people assumed floating exchange rates would handle balance, in analog to Hume’s species flow. no. a payouts tax might be analogous to a degree with an interest rate decline, or an expectation of depreciation, but they are not the same thing. a tax is an instrument with a target.

market participants understand they are not taking a position in a complex system, some of many accounts of which suggests imbalance will punish them, but where exceptions are almost as common as the rule.

they understand there is intention on the other side which will, however gradually, *constrain* outcomes. it is not just prices that matter, but the mechanism or intention that sits behind the prices. never reason from a price change. but you can reason from the overt policy behind a tax.