yea for all the claims of 'i eat meat for protein unlike those vegans/vegetarians who are protein deficient', meat is just a treat.
Base money includes some of the Government liabilities like bank notes, coins, settlement balances (also known as reserves which are balances held by commercial banks at Central Bank used to settle payments between banks). It does not include Government bonds.
More importantly, it doesn't include bank loans. Commercial banks create money too, they use leverage to create bank loans in excess of liquid assets they have which creates bank deposits (bank money). This is called endogenous money. And this bank money is special in that it is 'money', Government accepts it to settle debts you owe to it (eg. taxes, fees, fines), contracts are also largely enforced in bank money (you cannot buy a house with cash in many countries for instance, you can with bank money).
Another thing, bank money is also freely convertible to base money at par ($1 of bank money = $1 of base money). The Central Bank makes sure that's the case so there are no run on banks, when you make a transfer from one bank to another, base money is used (aforementioned settlement balances), you also convert bank money to Government's by withdrawing cash (since that's a Govt liability).
Given that bank money is freely convertible to base money, that bank money is created well in excess of base money (due to leverage), and that the base money is convertible without capital controls to USD (for example), the 'currency board' cannot guarantee convertibility to US Dollars in a mechanical sense. The usual claim that currency boards cannot be broken isn't true.
Raising interest rates is a way to keep people from exchanging base money for foreign currency, acts as a sort of an incentive. This cannot work in the extreme, e.g. Russia in the 90s where Central Bank raised rates to triple digits, paying out billions in Rubles which were convertible to US Dollars.
Of course, this doesn't apply if your currency floats, in this case any intervention becomes discretionary.
Issue is trade is only a small component of balancing international payments. UAE has no capital controls, so anyone can swap Dirham for Dollar freely, and their Central Bank must defend the rate they set. It's basically a money laundering haven so...
I would expand the third point is even more complicated and it's not just independent monetary policy but also independent fiscal policy you have to give up. At the extreme, no matter how high the interest rate is, a peg cannot be defended without running out of reserves. Basically you cannot:
- Provide absolute promise to provide a fixed rate for converting local currency to another. (fixed exchange rates)
- Provide convertibility in unlimited amounts. (no capital controls)
- Unconstrained (Gov spending and bank credit creation) creation of domestic money convertible into foreign currency i.e. demand to convert domestic money into foreign currency does not exceed the system’s capacity.
All at once. UAE does so because its reserves are so large attacking the peg is very difficult and usually impractical but mechanically the peg is theoretically breakable, even currency boards like Hong Kong are (they only back base money, not all money). So credibility matters a lot.
Really don't see how that'll solve their problem which is that their currency peg is under pressure? Unless China provides their own currency swap arrangement or loan to UAE.
Devaluation must be really scary thing for them considering how long they've held their $1=3.67 Dirham parity. Everyone has planned and expected that rate. Abandoning it is much riskier for UAE than some settlement being done in Yuan for the US.
That said, UAE has trillions in Dollar denominated assets in their SWF, just that it's mostly in illiquid assets seeking higher returns.
I think it's more about liquidity and credibility than actual "UAE being broke" issue. Credibility also matters, if UAE starts selling assets to maintain peg, it'll create speculative pressure which will further increase outflows.
IMF approves second review of agreement with Argentina and disburses another billion dollars
Basically another capital flight and treat subsidy. Much of which will go into paying existing debt ponzi.
Let's see how long this can continue before the Peso must collapse.
U.S. House of Companies in Argentina (AmCham). “We will continue to cut public spending to continue lowering taxes because taxes are a theft [...] We will take all the pesos off the street until the inflation rate collapses [...] We will not give up an iota in monetary policy, we will not give up an iota in continuing to deregulate,” he said. “We’re going to tie ourselves to the ship’s stick, we’re not going to listen to the siren songs.”
- Tax cut increases pesos in circulation.
- 30% interest rates increases pesos in circulation, it literally increases the fiscal deficit.
- They want taxes on workers but not themselves, since otherwise fiscal deficit goes toward infinity as % of revenue. In fact, they want workers to be in debt to private banks so they can pay taxes and other debts.
Both tax cuts for rich and interest payments are wasteful spending going into hoards or leaking into imports.
Really don't see a way out for Argentina unless they default on all their foreign currency debt and float the Peso, like actually float it, not pretend float since the latter forces Government to accommodate private demand for foreign currency. Then only can they raise socially useful spending.
The Iran war external shock really hurting the Gov's popularity. Cooking gas has become unaffordable or unavailable for the poor.
Even ignoring all of it, SPD is a shitty neoliberal party now. :P
Are communists responsible for that too?
Yeah it'll be a very interesting form of capitalism. Corps exist to turn money into more money. Since the state is now a biz, it can't run deficits/losses anymore. This implies no one will have any money since taxes > spending permanently. This can only be sustainable if profits are generated externally from foreign sector. But this also means not all countries can run profits.
Cortisol spike moment
J street plan is bullshit
Israel doesn't need aid from the US because they transformed their economy in the 2000s, into exporting services. Netanyahu and others know this. Cutting off some transfers is just a way to to prevent excess appreciation of shekel naturally without Bank of Israel having to buy up excess $.
In other words, where many global south countries struggle to obtain Dollars, Israel has too much of it.
By cutting off only the aid part, Israel can reduce the bad optics of being a parasite all while not being accused of mercantilism.
24
Interest rate hikes will not get ships moving through the Strait of Hormuz more quickly
(billmitchell.org)
article for free
Bulgaria became the 21st member of the Eurozone on Thursday, completing a long-sought step in its European integration despite years of political instability and pro-Russian campaigning against the move.
Sofia has failed to form a stable government for nearly five years. Large protests in November led to the collapse of the latest cabinet and raised the prospect of an eighth election in as many years. Allegations of corruption and mismanagement, the absence of a 2026 budget and sustained fear-mongering by pro-Russian forces have all tainted the moment of euro adoption.
“I warmly welcome Bulgaria to the euro family,” said European Central Bank president Christine Lagarde.
“The euro is a powerful symbol of what Europe can achieve when we work together, and of the shared values and collective strength that we can leverage to confront the global geopolitical uncertainty that we face at the moment.”
What might otherwise have been a celebration of European values has proved more divisive in the Balkan country. Support for the euro stands at about 40 per cent, while opposition exceeds half the population, according to two Eurobarometer surveys conducted in 2025.
Public scepticism is driven in part by fears that retailers will round up prices during the currency conversion, as occurred in other countries after euro entry. The prolonged absence of a stable government has also undermined official efforts to defend the changeover.
Disinformation watchdogs say opposition has been amplified by a sustained campaign from pro-Russian political forces and co-ordinated messaging on social media. Parties such as the far-right Revival, along with Bulgaria’s pro-Russian president Rumen Radev, have called for a referendum on the euro.
Anti-euro activism has been led chiefly by Revival, which has organised protests across Bulgaria, some featuring Russian flags and clashes with police outside EU institutions. During one demonstration in Sofia, supporters attempted to set fire to part of the European Commission’s delegation, chanting slogans such as “No to the euro” and “We want to keep the lev”. The messaging centres on claims that joining the euro would erode national sovereignty, undermine Bulgarian identity and benefit political elites.
Goran Georgiev, an expert on Russian disinformation at the Centre for the Study of Democracy in Sofia, points to a “decades-long push by the Kremlin and its proxies to block Bulgaria’s accession first to the EU and Nato, and later to Schengen and the Eurozone.
“Bulgaria’s euro-Atlantic integration succeeded despite this, and despite systemic problems such as corruption and the lack of an independent justice system,” he said. “The reforms pledged at EU accession in 2007 are still the ones the country struggles to deliver.”
Outgoing prime minister Rosen Zhelyazkov acknowledged “challenges” ahead but said the euro would have a “long-term positive effect” on the economy. Bulgaria’s inflation rate of 5.2 per cent in November “had nothing to do with the euro”, he added.
The switch from the lev to the euro is expected to have limited immediate economic impact, as the national currency has been pegged to the Deutsche mark and later the euro since the 1990s to guard against hyperinflation.
Eurozone membership, however, gives Bulgaria a seat on the European Central Bank’s governing council for the first time, granting it a direct voice in monetary policy.
Now Bulgaria is locked in, no more option to break the currency board.
Don't like what Troika did to Greece and PIIGS? You are spreading pro-Russia propaganda.
You don't like that Eurozone member country debt have credit risk and are closer to American states than actual countries? Russian propagandist.
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