[lbo-talk] Dark matter in the current account

[boddi satva]

I think that if you look at Latin America, for example, you see the
other side of "dark matter". Assets and economic growth seem to dry up
and go away. These economies don't accumulate as they should. The
people work and have nothing to show for it. I think that's because
their systems do not value their assets. Think about it this way: you
can sell the cash flow of most important economic assets anywhere in
the world into the American/dollar market but the reverse flow is much
less likely. It's difficult, for example, to sell American business
cash flows for a fair price in Indian rupees.

Instead of asking why people abroad keep taking our excess dollars, I
think it would be better to ask why they should stop. You can buy
anything you need to buy, price anything on a world standard and save
your money at any level of risk/return in the most liquid capital
markets. So long as the US keeps making bond payments and foreign
exchange reserves are, in the main, held in dollars to protect *other*
currencies, why not save in dollars?

Meanwhile, the third world is in a perpetual currency crisis and
economies driven by exports to the US struggle to keep their
currencies from rising too quickly and killing their price advantage.
So it seems to me you have non-dollar assets perpetually deflating
while people glady accept excess dollars because they know they can
use them and they know what those dollars are worth.

boddi