On the other hand, certain financial techniques can reduce the impact of such purchases on the currency. One is sterilisation, in which highly valued assets are sold at the same time that the weaker assets are purchased, which keeps the money supply neutral. Another technique is simply to accept the bad assets as long-term collateral (as opposed to short-term repo swaps) to be held until their market value stabilises. This would imply, as a quid pro quo, adjustments in taxation and expenditure in the economies of the weaker states to improve the perceived value of the assets. COUNT 3
QSN1 How does sterilisation help to keep the money flow even? ANS1 highly valued assets are sold at the same time that the weaker assets are purchased QSN2 What can a state do with bad assets, rather than cashing them in directly? ANS2 long-term collateral QSN3 How can weaker states improve the surface value of their assets? ANS3 adjustments in taxation and expenditure in the economies