peterchan75 (30-Mar-2012) wrote: Thread topic: Dear Mr Bernanke: Justice rather than diluting currency is the solution unemployment in any economy.
PIGS issue bond in euro. Kept issuing new bond to pay mature bond + interest. In the end, the bond becomes too big and their GDP couldn't support it. IF the PIGS have their own currency and issue bond in their currency, they would just print and pay back the bond albeit inflation.
Since this PIGS bond are in euro and majority are hold Euorpean bank + CDS on this bond also issue by European banks(... er.. maybe some gobal bank also involve). As a result, if the PIGS were to default on the bond, the banks would blow up. So, the lenders have to take hair cut on this PIGS bond and avoid default. In the mean, the ECB floods the banks with new euro. Yep.. doing what Mr.Bernanke has been doing. Once those banks are in sound footing, Greece can default and leave. The German will not finance the slackers in Greece.
The 1997 Asian financial crisis is sovereign debt related. Speculators attacked the currencies. Michel Comdesu, the hawk of IMF, was circling Indonesia like a vulture. Suharto was old and didn't act fast enough to stem off the capital flight. Mahathir did it and was successful and told IMF to back off.
BTW, MAS publish the money supply for each month.
MAS: Data Room
It's growing. The global financial system needs inflation and not deflation.
Inflation refers to the increase in price of a basket of everyday goods.
Deflation actually refers to the country's GDP progressively becoming smaller. It is assumed that when GDP contracts, joblessness rises: but this isn't always the case depending on how accurate in the first place the calculation of GDP was made.
Depending on causes, the 2 might not be in sync- stagflation: prices increase whilst GDP contracts.
The best scenario would of course be for GDP to grow whilst prices fall: economist haven't coined a term for this because they ?cannot be bothered to do so?.
A Tsunami could cause stagflation: contraction in GDP with price of goods increase due to scarcity due to natural disaster.
Inflation could also be due to natural disaster (scarcity due to natural calamity) rather than currency dilution (print more $$$) so it is presumptuous that the Central bank can say that inflation is always a good thing.
I for one think that inflation could be bad for the simple reason that it is an unnatural force by the government for the people to 'do something'.
It is like a smoke bomb/ poison gas that U throw into the enemy bunker to "flush 'em out" so that U could shoot them: a trap created by bankers to make the people fearful and confused by steep inflation levels so that they would either be induced to either invest or spend: thus increasing the GDP momentarily.
This momentary increase is however not sustained as credit card companies will go bust if the credit card debts for instance are not repaid... but on a bigger scale, property investment debt of course would entail bigger debts- thus the story of the Japanese lost decade(s) which I hear is hitting age 20 where from peak, property prices have fallen 70%.
To issue bonds without any plan on how to repay it is going the direction of either Zimbabwe (print $$ to pay) or Greece (controlled 'default')- either way, your government is a bankrupt one in the view of international $$$ investors.
Inflation is thus like illegal drug stimulant (steroids) used by sportsmen- yes it does drive GDP but only in the short term- Japan's lost decades show the painful consequence of such illicit monetary stimulation. Nobody trusts government anymore and the premiership of Japan becomes a game of musical chairs.
Fukushima was once an operating nuclear power plant providing cheap energy until the Tsunami revealed the corruption and inadequacies plaguing its implementation. Short cuts in disaster planning caused the overheating and subsequent explosion of the nuclear facility. Fukushima is now an uninhabitable nuclear zone.
Many end up with low savings or are in debt and thus dependent on government handouts and this social burden simply stifles the entire government if not the economy, ditto runaway inflation which scares away all investors- for which Zimbabwe is languishing at bottom of world GDP (your GDP will plummet even further if there is natural calamity).
People in general have to spend time on other important activities: spirituality/ religion, charity, environmentalism, physical-mental health and hygiene.
GDP remains only a number coined by economist with a myriad of ways for its determination. As a mere number, it has little bearing on the quality of life across society. Inequality, barter trade, resilience against calamity, charity, environmentalism, justice nor even spirituality are all important aspects of human society that GDP makes little if any measurement of.
So until and unless a better measurement of human progress may be found, it would perhaps be better for the central bank not to toy around too much with the inflation rate nor the use of it as excuse for the printing of more illicit monies.
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1st draft, may be edited later.
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At/ realted:
31Mar2012: Dear Mr Bernanke: Justice rather than diluting currency is the solution unemployment in any economy.
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