Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
You're right, liquidity is the right word to use, but I don't think your story makes that case because of the fact that foreign currency's supply is fixed, just like gold.  This means you can't separate the demand for gold or dollars as scarce commodities -- investments to hold, not currency to trade -- from the characteristics of demand for either as a form of money.  If there were no limit on the supply of dollars, and people still made runs on the bank for gold and not dollars, then your account of cause and effect would hold.  
by santiago on Fri Dec 30th, 2011 at 11:03:11 AM EST
[ Parent ]

Others have rated this comment as follows:


Occasional Series