MMP Blog #28 Responses
Comments and responses on the Modern Money Primer Part 28.
Even if the government ties its hands behind its back and its shoes together, it makes no difference – the balance sheets still balance.
A country might choose to use a foreign currency for domestic policy purposes. Here, however, we are examining a nation that does not issue a currency at all.
A country that floats its exchange rate can enjoy domestic policy independence and free capital flows. A country that pegs its exchange rate must choose to regulate capital flows or must abandon domestic policy independence.
We will look to the frequent claim that the US is “special”—while it might be able to run persistent government deficits and trade deficits, other countries cannot.