A country that owes foreign currency will force them to repay the debt in the foreign currency it borrowed, and the money cannot be printed by itself, forcing it to exchange to get the desired foreign currency. The sell-off has no strategy to weaken their currency. There are many ways to repay. They may have to sell their reserves of other foreign currencies, metals such as gold, silver ... or sell the country's natural resources such as rare earths and precious metals...
All debts must be paid if they print the money themselves to repay the debt, then inflation will definitely occur.
Topic: Question about inflation and debt. (Read 879 times)
After analyzing all the available information, one can accurately answer the question posed that it is the shockless and corrupt government of Venezuela that does not allow the country's economy to develop and that it practically steals everything that should belong to the people of Venezuela
You don't need to be an Einstein to understand that
It is interesting that the population of Venezuela is a few millions smaller than that of Saudi Arabia (31M versus 33M), so all things equal, Venezuela should be better off than SA. Apart from that, this Latin American country has far better climate which ensures better conditions for sustainable agriculture and a lot of other things. Compare that to SA which is mostly desert, and there's not much beyond oil (and natural gas)
This could be the solution to Venezuela's hyperinflation rate as of the moment. The country's been in a bad debt lately and their money pretty much is worthless right now. They have little to none to work out, so basically what they could just do to alleviate this is to sell stuff they already have. I don't further details regarding the issue in Venezuela's economy but as I was saying thsi could be a viable solution
Hyperinflation is not a cause
It is an effect of and a consequence to some underlying problem (a host of problems) which reveals itself in many ways, while hyperinflation is only one of them (but probably the most conspicuous and telling). The point is, you can't effectively deal with it without dealing with this deeper problem as it would be like fighting with a symptom of a disease instead of overcoming the disease itself
And the main problem with that problem (pardon the pun) is such you can't solve a problem by relying on those who are creating this problem in the first place ("If you're not part of the solution, you're part of the problem"). In other words, solving Venezuela's economic woes first and foremost requires dismantling the whole political system there, which is a grave problem in its own right
This could be the solution to Venezuela's hyperinflation rate as of the moment. The country's been in a bad debt lately and their money pretty much is worthless right now. They have little to none to work out, so basically what they could just do to alleviate this is to sell stuff they already have. I don't further details regarding the issue in Venezuela's economy but as I was saying thsi could be a viable solution
Hyperinflation is not a cause
It is an effect of and a consequence to some underlying problem (a host of problems) which reveals itself in many ways, while hyperinflation is only one of them (but probably the most conspicuous and telling). The point is, you can't effectively deal with it without dealing with this deeper problem as it would be like fighting with a symptom of a disease instead of overcoming the disease itself
And the main problem with that problem (pardon the pun) is such you can't solve a problem by relying on those who are creating this problem in the first place ("If you're not part of the solution, you're part of the problem"). In other words, solving Venezuela's economic woes first and foremost requires dismantling the whole political system there, which is a grave problem in its own right
I also asked my teacher about this in the past.
She just smirked at me and asked me if I want to have another inflation, I'm confused. This could happen but the thing is that the money circulating in the country would increase and that would lead to inflation.
Economic inflation can indeed happen at any time because currency conditions are very easy to print and there are no restrictions when wanting to print local money will make inflation likely to happen again, in my opinion it is different if there are currencies that really have a supply limit and cannot added or subtracted again it will make inflation difficult to occur because the portion is clear. She just smirked at me and asked me if I want to have another inflation, I'm confused. This could happen but the thing is that the money circulating in the country would increase and that would lead to inflation.
I also asked my teacher about this in the past.
She just smirked at me and asked me if I want to have another inflation, I'm confused. This could happen but the thing is that the money circulating in the country would increase and that would lead to inflation.
She just smirked at me and asked me if I want to have another inflation, I'm confused. This could happen but the thing is that the money circulating in the country would increase and that would lead to inflation.
It’s not an easy task for any country to pay off it’s debt, there is no simple way to do that. If it was easy as most people think it is, then a lot of countries would have done that. It’s just like a business, it’s not everyday you’re able to trade your way out of the position.
But, one thing I have believed would help any country to be able to support themselves and get off debt is by doing more exports and less imports. That way more money will be coming into the country. This same topic was once discussed on a forum and someone suggested that the government shouldn’t tax high earners a lot, because they are the ones that create jobs, higher tax means they will be moving their Businesses out from the country and that will lead to high unemployment rate.
But, one thing I have believed would help any country to be able to support themselves and get off debt is by doing more exports and less imports. That way more money will be coming into the country. This same topic was once discussed on a forum and someone suggested that the government shouldn’t tax high earners a lot, because they are the ones that create jobs, higher tax means they will be moving their Businesses out from the country and that will lead to high unemployment rate.
If a random country is in debt, is printing money a good way to pay it off at the expense of the citizens?
For example, lets say you owe an entity $100. If you print an extra $100 bill you pay off your debt, but unbeknownst to the entity the $100 that they lent you is now worth less.
Would the barter system be a good way of combating this?
For example, lets say you owe an entity $100. If you print an extra $100 bill you pay off your debt, but unbeknownst to the entity the $100 that they lent you is now worth less.
Would the barter system be a good way of combating this?
Not barter but a universal credit rating system can help in facilitating foreign exchange market. Every item of international importance should be given some fixed rating for example, one gallon of petrol worth 5 ratings while 100 kg of onion worth 4 ratings, etc. These ratings could be periodically adjusted due to variation in supply/demand.
Now any country can import goods from any other country without paying real money. The whole system will work on credit system. Debt of one item can be paid off using the credits earned by exporting other items.
If any country is in need of cash flow then it can sell the credits to certain mediator like IMF/World Bank which pay the equivalent amount in fiat currencies by assessing the country's economy. Stronger economies will get better exchange rates for their credits as compared to weaker economies.
This system won't work for selective countries. It has to be adopted by all countries unanimously. I just took a hypothetical case but in order to make this system anywhere near reality, there are lots of adjustments needed to make. First of all, current debts for every country from every country should be accounted for. It is wrong to start with zero credit for every country.
Second and the most important step would be to fairly assign value/credits to every item. In 4th Ministerial Conference of WTO held at Doha, developed nations played smartly and reduced tariffs on raw materials including agricultural product significantly. However, tariffs on final products weren't included in trade negotiations. As a result, importing raw materials from developing nations become cheaper for developed nations but they still selling final products to developing nations at higher price. If such trade manipulations are made in calculating credits then the above said model will fail like inflation-based currency debt model.
The answer is very simple, if you ask whether such a method is good? then you just see if there is a country that implements the system as you say now? certainly not. Every country has thought about the risks before taking action and I think something like that is suicide, maybe you want it to be like a crisis in Venezuela.
Smart answer. Setting off debt with something in return could disturb the economy lot more than inflation does. There are lots of complications in substituting current debt set-off method with barter, among which the most prominent is double coincidence of wants. If country A doesn't produce anything worth significantly to country B then A will never able to take debt from country B.
If a random country is in debt, is printing money a good way to pay it off at the expense of the citizens?
For example, lets say you owe an entity $100. If you print an extra $100 bill you pay off your debt, but unbeknownst to the entity the $100 that they lent you is now worth less.
Would the barter system be a good way of combating this?
For example, lets say you owe an entity $100. If you print an extra $100 bill you pay off your debt, but unbeknownst to the entity the $100 that they lent you is now worth less.
Would the barter system be a good way of combating this?
Not barter but a universal credit rating system can help in facilitating foreign exchange market. Every item of international importance should be given some fixed rating for example, one gallon of petrol worth 5 ratings while 100 kg of onion worth 4 ratings, etc. These ratings could be periodically adjusted due to variation in supply/demand.
Now any country can import goods from any other country without paying real money. The whole system will work on credit system. Debt of one item can be paid off using the credits earned by exporting other items.
If any country is in need of cash flow then it can sell the credits to certain mediator like IMF/World Bank which pay the equivalent amount in fiat currencies by assessing the country's economy. Stronger economies will get better exchange rates for their credits as compared to weaker economies.
The answer is very simple, if you ask whether such a method is good? then you just see if there is a country that implements the system as you say now? certainly not. Every country has thought about the risks before taking action and I think something like that is suicide, maybe you want it to be like a crisis in Venezuela.
Printing money is a good idea only if your currency is a reserve currency. Otherwise like the others said, you will end up like Venezuela.
How do you think USA get away with it? It is because no matter how much they print, there is still demand. (Or was)
The danger is, now countries like Russia, China, Iran and even some European countries want to use something else. (Euro or gold backed crypto) When this happens, USD will lose its demand.
How do you think USA get away with it? It is because no matter how much they print, there is still demand. (Or was)
The danger is, now countries like Russia, China, Iran and even some European countries want to use something else. (Euro or gold backed crypto) When this happens, USD will lose its demand.
Printing money is never a good idea. At any circumstances that could only lead to economic devastation. Once you're deep in debt the only sustainable solution is growth of business and industrial production but for such countries that is very slow and painfull process, often without results.
Btw. to my opinion Euro is strong and stable enough to fully support european economies.
Barter system is usually better for developing countries, the major ones do not really posses too much that they own that they can give away in exchange of their debts. For example in developing nations, there is not much money in the private sector so the government has to take things in their own hands and with the taxes they collect they build business that will help the public, however after a certain period they realize they have too much debt that they are having trouble even paying the interest on it so they give their governmentally owned business to someone in exchange for a lot of money and pay their debt so they can get a breather and at least not have trouble with their interest rates at least, they think they may solve the rest better after the interest goes down a lot, some succeed it, some fail even afterwards.
printing more money to pay off debt is not a good solution because it will make the value of the currency go down as happened in zimbahwe. and using a barter system is also not a good solution. because the barter system is very inefficient and it will be difficult to determine the value of an item. in my opinion the solution so that the country can get out of debt bondage is to increase domestic industry so that state revenues increase and reduce imports.
If a random country is in debt, is printing money a good way to pay it off at the expense of the citizens?
For example, lets say you owe an entity $100. If you print an extra $100 bill you pay off your debt, but unbeknownst to the entity the $100 that they lent you is now worth less
For example, lets say you owe an entity $100. If you print an extra $100 bill you pay off your debt, but unbeknownst to the entity the $100 that they lent you is now worth less
It would be bordering on insane not to use this to your advantage
However, it would be unwise to print that $100 bill and pay the debt back in full. If you do that, you indeed pay out the debt, but you also destroy your printing power, the power of your money, and that makes no sense at all. What makes sense, though, is printing the interest on the debt. In this way you make your creditor happy as he receives interest, while you are also keeping your debt manageable without seriously devaluing your currency
Would the barter system be a good way of combating this?
If by that you mean paying the debt with some real asset, well, it may pan out, to varying degrees. But you should also take into account and thoroughly examine the possibility that this particular asset becomes dirt cheap in the future
There is always someone who does not understand that money is not value, but only a representation of value.
Money - if it is not based on real wealth - is only paper.
So, no: printing money is absolutely useless, only to create problems for citizens.
If money printing can be the solution, there would be no country in the world that would have debt. Certainly, the impact of printing excess money would cause undesirable effects to ones economic status. Printing excess money to pay debt would only damage the integrity of it, losing its value and in return, would cause economic crash. A country must solve the problem by not adding more problem like, continuous innovative strategies and attracting foreign investors to increase economic income to lessen debt. Money - if it is not based on real wealth - is only paper.
So, no: printing money is absolutely useless, only to create problems for citizens.
There is always someone who does not understand that money is not value, but only a representation of value.
Money - if it is not based on real wealth - is only paper.
So, no: printing money is absolutely useless, only to create problems for citizens.
Money - if it is not based on real wealth - is only paper.
So, no: printing money is absolutely useless, only to create problems for citizens.
If a random country is in debt, is printing money a good way to pay it off at the expense of the citizens?
For example, lets say you owe an entity $100. If you print an extra $100 bill you pay off your debt, but unbeknownst to the entity the $100 that they lent you is now worth less.
Money printing can be applied but that is certainly the worst way I have ever known. Venezuela has been insolvent due to too many people and too much investment in social security. At that time, their public debt was too great and Maduro decided to print money and now their country seems to have nothing left. we should pay our debt in other ways, by economic contracts and other things. never deal with cash, it will make the economy go down. For example, lets say you owe an entity $100. If you print an extra $100 bill you pay off your debt, but unbeknownst to the entity the $100 that they lent you is now worth less.
If a government prints its state currency to pay off international debts which are usually in the form of T-bills, then that money will enter the country only. The value of your currency will fall down and at the end the excess currency will lead to inflation.
This won't at all work without avoiding inflation and lower fx rate. Moreover, most of the debts are in the form of dollars and printing dollars isn't legal everywhere.
This won't at all work without avoiding inflation and lower fx rate. Moreover, most of the debts are in the form of dollars and printing dollars isn't legal everywhere.
If you are going to print an additional money just to pay the debt of the said country, the value of the money that the country has might become a trash or might lessen its value since the volume or the supply of that money is high. Meaning, the higher the supply, the more chances that its price might go down like what happen in the Venezuela. The value of their money became useless that is why they decided to have their own cryptocurrency.
Jump to: