Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
So I guess Zimbabwe had a balance of payment problem? I mean after all, who the hell would buy anything in Zimbabwe? Is this a reason why Zimbabwe started printing money to balance its payments and thus experienced unbelievable inflation?
It started because of politics in Zimbabwe.
Mugabe first caused massive deflation by basically killing off the productive part of society which were the Whites. Of course, the Whites were productive because they kept native Zimbaweans down but what Mugabe did was shoot the hostage because the bullet would also wind up killing the hostage taker.
When the deflationary spiral began to take root, Mugabe tried to stimulate inflation by simply printing money. What he/ his ministers forgot or didn't know was that deflation is a problem with liquidity not with the money supply. Simply printing paper doesn't stimulate production or investment.
Who'd invest or produce in an environment run by an irrational maniac?
Last edited by wawaweewa; 12-27-2011 at 08:50 PM..
Can anyone explain me why the balance of payments was an issue back in the gold standard era? Friedman talks about floating exchange rates as an alternative mechanism to achieving a balance of payments (the book was written in 1963). Can someone clear it up?
China is keeping its currency under valued and nobody has the guts to do anything about it. In fact Romney is the only candidate talking about it. On the other hand, the Euro may be overvalued.
The prize for the currency set too low in value is the US dollar. No other country could get away with setting interest rates that low and still have demand for it. See anyone buying up yen denominated debt? If China allowed this artificially depressed currency to duck the yuan, it would be the largest give away in history basically going to Wall Street. The US is a raw deal for Chinese investors because our rentiers take all the profits while there are high profits to be had in China due to lots of surplus not mopped up by land and finance rentiers. Its like swamp land for 2 feet of top soil.
Its basically like saying Mr China, invest here for $3000 a month rent and let us invest there for $300 a month rent. China says drop dead.
Can anyone explain me why the balance of payments was an issue back in the gold standard era? Friedman talks about floating exchange rates as an alternative mechanism to achieving a balance of payments (the book was written in 1963). Can someone clear it up?
If you run out of gold during the Bretton Woods era it means you have to boost exports to keep importing at the same rate.
Interest rates stay so low due to a transfer of wealth from the productive portion of the U.S. to the financial aspect of the economy. Industry here in the states hallows out not through natural economic forces, but due to this transfer of wealth to the financial sector. This is a large cause of the increasing differences between the haves and have nots. It is not the only cause, but substantially helps to magnify economic inequality.
More economists should follow the flow of money to gain a true understanding of the struggles we're currently having. Cash is being transferred from consumers to Chinese factories and reinvested in government securities to keep the Chinese yuan from gaining adequately in value. Thus, money that originally was in consumer pockets ends up in the hands of the financial sector. For the last decade, we were able to hide underlying weakness by taking on increasing debts. When the debt game ended, the economy collapse. Rather than identifying and correctly the underlying causes (massive trade debts) we've tried to keep the game going by having the government rather than households increase their debt.
Convertible currency countries dont have to achieve balance of payments. The concept only matters to countris without essentially convertible countries. Those with convertible currencies basically get to issue paper for goods. Then the world currency markets get to dictate what those pieces of paper are worth in trade. But the economy which issued the paper basically doesnt need to balance. The trick is the convertibilty part. Those pieces of paper are most valued in the economies the world wants access to. This is why the arguments that China or whoever will eventually not want dollars is just silly. Currency brings access to markets and its goods and the US still has many of the most desired goods. Whether you want Boeing planes, Wall Street banks services or Disney's entertanment you need dollars to get them. So today you might sell a cheap piece of clothing to a US retailer and tak his payment, but what you are really buying is the option to get those products. Now lets say you are a Costa Rican widget maker and some retailer in Vietnam wants your products. What are you going to ask for in return? A dollar most likely because you trust you will find more of what you want in the future in the US than in Vietnam. So if you are Vietam or Costa Rica you can generally only buy as much as you sell in return. Your local currency is just not in demand outside your borders. So you sell things and get dollars and use them to buy imports. You must remain in balance or print more money in hopes of getting what you need which just fires up inflation and in short order eats away at the extra money you printed. Balance is really your only option over time. The largest economies never have that restraint, they just have to keep producing the things the world wants.
The exporting nation has a multitude of choices, but in terms of exchange it can consume, invest, or save in goods, services and assets that are denominated in the currency of the importing nation, or do the same in any country by converting the their currency to that country's currency. Keep in mind that the importers pay in whatever currency the export is denominated in. If it's crude oil from OPEC, you pay in USD.
The exporting nation has a multitude of choices, but in terms of exchange it can consume, invest, or save in goods, services and assets that are denominated in the currency of the importing nation, or do the same in any country by converting the their currency to that country's currency. Keep in mind that the importers pay in whatever currency the export is denominated in. If it's crude oil from OPEC, you pay in USD.
Of course as in imports from China we pay only in USD.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
