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Old 02-18-2002, 06:31 AM
Posts: n/a
Default Re: An excellent article, a must read for beginner

The currency trading argument is one I actually quite conclusively agree with. Any economist can tell you when there are moves in currency markets caused by speculators betting against a peg, dirty float, or trading band it inevitably leads to an overshooting of the FX. While traders invariably defend their actions as "punishing bad policymaking" the truth is they are flat-out destabilizing the market and sucking profit out of a country's misfortune. Not that I am a bleeding heart liberal, but what does their currency trading have to do with improving liquidity or making the markets more efficient? What they are in fact usually doing is almost cornering a market making it overwhelmingly risky to bet against them. In fact that is what they are looking for, making the risks going against their actions so risky that the market implodes and that the populace of the country they are targeting even has to join the bandwagon for fear of what may happen. Capital markets are efficient and a good place to speculate. They generate positives for economies in providing capital for expansion by rewarding innovation and success and punishing failure. Currency market attacks are nothing more than extremely rich bankers and investors trying to bankrupt a sovereign government and even more so the lowest classes of the general population that has no financial interest in other investment markets, but end up the hardest hit when currency markets are over-run. I don't think there is any solution that makes economic sense to moderate these attacks, but give me one good legitimate reason to defend the attack of a currency. It certainly isn't because they need to use the currency for any kind of business purpose, which is theoretically the intent of having a currency market in the first place.
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