oussama94
05-29-2017, 00:13
In the monetary model example we showed that by
buying stocks and bonds in the marketplace the Japanese government
was basically printing yen (increasing the money supply). Monetary
model theorists would conclude this monetary growth would in fact spark
inflation (more yen chasing fewer products), decrease demand for the yen,
and finally cause the yen to depreciate across the board. A currency substitution
theorist would agree with this scenario and look to take advantage
of this by shorting the yen or, if long the yen, by promptly getting out of
the position. By taking this action, our yen trader is helping to drive the
market precisely in that direction thus making the monetary model theory
a fait accompli.
buying stocks and bonds in the marketplace the Japanese government
was basically printing yen (increasing the money supply). Monetary
model theorists would conclude this monetary growth would in fact spark
inflation (more yen chasing fewer products), decrease demand for the yen,
and finally cause the yen to depreciate across the board. A currency substitution
theorist would agree with this scenario and look to take advantage
of this by shorting the yen or, if long the yen, by promptly getting out of
the position. By taking this action, our yen trader is helping to drive the
market precisely in that direction thus making the monetary model theory
a fait accompli.