to determine the interest rate, and the supply of currency, which helps to determine the exchange rate. But I would restate the story as follows: * the Bank of Japan reduces the supply of money (perhaps via an open-market purchase of Japanese treasury bonds, though I don't know how they do monetary policy), driving up the interest rate on Yen-denominated assets. * the rise in the interest rate on Y-denominated assets means, all else constant, that the demand for Yen to buy these assets rises, so that the price of the Y _rises_ [not "drops" as above]. * a rise in the Y exchange rate relative to the British Pound is the same thing as a _fall_ in the value of the Pound relative to the Yen. * if the Bank of England wants to prevent this falling Pound, it will have to raise the interest rate on Pound-denominated assets (unless the other determinants of the exchange rate change). It might do this by purchasing British treasury bonds on the open market (or raising the "bank rate" on loans to banks). This would involve a reduction of the amount of money and loanable funds in Britain. The above story is different from Bill's. Maybe I don't understand the purpose of his question beyond his building of >a from-the-ground-up understanding of how international trade and finance is structured.< >This is because I want to then identify the groups involved and the policy prescriptions they tend to urge upon governments. This then, hopefully, leads to answers of the sine qua non question of political economics, Cui bono? and it's correlate Cui futuo? (My conjugation is probably wrong, but you get the picture.).< what does cui futuo mean? "who gets f**cked"? Louis Proyect writes: >Sometimes I say to myself--no offense to anybody on PEN-L--that scholarship is only meaningful if you don't get paid for it. Who cares if you get paid to read De Cecco, if it is part of getting ahead.< Actually, there's a lot of truth to this anti-academic slur. A lot of people do a lot of research in order to do a lot of publications in order to get tenure and promotion -- even though they're not very interested in the subjects being researched. (Similarly, people are rewarded for editing or publishing journals that publish those articles.) That means that there's a lot of stuff being published that no-one in his or her right mind would be interested in. >I am afraid that one of the reasons that there is so little discussion on PEN-L is that most people regard this type of discussion as part of their job and who wants to talk about their job...< I think the explanation is simpler: lbo-talk is sapping pen-l's energy. I for one have been overwhelmed by the volume of messages on lbo-talk (and their content, topics like the Spice Girls!) and am pulling out. I hope that I have the energy to contribute to pen-l's rebuilding. > Sometimes I think the worst thing about the academy is the tendency it has to dull one's appetite for the very subjects one is professionally involved with.< Part of this is the over-publication rat-race sketched above. Part of this is based on the overspecialization that plagues almost all academics. in pen-l solidarity, Jim Devine [EMAIL PROTECTED] & http://clawww.lmu.edu/Departments/ECON/jdevine.html
