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Nairaland Forum / Nairaland / General / Politics / Why Does A Country Needs To Borrow When She Can Easily Print More? (26864 Views)
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Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Becomrich11: 2:24am On Dec 02, 2010 |
You I once worked for a canadian bank. So i know alittle about the banking here. zimbawbwe inflation had nothing to do with printing money. There was no trade. They were block from doing business with most nation. even some african countries are not doing business with them. There was an Africa union block, if I remember against them, You cant go and print money just because you want to pay salary, NO. That was what the 1971 or 73 award was about. You have to create an avenue where nigeria govt has money or some form of revenue. zimbawbwe inflation was base on economy block by the international community and bad government. Bumping out money should be a non disclosure. It should be secret so that it does not affect the economy while it is done. The central bank dont have to tell anyone when they bump money into the system. This way it does not bring inflation with it. When africa countries want to bump money into the system, they make a big show about , so that people think they are doing something. Which is what you see. That people having knowledge of that information that that money would be bump into the economy is what cause inflation. It is the informationwe have on stock that affect stock. If you dont have any information, the stock would remain stable. same thing goes for inflation. Nigeria govt make a show of it, and that information causes inflation. It should be top secret, over here they sometime even denied when it has been done. you can see them going on television. When you start telling people. the information is what cause inflation. It is like stock, good and bad news affect the stock exchange. If nigeria is broke, you cut down on spending. remove the local govt from allocation. cut down on trip abroad, cut done on sport and other not to financial rewarding issue. But the issue still remain, that banks can not run on depositors fund, which is What Iweala and others were doing. Why do you think they call it FEDERAL RESERVE in the USA.?? what does the word RESERVE mean. the issue is, sanusi idea of taken money bank from people was a wrong concept. this is was crash the nigeria economy. If you look at the USA or Canada, Let me use canada for example. from what I know, I am not accurate about, it, it is 10 times the depositor fund in circulation. imagine if all the depositors show up at the doors of the banks and tell them, they want all thier money. While you have borrow out thier money. You see money is paper. Where do you think the mortgage money we borrow from banks comes from. Do you think it is from Heaven.?? Or do you think it is from the moon or do you think it is mostly from depositor fund. No. Find our how much is in circulation in the USA and how much the depositors fund are. If i was president of Nigeria, what I would make banks to do is find out how much deposit in all the banks. And if the total depositors fund is 1 trillion. The total amount available money for borrow should be 10 trillion. But in Nigeria, banks are only running base on depositors fund, that is wrong. What the banks should have is 10 times what the depositor fund is. In canada it is 10 times. according to my friend. The reason those bank had problem, is because depositors came to collect thier money , while they had already borrowed out the money. What I would do if I was president is . to increase the fund available to the banks. beyoud what the depositor fund is. The reason let say you have 1 trillion in the banks, the owners can wake up one day and collect thier money. And you would have zero money in the bank. But you have to check your GOLD too. for security. The central bank should have 10 trillion if the we have 1 trillion of depositor fund. While 6 trillion of that money for Business(including mortgage, business and companies loan etc ) and another 3 trillion held at the centre bank. I know canadian mortgage system fund is not coming from depositor fund only. But more of govt fund. While the 6 trillion business fund given to bank is borrow by the banks from the central bank. It also give the federal revenue. Which mean the central bank is making profit from money the banks are borrowing. If the central bank borrow out to the banks at the rate of 2.0 % . it makes money too. This help the government to have revenue to pay salary and others. since the central bank would be making money from interest. This also remove the so call dependant of the federal govt on oil as its sole means of funding. Bumping out the money should be in stages, if not , you would create inflation.You dont inject the money because you want to have an election. and run away and steal the money. which is what PDP want to do. You wait after the election. What they want to do is bump money and steal it and run away, which is wrong. that is why they ae acting the whole show, some of them are criminal. What you have now is the banks are mostly or solely on depositors fund. And even that money Sanusi is collecting back the money. Mortgage are expensive. And if you are going to borrow someone mortgage over 30 years. It cant comes from depositors money, because depositor can come back and claim thier money. Which has been the reason why you have stress in the bank. Are you going to tell depositor, you are going to wait 30 years to get your money, that the bank has borrow out the money for 30 years. No, you dont do that. Iweala and others did not do a good job while they were there. If i was president, this is one thing I would do, the issue is all the people in power in nigeria are not expose people. This is why I think I should be president, because, your people in power have no idea, they are just there as showglass. As president, I would have power to reform the system . It is obvious your leaders lack knowledge it is too obvious. Your problem is there is noway zimbabwe can ever have a good economy with bad leaders. Any nation with bad leader do not have good economy. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by oncolor: 2:32am On Dec 02, 2010 |
Katsumoto: Your option 1 only happens when government gives out free money to all its citizens or majority of its citizens without any corresponding productivity. If govt instead prints this money and uses it to pay for developmental projects then the companies that provide these services go out and hire more workers, they have reduced unemployment, which in turn will give the workers in these companies more purchasing power allowing them to buy more goods which in turn will stimulate those companies producing the goods they are buying to produce more and expand their factories etc. I think it is actually a good thing because you are not just printing money and giving to citizens but developing basic services which would have a multiplier effect on the economy. Like 3kay945 pointed out, what happens when the UN or WORLD BANK or some other foreign donors doll out billions in aid for one project or the other? |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Musiwa13: 4:10am On Dec 02, 2010 |
you can only give money to business to borrow. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by rhymz(m): 7:28am On Dec 02, 2010 |
I understant that if a government were to print more money and circulate it into its own economy, that this would inevitably lead to increased inflation in its country. Sound argument for not printing more money. But why would a country not print more money to purchase from other countries (e.g. to repay debt or to purchase raw materials). Wouldn ’t the extra money then simply be dumped into the other country, leading to higher inflation in that country and not your own? Or perhaps is the answer that in dumping the extra money overseas, you are indirectly creating more money in your own territory? Maybe a naive question but I would love to have a good answer to it! Besides, I don't think it is in every instance that printing money can lead to inflation. If only government can determine the right amount of money to be printed in line with production then its inflationary effect might not be tangible. Also, in cases of recession, government can print out money to stimulate demand and in effect, stimulate the economy, the US is a recent example of this method and so far, it is working. I think the bone of contention is how to meet money supplied with volume of production(demand), if the discrepancy can be solved, printing your way out of debt might not realy be a bad idea. My 2cent. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by keni1000: 7:46am On Dec 02, 2010 |
Nikka u r a fuckn retard, I believe every literate nigerian shld av had at least a basic knowledge of economics, |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by NnaNna4(m): 8:33am On Dec 02, 2010 |
[color=#990000][/color][size=8pt][/size][font=Lucida Sans Unicode][/font]NOW I KNOW WHY NAIRA DEPRECIATED SO RAPIDLY DURING BABAGIDA REGIME. INCCESSANT CASH MINTING. IT IS COMMON KNOWLEDGE THAT NIGERIA CANNOT OR WILL NOT PRINT DOLLAR. SO YOU PRINT NAIRA AND USE IT TO BUY DOLLAR AND CONTINOUSLY NAIRA REDUCED AGAINST DOLLAR NEVER TO RISE TO FORMER GLORY. THANKS FOR THE WISE CONTRIBUTORS. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Katsumoto: 8:34am On Dec 02, 2010 |
3kay945: oncolor: In the options you speak of, money is already in supply, it is not simply created (printed). |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by rhymz(m): 8:47am On Dec 02, 2010 |
Nn-a-Nn-a:. . .can you explain in details how Naira went below dollar as a result of printing more naira note? I think there was depreciation because the minted notes where not used to creat or support production that could ve balanced any exchange differential caused by the minted notes. The Americans and some european countries ve done thesame thing recently and it has rather been taking them off the recession. Money borrowed from world bank and co can be seen in a similar light, is not like they were gotten from profits or sth yet they are supplied to the money market and to offset national debt without all the attendant negetives that's alleged to be associated with just printing money. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by cnnnigeria: 10:13am On Dec 02, 2010 |
so as to avoid inflation |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Nobody: 10:28am On Dec 02, 2010 |
Why is it that we cannot just print money to grow our economy instead of the difficult path of increasing production? Most of the answers I have seen on this forum are focused on secondary functions and uses of money such as stocks, import export, etc. The answer lies in the fundamental definition and use of money. Economics will quickly use the word inflation without breaking it down. But before explaining, I wish to point out that you can actually get away with printing small extra amounts of money, it is when you do it on a large scale that you have a problem. Let me start by saying first that money itself is not a resource. (Many modern economics argue otherwise, I argued a lot about this with my Sec. Sch economics teacher and we could not agree). Money is a representation of the actual resources we have. Without money (e.g cowrie shells as used in olden days) we will be stuck with the problem of trade by barter, and the attendant issues of finding someone who has want you want and wants what you have so that an exchange can take place. So say you have a goat and want a spoon, you find someone who wants a goat and has hanger, you still have a big problem. Even when you find someone who has a spoon and wants a goat, will you give him a whole goat for a single spoon? or would you want to kill your goat just to give him the leg for a spoon, the rest of the goat will soon spoil if not exchanged, or you have to eat the remaining goat meat for like a week when you prefer yam. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Nobody: 10:29am On Dec 02, 2010 |
Hence using another object (Money) to represent each unit value of any type of resource allows us: 1. To be able to trade without having to find someone who wants what we have and have what we want 2. To be able to trade off a small part of a resource like a whole cow without having to loose the remaining value of the resource in the process. Money is just a particular object accepted by all or compelled to by accepted by all through societal laws to serve as an intermediate form to which we can convert any resource in other to have a uniform medium of exchange and trade. The total collection of money in circulation is therefore directly related or dependent on the amount of resources that is in existence within a society. But can be increased or decreased, usually by the Central Bank of a country. We have a relative value we attach to different resources, a cow may be said to worth about 50 chickens or ten goats. Depending on the amount of money in circulation we can use say 10 cowries to represent a chicken in similar manner. If a single individual should find or make more cowries, he might be able to cheat the system by buying goods with cowries that do not represent any resource he or she has. That is what money counterfeiters do. But if the entire society decide to put more cowries in circulation, it will in no way increase the amount of chickens or cows or trees that the society has. What will happen is that since cowries are no longer as scarce as before, a chicken may now be exchanged for 15 cowries instead of 10. That is what you call an inflation viz a viz Inflation in the money value of the chicken. In all my talk replace the cowry shells with square paper cuts signed by the king or rulers (Thats what paper money is). Instead of going to the sea to find more cowry shells to put in circulation, you just have to print and cut more papers with special features so that counterfeiters cannot do same. Note that resources can actually be created, but you need some resource to create more resources. In contrast to wealth creation by printing more money, there is a similar classical case in commercial banks. A commercial bank will collect your money (indirectly your resource) to safe keep for you and give you an ordinary paper to hold for your claims. When you go away, someone who wants to create more resources will come to the bank and explain this his or her wonderful business idea and the amount of production resources he needs and try to convince the bank to give him your resources and that of others, promising to have finished production at a certain time and return equal value of resources to the bank, and some extra called interest. If the bank agrees they will allow such, if he is successful, the bank makes a profit and returns your resources whenever you ask for it back. But in this case, the money in circulation has not increased, but the resources have increased. The overall effect in the economy is that you have more resources and less money, so resources will exchange for less, like our earlier chicken may now be exchanged for only 8 cowries instead of ten. When the banks over-do wealth creation and lend too many people whose production business collectively fail at the same time, you have a vaccum being represented by money in circulation. Such vaccuums must collapse, thats the famous financial crisis. When you hound the banks too tightly that they do not lend money out, no extra resource will be created and only rich people will have enough money to create more resources and you know most rich people only like to enjoy their wealth. Money in societies that have many more resources compared to the money they circulate (like US) will be considered to have more value than money from countries with less resources and equivalent amount of money in circulation. The specific number relating the two countries’ money is the exchange rate. Remember money is not a resource, unless you consider using it as elements in your new mosaic art work. The funniest part of Nigerians understanding of money lies in the attitude of our leaders. When someone loots say two billion naira and sends it to swiss bank, what you have done is to give swiss people a blank authority to choose whatever resources they want from Nigeria, use it to create jobs and more resources for their people and pay back a pittance when you ask for your money back. The swiss bank will definitely lend the money out for swiss people to create more wealth, while our silly leader comes back to print more worthless money. Meanwhile his grandson or grand daughter will in the next ten years lose a job or not even find one because the production firm or factory that could have employed them was never established or had to close down as the Swedes had already come around with the huge amount of our money the leader kept in their bank, they used it to collect the best of our groundnut, the best of our palm nuts, cocoa, crude oil. they will go back process and add value to them, comeback and sell to us at a price that will kill any competitive producer we have and ensure they have a future market for their products. they will then give back to our dear leader his money and take the profit. We remain non-industrialized, while they wax strong all because our leader studpidly made their cost of production unbeliveably low. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by kulutempa: 10:46am On Dec 02, 2010 |
KenGali: Ding, Ding, Ding. Bingo. Someone hits the nail on the head at last. Money is a medium of exchange, That is why it used to be backed by gold unitl the American President Nixon decided in 1971 to stop this. To those who believe printing money is good thing, try painting the picture of a goat on a piece of paper, and then try to exchange it for 10 live chickens, and see how far you get. Why do you think counterfeiting is a criminal offence? Printing by governments is no different , but they resort to it when they get desperate and there is no other alternative. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by kulutempa: 11:13am On Dec 02, 2010 |
Thank you for your helpful contribution KenGali. It is quite clear from what you say that this is why more productive countries like Germany and America, have stronger currencies than countries like Nigeria and Ghana. It is also why our currency was much stronger in the 1960s because of our agricultural productivity and export of commodities like groundnuts and cocoa which fetched good prices on the world market. In the 1970s the naira was also strong because we were exporting crude oil whose price was skyrocketing due to the Arab oil embargo. We therefore had a trade surplus with other countries and a strong balance of trade. As soon as the oil price crashed in the 1980s the naira, not surprisingly crashed as well and its exchange rate relative to strong currencies like pound sterling and the American dollar, fell sharply. In a nutshell the value of your currency is directly related to your productivity and trade balance, and printing more of it without adding value to your economy is a recipe for economic disaster. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by cecegorz(m): 11:18am On Dec 02, 2010 |
Thanks y'all the economics profs in the house. Basically i see all your explanations of the ills of printing money in one light, that is govt stashing GMG bags full of N1000 bills and mailing to every family in the country. Definitely every body knows that Zimbabwe will become a paradise compared to Nigeria at the end of it. I remember when Jimoh Ibrahim mooted this idea during the banking sector crises, he was laughed off as a no-brainer but that was what Sanusi did eventually to rescue the banks. Now, when a govt borrows billions of Naira as they are won't to, more funds too are injected into the economy. The question is, instead of more borrowing and becoming a perpetual lave to the creditors, why can't govt discretely mint funds and use it to revamp infrastructures that will trigger more productivity? Like building more and refurbishing refineries, power sector, rail lines and roads network expansion?? Profs, oya educate us |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Nobody: 11:31am On Dec 02, 2010 |
Please read my earlier post and you might answer the question for yourself. It is not true that the money printed by sanusi had no effect on the economy, the effect was just not significant enough for you to notice, and most of the banks did not even use the fund so might not have been in the danger he described, but thats another story. For your infrastructural revival, you do not use money paper to build bridges rather it is the cement, stones and rods that you buy with the money that you use to build a bridge or road or house. If your government prints 60 billion to build airport runway, a soon a it buys the first set of building materials , it will inject a huge amount of notes into circulation, invariably the system will balance out so that goods will cost more since there is no attendant increase in productivity. Initially the effect will not be noticable just like Sanusi's bailout, but If your government continues doing this all throughout the year by the year end, you will be buying a loaf of bread for N1000, and your exchange rate will be like 50000 naira to a dollar, and you sallary will be like N20,000,000 a month but it will not be enough to feed your family for the month. it is called Hyper-inflation. But when a country borrows money from another, they are actually borrowing resources not just empty papers. You might also think why not print money and use for imports, If you do that the money will eventually return to circulate in your countrys economy as other countrys will use it to buy from you. After a few days, international traders by laws of demand and supply will feel the increase in the amount of money you are circulating and lower your exchange rate or refuse to buy from you if you do not lower the value of your money. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by cecegorz(m): 11:46am On Dec 02, 2010 |
^^^^ Well taken. The question is still not yet answered. How is the money injected from printing different from the ones brought in from IMF and world bank as loans. If both has the same effect, as in triggering inflationary tendencies, why still go cap in hand. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by medoski(m): 11:51am On Dec 02, 2010 |
I will try to make my language as soft and as accessible as possible. these facts are important: The amount of cash money in circulation is a very small percentage of the amount 0f money people actually take to banks to deposit, that means in a situation of mass withdrawal, the banking system cannot meet cash demand. secondly, there are parametres that actually determines the amount of money to be pumped into circulation. before the oil boom in Nigeria, it use to be the activities of the Agricultural Marketing Board, now it crude oil sales that determines the amount of money in circulation. Also, if we go back to the history of the introduction of paper money, we found out that all the circulating papers used as a means of exchange in old England were all backed by either a gold deposit with goldsmith or some other valuables, before the government of England hijacked the transaction from the Goldsmith. This means that when printint papers to circulate as cash, the nation should be able to redeem the cash in gold or some other valuables. Usually the stock exchange market is a barometre that measures the economic activities in a country. but unfortunately in Nigeria 80% of transactions are informal i e not through the bank. so we find it very difficult to get statistics to make projections I wil make subsequent cotributions . thanks |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by mecussey(m): 11:54am On Dec 02, 2010 |
This is the question I've been asking since I was a kid; unfortunately, I don't know economics and most guys I ask just say things which looked like they crammed from textbooks, like defining inflation for me. I think I now know why, from Nairaland. Whoever created this world (Earth) and everything in it is an expert. Minus one animal or plant may have caused inflation or deflation; I am sure if I do like him, I will be more rich with Naira. Who supported me? |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Nobody: 12:09pm On Dec 02, 2010 |
cecegorz:I told you why in my last post. If a country brorrows from another country, they are borrowing real actual resources unlike when they just print. The money IMF has is from contributions of many countries. These are real hard work earnings of these countrys represented as money. They are indirectly lending you there prodcution resources(coal, diamond, machines, etc) etc. unlike when you just print empty papers. Infact, esp in case of African country's when EU or US lend them money, because they know you must convert it into the actual resources you need such as machines or say mosquito nets for health programs, they will insist that you must buy those things from them too. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by jamesugo: 12:12pm On Dec 02, 2010 |
Printing more money-neglecting borrowing will lead to inflation,high taxation,etc. The money in circulation becomes much and will definitely create way for economic degradation. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by cecegorz(m): 12:20pm On Dec 02, 2010 |
Well done Kengali, But believe me folks, inspite of what you read in text books and what the western media bandy about, President Nixon's action of the early 70's that took the dollar off gold standard was actually to allow the feds print more money as the need arises. The only major area i have issues with our clime is that while other sensible leaders will ensure that funds are maximised in productive ventures, ours' are frittered away into foreign bank accounts, leaving a gaping hole for the naira to have a free-fall. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Katsumoto: 12:43pm On Dec 02, 2010 |
kulutempa: The value of the currency is not linked to the productive capacity of a country. It is no secret that most exporting countries want a lower value for their exports so as to increase their exports. The chinese have been manipulating the Yuan so as to sell more products which is a disadvantage to other competiting countries such as the US and the EU. The value of the Naira dropped in the 80s as necessary conditions from the IMF for the loans from the Shagari and IBB (SAP) governments. Japan is an export driven country, yet the Yen has a lower value than the Swiss Francs. Also, before the advent of the Euro, the Sterling had more value than the Mark yet Germany exports more than Britain. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Katsumoto: 12:50pm On Dec 02, 2010 |
KenGali: Your post is more about the uses of money and does not address the problems caused by an increase in the supply of money in the economy. What happens when the CBN prints more money? |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Nobody: 1:01pm On Dec 02, 2010 |
Katsumoto: KenGali: |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Katsumoto: 1:13pm On Dec 02, 2010 |
KenGali: This is more about paper replacing cowrie shells or other legal tenders and the actions adopted by central banks to prevent counterfeiting. I do not see anything about increased supply of money and its concomitant effects. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Homonide: 3:45pm On Dec 02, 2010 |
Even though i aint no economist, i think you guys are missing a fundamental an important point why Countries can't just mint money when they need it, which is that- money is used in minting money It is said for instance that the cost of producing the polymer notes in Nigeria is actually more than the value of the notes themselves. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Katsumoto: 3:59pm On Dec 02, 2010 |
Homonide: It would be unwise to use Nigeria, where corruption reigns supreme, as some sort of yardstick . To print bills or mint coins, the United States Mint and Bureau of Engraving and Printing must purchase all sorts of resources, including paper, ink, equipment, and metals. In the case of bills, these purchases are an insignificant fact because it takes very little to add on an extra zero to cover the costs. http://www.moneyweek.com/news-and-charts/economics/how-expensive-is-printing-money.aspx |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Reference(m): 4:24pm On Dec 02, 2010 |
Why print money when you can print a picture of Buckingham Palace and live in it, or print a picture of our politicians behind bars or print a copy of my Nigerian Constitution and when you get tired and frustrated print a picture of a three-course meal including a chilled Bolinger 63. Mtcheew, no go work. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Nobody: 4:36pm On Dec 02, 2010 |
@OP If u print money and do not generate equal amt of value u create what you call inflation (@ least that's dy say). U then have too much money chasing very little goods and services. Prices go up and u back where u started. Gaps between government revenues and expenditures must be bridged (mind u, there would always be gaps - positive or negative - most times negative, unless u re China or Germany). Hence the need to borrow. Before the recent global economic recession, everyone tot borrowing was idea way of solving budget deficits, so everyone went borrowing (the few countries who went saving are now reaping the benefits). An alternative to borrowing is raising taxes, but that comes with a lot of social implications. I am not economist, but this what we ve been told. In my opinion, government should try as much as possible to increase their revenues and also endeavour to limit their expenditures to what can be accommodated by their revenues i.e cut ur coat according to ur cloth. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by kulutempa: 5:36pm On Dec 02, 2010 |
Katsumoto: I am talking about the value of the currency with all other things being equal. I was not talking about currency manipulation which is a different thing altogether, and the hole in your argument is that while it is true that export oriented countries try to deliberately lower the value of their currency to make their exports more competitive, can you give me one example of a country that is unproductive and has managed to keep a strong currency with low inflation over the medium to long term (say 5 to 10 years) Just one. One more thing. If the value of the Naira dropped in the 1980's because of IMF loan conditions, how come it has not gone back up 25 years later? Just asking. |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by seanet02: 6:44pm On Dec 02, 2010 |
@op Did you go to school at all? |
Re: Why Does A Country Needs To Borrow When She Can Easily Print More? by Katsumoto: 6:57pm On Dec 02, 2010 |
kulutempa: How do you define unproductive? All countries are productive; there are only differing levels of efficiency and productivity amongst all nations. Otherwise, some nations would perpetually require rescuing. Having said that, Malta had a particularly strong currency before joining the Euro and low inflation even though I wouldn't classify it as unproductive. The mainstay of the Maltese economy is tourism. The reason why a lot of third world countries have low valued currencies and high inflation is precisely because of the questions asked by the OP and conditions from the IMF. kulutempa: The Naira was revalued slightly when Nigeria operated the fixed exchange rate mechanism which pegged the Naira at 22 Naira to 1 USD under the Abacha govt. This was unsustainable due to our continued trade deficits and the fixed exchange rate was abandoned and the floating rate mechanism was adopted and this allowed the Naira to find its through value (around the 150 Naira to 1 UDS). To appreciate (or revalue under a fixed exchange rate mechanism), the Naira must have persistent trade surpluses but the rate at which we import everything and produce little works against that. This is the argument against the Yuan; China has the largest trade surpluses in the world and the Yuan should have risen much higher than it currently is but the Chinese government manipulates the currency through foreign currency trading. Also, currencies are not automatically revaluated following the expiration of IMF conditions as you are alluding to in your post. |
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