On Oct 15, 2011, at 12:15 PM, Sebastian Gerhardt wrote:
> Here I take the oldfashioned position of Anwar Shaikh and Rania Antonpoulos,
> refusing the Ricardo-view of comparative cost and insisting on the
> real basics of absolute advantage in international trade. In this
> view there is not much room for manipulationof exchange rates by
> central banks.
But market rates often oscillate a lot around that intrinsic value. Central banks can't fight the underlying trend, but they can move market rates. Fun fact: the Federal Reserve has, over the long term, made money on its currency interventions. To talk the language of the market, they're the smart money, and the traders who push values to extremes are the dumb money.
Doug