Reply to post: Re: HS2 and the Galileo replacement

Re: HS2 and the Galileo replacement

@ Dan 55

"As do dollarized economies"

ok

"You mean they shouldn't run a deficit."

So you do understand that they are chained to the same restraints over the euro area. The same would apply within the US but not as much for economies unofficially using the dollar internally.

"They have a shared central bank setting the interest rate, as do dollarized economies."

Ok. And the states in the US use that money interacting with the central bank, the interaction being to varying degrees outside the US aka a weaker effect unless it suddenly got dumped onto the US economy (which would then hit as stimulus to the US and the FED would likely react by unwinding QE even faster). If the dollars stay away from the US supply of money the FED wont really care about it.

"No, that would be bailing out Californian bonds."

And would that put more USD in the US? Which of course would be devaluing the currency (QE/stimulus) which would be affecting the US as a whole. If its just locals swapping the money for assets in California then that is California taking on debt owed to the people.

"No backpedalling."

I aint. You made a pointless statement "EU not being a nation state". Its not back pedalling to point out you are saying something fairly pointless to the discussion. We are talking about the currency area which is the EU's currency area. Please tell me you know that?

"Once again, if a country dollarizes its economy, it becomes part of the dollar currency area."

And I am saying kinda maybe depending on circumstances. In a place where they just need a currency to trade with each other then no not really. They are not paying tax to the US, those dollars pretty much vanishing from the US as they are used internally. A currency pegged to the dollar then bailed out would no longer be pegged to the dollar, that is self explanatory (or if bailed out to keep the peg is likely dooming the economy but not affecting the US). If the place uses the dollar and gets bailed out, what are they bailed out in? The US controls the dollar. I am not sure where you are stuck.

"You're arguing that bailing out a country is bailing out another country"

No! That is not what I am arguing. Bail out France is not bailing out the UK. Bail out the GBP and you bail out the UK. Bail out the EUR and you bail out the EUR, these effects are the point of the bailout. The US dollar is slightly more difficult as it is often used internally in economies where their official currency went to pot.

"I'm using the example of a dollarized economy to show that is not true."

Try the UK instead of the US then. Bail out Scotland, or Wales or NI or England. The GBP goes down. Put more GBP in the system and the GBP falls. That is the intention of doing it.