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putting aside the currency exchange mechanics, my question is more that if a sovereign debtor wants to give me a trillion bolivars of debt payment, but has a 10
by clairity 6y ago
putting aside the currency exchange mechanics, my question is more that if a sovereign debtor wants to give me a trillion bolivars of debt payment, but has a 1000 pounds of ready coffee beans, i'd demand the coffee beans rather than the bolivars because that won't devalue in the global economy nearly as quickly.
certainly this can only work if the country has enough various goods worth more in other currencies than they have debt in their currency. it's almost like an arbitrage, but it's not entirely riskless (which by definition, arbitrages are).
- lumost 6y ago^ counter-parties can balance their books in this manner and are likely to do it more efficiently than loan officers. Hypothetically, your example can be performed at an arbitrary scale with the only constraint being how fast the currency devalues prints and how fast you can turn bolivars into coffee beans, gold, or other hard goods. additionally, the government may not have rights to the beans. In cases where governments can expropriate assets and goods from individuals, they have used them to directly raise foreign currency. A notable example of this is the Ukrainian famine.