Katsumoto:

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.

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.

I will start by defining economic productivity which is the ratio of how much you can produce (output) based on the resources available (input) A high national productivity indicates efficient production of goods and services and a competitive economy. An unproductive economy is the reverse: inefficient or low production of goods and services
compared to the resources available in that economy. Malta had a productive economy based on tourism (services) and that is why their currency was strong before they joined the euro. I have to say that your second comment is particularly telling. You said that the naira dollar peg at 22 to 1 was unsustainable due to our continued trade deficit. You then went on to say "To appreciate the Naira must have persistent trade surpluses but the rate at which we import everything and produce little works against that." Looks like you have just confirmed that productivity does indeed affect the value of a currency after all.

kulutempa:

I will start by defining economic productivity which is the ratio of how much you can produce (output) based on the resources available (input) A high national productivity indicates efficient production of goods and services and a competitive economy. An unproductive economy is the reverse: inefficient or low production of goods and services
compared to the resources available in that economy. Malta had a productive economy based on tourism (services) and that is why their currency was strong before they joined the euro. I have to say that your second comment is particularly telling. You said that the naira dollar peg at 22 to 1 was unsustainable due to our continued trade deficit. You then went on to say "To appreciate the Naira must have persistent trade surpluses but the rate at which we import everything and [b]produce little works against that." Looks like you have just confirmed that productivity does indeed affect the value of a currency after all. [/b]

The Maltese Lira had more value than the Japanese Yen. The Brazilian Real and South African Rand also have more value than the Yen. Would you say that Malta, Brazil, and South Africa have higher productivity than Japan in the long term?

To reduce your trade deficit or increase your trade surplus, a country must import less and export more. Having said that, a country can produce a lot for internal consumption and still have a trade deficit, case in point - THE USA. Would you say the USA has low productivity?

I get the point you are making but value of currency is not dependent solely on productivity. There are other factors such as consumption, rate of savings, size of market, etc that also matter.

Thanks katsumoto, i am really enjoying your posts here on nairaland, i think the other guy too is trying. So far so less the discussion have been good

Katsumoto:

The Maltese Lira had more value than the Japanese Yen. The Brazilian Real and South African Rand also have more value than the Yen. Would you say that Malta, Brazil, and South Africa have higher productivity than Japan in the long term?

To reduce your trade deficit or increase your trade surplus, a country must import less and export more. Having said that, a country can produce a lot for internal consumption and still have a trade deficit, case in point - THE USA. Would you say the USA has low productivity?

I get the point you are making but value of currency is not dependent solely on productivity. There are other factors such as consumption, rate of savings, size of market, etc  that also matter.

You have already said that Japan deliberately keeps the value of the yen low to make its exports competitive and I have said that I am also aware of this.  In fact the very reason that they can afford to do this relative to their trading partners is an indication of the strength of their currency and their productivity.  As to the USA let's just say that the fact that the dollar is the world's reserve currency helps them tremendously and masks structural weaknesses in their economy.  To answer your question,  I would say that relative to trading partners like China and Germany, the USA has low productivity in the manufacturing space, hence her trade deficit,  but her  large service sector (banking, financial services)   makes up for this.

kulutempa:

You have already said that Japan deliberately keeps the value of the yen low to make its exports competitive and I have said that I am also aware of this.  In fact the very reason that they can afford to do this relative to their trading partners is an indication of the strength of their currency and their productivity.  As to the USA let's just say that the fact that the dollar is the world's reserve currency helps them tremendously and masks structural weaknesses in their economy.  To answer your question,  I would say that relative to trading partners like China and Germany, the USA has low productivity in the manufacturing space, hence her trade deficit,  but her  large service sector (banking, financial services)   makes up for this.  

I said China and not Japan; Japan is not a manipulator. America and the Western Europe have low productivity because they has built up over the years very expensive labour forces when compared with China, Vietnam, and other South East Asian countries. Its a cycle, the same thing will happen to Asian workers over time. We get to read more regularly these days about worker dissafection in China. Suicide increased recently amongst workers in Foxconn (Apple contractor in China), there are worker strikes related to working conditions, pay, and other benfits. With time, labour and other factors of production will increase with an inverse reduction in productivity.

seanet02:

Thanks katsumoto, i am really enjoying your posts here on nairaland, i think the other guy too is trying. So far so less the discussion have been good

How you dey now?

Nice sharing. thanks.,

Katsumoto:

I said China and not Japan; Japan is not a manipulator. America and the Western Europe have low productivity because they has built up over the years very expensive labour forces when compared with China, Vietnam, and other South East Asian countries. Its a cycle, the same thing will happen to Asian workers over time. We get to read more regularly these days about worker dissafection in China. Suicide increased recently amongst workers in Foxconn (Apple contractor in China), there are worker strikes related to working conditions, pay, and other benfits. With time, labour and other factors of production will increase with an inverse reduction in productivity.

Japan is not a manipulator? Well this article from the Financial Times last October titled " Japan Finance chief defends yen intervention" confirms that they do manipulate their currency and intervene in the forex markets to do so.

http://www.ft.com/cms/s/0/6a5d13ca-d292-11df-9e88-00144feabdc0.html#axzz16zZOhvQn


I however agree with your last statement and that is why, on a final note, it will soon be Africa's turn in the cycle. Be prepared for it.
Thanks and goodnight

If they print more money, You sure say e go reach you?

To question, I understand the risk of Inflation associated with printing more money, Like the ''For every action, there is a Reaction'' Law

However, I think You can simply print more money and destroy the money slowly over a longer period from taxes collected[ I agree our Tax System sucks]. This is the equivalent of interest-free borrowing. And therefore might not lead to inflation in the long term. I mean if I borrow, I still get to pay about 6% Compound Interest anyway, why not risk a 3% Inflation in the Short term (those figures are just figurative o)

We cant just simply print new money and force it into the system like that. That is what the CBN is always trying to prevent when it is said they are mopping up excess liquidity in the system by issue new bonds. When there is excess money in the system, consumers tend to spend and extravagantly leading gradually to a general increase in the price of goods and services (inflation). It sounds bookish but it is true. Like it or not, when there is excess money in the system, everything becomes expensive. That is what happened to Germany during WW2. The Reich govt was printing money indiscriminately to support their war effort till the economy got soo inflated and German Mark so worthless. It is said that a woman then once went out to buy a loaf of bread. It was so expensive that she had to carry the money to buy the bread in a wheel-barrow. At the bakery, she momentarily left the money and barrow to go inside. Somebody then came and stole the barrow and left the pile of money there. Cos it was of no use to him.

By the way, don't you think that if some people are allowed to print money as they like, wont they be tempted to also print their own personal share abi allocation. And after printing this money, how will it be introduced into the economy? As what? By whose authority?

The major argument I buy is that it will affect exchange since you cannot print dollar, Your foreign can only come from economic activity

Quote from: KenGali on Yesterday at 10:29:29 AM

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.

Katsumoto:

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.

I do not understand why you are delibrately missing it, maybe you are too adavnced for my explanation because my explanation is meant for those that do not have background in economics.

Is this thread a joke?

American Productivity is not low oo. . . I find it difficult to imagine a situation where reasonable increases in demand would outstrip supply even for a medium term cycle. Possibly short term but definitely not long term.

It is for this reason I am surprised there is so much opposition to Bernanke's stimulus on grounds it could lead to inflation.

Even during the recent years of excess liquidity, inflation only rose because of commodity prices, and that was because of China's appetite for everything with a chemical symbol.

So Bernanke. . .PRINT PRINT PRINT

Nobody is talking about the spending habits of people. If my neighbour does not have 6 cars wont the economy heal?

why borrow money when nigeria is not a poor country?

why not ask all the looters to fund or donate if we need money




http://indianbestactress..com/

not enough papers to print them we need to import papers to print enough money

if CBN prints more money, it would be looted and saved abroad

From my little economics book, too much money chasing too few goods/services is inflation but when much money is properly utilised to promote production in diverse areas of the economy such that exportation is encouraged and achieved, it will boost the economy and then inflation is controlled by making sure that those monies printed/borrowed out to banks are recovered at minimal interest rates. in the end it's cool but that can only happen in a disciplined society and gov't, not these ones we have at the moment.

$1 plain english.

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