In figure 3 we show the money and domestic asset market equilibrium schedules for given stocks of each of the assets. Along MM the domestic money market is in equilibrium. Higher interest rates reduce money demand so that equilibrium requires a depreciation and thus a rise in the domestic currency value of foreign assets and - hence wealth. The exchange rate thus plays a balancing role by affecting the valuation of assets.
Rudiger DornbuschRelated topics
assets balancing currency depreciation equilibrium foreign given interest market money rise show thus valuation value wealth higherRelated quotes
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We need examples of people who, leaving Heaven to decide whether they are to rise in the world, decide for themselves that they will be happy in it, and have resolved to seek not greater wealth, but simpler pleasure; not higher fortune, but deeper felicity; making the first of possessions, self-possession; and honouring themselves in the harmless pride and calm pursuits of peace.
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The world is now unipolar and contains only one superpower. Canada shares a continent with that superpower. In this context, given our common values and the political, economic and security interests that we share with the United States, there is now no more important foreign policy interest for Canada than maintaining the ability to exercise effective influence in Washington so as to advance unique Canadian policy objectives.
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Ben's Mr. Market allegory may seem out-of-date in today's investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising "Take two aspirins?"
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