Topic: Rampant inflation, yet a steady exchange rate. (Read 469 times)

We need to get more specific. I'm assuming you're talking about developing or emerging markets?

In North America, what you're saying has been true for the last ~20 years. Wages have stagnated and diverged from GDP growth since 2000 or so. That certainly was not true in the preceding generations going back to the 1920s or whatever, which is what I was referring to.


I don't think so. It's an attempt to prevent depressions and curb recessions. Fed policy may be misguided and may end up imploding the economy one day but I don't buy into those kinds of conspiracy theories. It's pretty well known if you have savings, you shouldn't keep it in cash. That's the whole point of retirement accounts; they get invested into the market.

Eh, as recent as 2 years ago you could get a few loafs of bread like 20 SDG, today it's like 8 times as that. I don't have a grandfather around, but salaries were pretty normal pre-2018 protests, my dad's job was making like $3200 a month in SDG in 2014.

I like the idea of more markets to import goods from, because it makes foreign suppliers compete with each other to sell at the lowest price. And despite sanctions there's still a swarm of far-east suppliers for Sudan in China and Hong Kong.

According to this chart, the exchange rate was quite normal a few years ago, except for an oddity at the end of 2016 for which I have no explanation (could be a political event?)




So apparently stores are stopping selling their stuff because of the price hike overnight. I hope this exchange rate hike is only temporary, because stores take a few days to adapt to the new prices and if this persists, things here will become even more expensive.

I still experience floods like that once in a blue moon, because here, when it rains it pours. I've personally seen whole streets and walkways flooded with muddy water, and nobody is there to dry it up. The floods aren't as bad where I live, I heard it's worse in some areas of the city.

I also heard they are getting an ambassador to the US. I hope he can manage to convince them to remove them from the state sponsors of terrorism list because if they do, all the trade barriers between US companies and Sudan will be overcome, and the country will be in better shape with fresh new trade.

It is unsustainable just like everyone said, when a country continues to have high inflation, dollar will eventually become a lot more valuable, it is just about how many people in there who have dollars or who can afford to buy dollars. Let me give an example from bitcoin world and we can understand a lot better.

Let's say you live in a nation that is not using dollars, basically almost any other nation than USA, and you have your local exchange which deals with bitcoin to fiat and vice versa, and bitcoin price went up in dollars, became 15k, if there are not enough volume in that local exchange you use and someone sells a ton of bitcoins to drop the price, as long as there is nobody to keep buying for arbitrage reasons, they will not be capable of changing the price, so you would have a local exchange with 10k bitcoin price whereas everywhere else has 15k.

This is the usual problem of every country especially now that we are facing in pandemic. Most country resort to printing a lot of money however in return the value of money will depreciate and its buying capacity will be lesser. When it comes to exchange rate which you mean is steady and if we will going to analyze that exchange rate must also be in line with the inflation rate of that said country. This is one of the risk to consider when one is doing currency exchange. The choice to exchange to a different currency must be through indicative study for movement of currency value.

BUT it IS bad as people make out. In most regions of the world, the salaries of people doesn't keep up with the rising prices of goods and services. Why do you think more and more people go below the poverty line every year? The gap between rich and poor has been wider and wider.


Intentional to control the monetary supply to make plebs like us poor, and make us believe that it is OK. Haha.

Sudan has often been hit by crises. Early this year there was a food crisis in several important commodities such as the bread crisis, the fuel crisis and transportation. Besides that, the imbalance in the rate of economic growth that occurs in market import inflation.
the government has tried to anticipate it but the steps are still not right. The most important thing is that Sudan should not sell its country's assets so that it still has a chance to rise.

According to what was reported in some local newspapers^[1], the price of the dollar is about 260 Sudanese pounds, which means that the price lost about 42% of its value within 10 days, and speculation continues.
I do not think that what is happening is natural, and according to some news, the speculations that occur in the black market are caused by the fact that some buyers buy in large quantities, so I think that the government is buying dollars from the black market because there are many statements by the Prime Minister who says that the Central Bank does not contain reserves of cash The foreigner.

I think that one of the factors that prompted them to do so was the payment of millions of dollars in damages for the bombings of the United States embassies in Kenya and Tanzania in 1998^[2].


The country is also still on the list of terrorism, and finally the devastating flood of the Nile River with COVID-19 effect.

[1] https://www.sudanakhbar.com/816418
[2] Analyst: Sudan Has No Cash to Pay Damages for 1998 Embassy Bombings

I wonder what kind of salary he was getting paid back then. $3,500 a year?

Looking only at purchasing power perverts things a bit. In terms of wages (how far your paycheck goes) it's not nearly as bad as people make out. In fact, technology and globalization has significantly lowered the price of some goods even after we account for inflation.

The real issue is whether you hold your savings in fiat money, which is obviously a terrible idea. Inflation is a tax on savings.

That's actually intentional. Keynesians use inflation as a disincentive against hoarding money, which in turn facilitates economic growth because people have to find ways to spend and invest their money before it loses value.

The part of the exchange price being stuck in one point is the biggest scam of the century because its not stuck what the central bank is doing is to force it at that level by all means necessary and one of those ways is the criminalising of those holding the USD the moment the government removes all of those controls, the local currency will fall so hard that the inflation you are currently seeing will be a child's play. Now the managers of the economy especially the central banks are not foolish and when it comes to addressing inflation of the entire economy, it goes beyond basic economics that we have come to learn either in high school or at the university level.

What?

Head explode.

Ask your grandfather, or if you still have one, one of your great grandparents how much was a loaf of bread during the time when they were teenagers.

Wait for the answer.

That's inflation.

- This is absolutely caused by Sudan's incompetent  officials which results to bad governance, making its people suffer more.

I think Sudan would drastically need immediate economic reforms asap to stop its bleeding economy.

Inflation is basically an increase in the price of goods and cost of living, devaluing of a currency is an aftermath of inflation; Goods are overpriced, so automatically the value of what you could buy with the equivalent of $1 (for example) would increase leading to a change in the conversion rate.
This ideally should be an isolated crisis for the impact to be more felt, i.e; there are little or no changes in the value of similar products in other economies.

Fixed exchange rate is a policy governments use to try and ensure stability, but it also has its downsides. You should also note that bank exchange rate usually differs from black market rates due to regulation.


During an inflation, the central banks would be implementing policies to encourage spending, so I would assume it would not be too easy to convert to some other currency as a regular individual (I could be wrong), the other option then would be the black market which would reflect the overblown changes in rate.  Also, interests on loans would make this quite unprofitable and risky.
It would be a good idea though to switch to hedge funds to protect assets you hold.

Exchange rates should be definitely changing the price of dollar versus fiat, I mean in many nations that happened, especially in places like Venezuela or Zimbabwe you could buy so much with just one dollar and it is billions in their fiat as well. Obviously that is not ideal but having inflation yet having same rate means there is some people who want to profit from it.

I mean if it is such an easy way to get dollars with the same rate while you still have higher inflation, what I would suggest is get a huge loan if you can in your own currency and buy dollar with it, believe me you can pay it back slowly but eventually if inflation continues dollar will go up a ton in your nation as well and at that point you will be wealthy and sell it for x10 more easily.

That suppose to happen, so probably USA's economy is also not healthy unlike before the pandemic. I like the idea of yours collecting bitcoin, however, like you said, you can't buy bitcoin in your country but the fact that you are here in the forum, I know you can find a lot of way to earn bitcoin or find a way to buy bitcoin in any possible forms. I find bitcoin as a way to hedge with the rising inflation especially if you are in a small or poor country, so in my case I'm thankful that I discover bitcoin 4 years ago as I was educated that the fiat system is not safe.

It's good to have an option when hyper inflation hits us, we might not see it happening soon but it's better to be ready.

It is not pointless to hold bitcoin under those circumstances the only thing is that it is harder to convert it to your local currency, as an example assuming the exchange rate of 150 SDG for a dollar is correct, and I think it is since most likely the official rate is manipulated, this means that if you buy bitcoin at that point and the inflation grows 100% and the price of bitcoin remains flat if you try to sell whatever bitcoin you got you will get twice the amount you bought it with.

When people think of black markets they think about illegal goods and services but when the economy is being manipulated by the state the black market is just as any other market in a free economy and gives a better idea of what things really cost and I have no doubt there are people there accepting bitcoin but not being vocal about it.

Sudan has been doing not that well financially but we are talking about big changes, they officially changed their political stance from Islamic nation to a secular nation for example, you think that is earned easily? Obviously that will hit you in the guts for a while politically.

Unrest has never been great for any nation, plus they are actually not doing that well geographically neither, they are not in the best of places if you ask me, all of these combined with absolutely no foreign investor (and not even too much local) means it is not growing neither.

All of these could be fixed, all that is required is help from government to people so they could grow, give out loans, print money for right purposes and even though inflation grows worse, if the money used for having bigger and bigger profits, that means the future could be bright. Think of Sudan like a company that took out a huge loan but used it to buy another factory in order to profit more, if the factory actually profits more that means it was a good loan and they will repay it and continue awesome, if factory sucks they are in big trouble.

In addition to @Upgrade00 comment about pegged or floating exchange rates, the theoretical exchange rate can be calculated by relative PPP formula.
If the cost of other countries' goods also increases with the same rate, the exchange rate would be unchanged. But it's not the case.

For me, common sense is enough if the Sudan gov continuously prints money; the effect will be hyperinflation. So prepare for the worst! Store enough cash and hedge with gold or other assets.

SDG is the Sudanese pound, it's North Sudan's currency, and when South Sudan split from it in 2011 they printed their own money but called it the same name.


Well the previous government did have some bureaucracy and corruption where some portions of government subsidies went into ministers' pockets instead of being spent to improve the economy, but the new one seems to be more honest. But some people's expenses became so high, they are being driven to the point of doing drastic things like sharing their homes with others to share the rent expenses.


Here's the problem: There are certain supplies and ingredients needed to make them. When those become scare, could be locally or citywide, this forces them to make less food and that drives the prices up because there is less supply but the demand is the same. Intermittent electricity failures that affect today's supply of bread/food/goods make the situation worse. Most of the private companies here have generators but small shops don't and that's where almost everyone buys their stuff from. Transportation has also been hit badly and the higher costs of moving across streets by taxi (a very common activity) are eating into people's wallets. And since the money is inflated, it's not much use to the drivers either!
(I forgot to mention earlier that a mere bottle of water costs a whooping 25 SDG now)

I'm speaking only for Khartoum, smaller towns are probably in even worse shape than I outlined above.

Is SDG the country(North or South?) national currency. I wonder if businesses are tightly control there, lots of people are not working, government/people abusing the nation's currency, people/govt deliberately manipulating the supply of things etc ?
 I don't see why bread or other foods that are normally produced locally in large number should be that expensive.

Nah, the vast majority of forex trading is done between a pair of USD and some other currency. The SDG is not popular to trade internationally with by a long stretch, but it seems to be attractive for Sudanese people to trade with since they hold the most SDG.


Actually according to the PM's comments last January, this country doesn't have enough foreign currency reserves to stabilize the SDG. And if that was the case a few months ago, imagine how low the reserves are now. Sudan's been trying to export more natural resources to make up for the higher inflation, but exports only scale so much. And it doesn't help that they a) have much larger expenses in imports than they have exports, putting them in larger debt and b) Gold and oil smuggling lose them more money.

There isn't much that can be done to alleviate the debt problem. Lending countries and the World Bank are only going to lend so many $millions. And even that aid is debt they can't pay off. I heard it's a practice for countries that default on their loans to give up stake in their natural resources areas to foreign companies of the creditor's nationality.

That's weird.The inflation in Sudan should cause the Sudanese national currency to become cheaper,compared with other currencies.
I'm not familiar with the inflation rates in Sudan and I don't have enough statistical data about this subject.
Perhaps the foreign trade of Sudan isn't dominated by USD/SDG deals,so there's no liquid enough market for US dollars and SDG to be exchanged.
Maybe Sudan has enough national reserves to maintain the value of it's national currency on the foreign currency markets,while the government/central bank can print more money,which are backed by the national reserves of Sudan,therefore increasing the domestic prices and causing inflation,while keeping the value of the currency,compared to other currencies.

(Off topic, but ironically, that is one of the things I'm trying to get, if you know any places that ship to Sudan or at least somewhere in the Middle East, send me a PM.)

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My BTC isn't exactly useless though. I can still buy services online with it, I could even find e-shops that accept BTC and ship to here (I don't do that much though), I just can't buy things locally using it.

Hmm, if you can't buy anything with btc then it means the adoption of such technology on your country is quite low. Therefore, your btc holding will be pointless if you still need to convert it into your currency first. Sad to say but it will still get affected by the inflation.

And even if you found one, I think it will be all the same. You cannot simply give .005 btc for a laptop (just an example) just because you want to. Of course your SEC will make regulations upon it and assign SRP for every product based on its fiat value. It seems that we can't easily escape the inflation .

The reason is less of printing money; there is shortage of pepperoni- a popular pizza topping. The price of pepperoni has increased to 50% even. Therefore, it's likely that either pizza supplier have to increase the price of pizza or have to change pepperoni supplier. You may get interested to read this- https://www.bloomberg.com/amp/news/articles/2020-08-14/america-s-favorite-pizza-topping-is-starting-to-get-scarce

That was an interesting article, and thanks for posting it.  I live in the US, and there's basically no bargaining/haggling about prices except for things like cars or if you're dealing with an individual as opposed to a business. 

I don't quite understand currency trading, so I can't give you a good answer to your question, but I related to this statement from what you wrote in the OP:

You mentioned pizza, and my local pizza joint just raised their prices fairly significantly, so I think the effects of rampant money printing and/or COVID-19 are starting to show themselves.  And if you look at prices of things like stocks, bitcoin, precious metals, they're all sky high.  Everything is starting to get inflated, and I don't see any end in sight to this.

Gee, and I wasn't even aware of the black market here. It seems to be much more inflated and volatile than the official rate and I must have been shielded from it as I've yet to encounter someone selling things at that rate, probably because I don't go shopping much. That's why I was confused when I saw articles quoting such large exhange rates like 140 and 150 because they never happened at official rates. This situation is worse than I imagined, and I don't think some people are aware that SDG is severely overralued by the government.

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Local items are bargained as hell over here, which you can observe at https://www.lonelyplanet.com/sudan/a/nar-gr/money-and-costs/355629 but both official and black market exchange rates are so high that prices are still several times higher than they should be.

If your country uses a floating currency rate i.e, one which is dictated by changes in the economy, (as opposed to a fixed rate; which is pegged to another currency) then it would be influenced by changes such as inflation and the exchange value would be affected.
Sudan currently uses a regulated floating policy, which means it is still controlled to an extent by the government/banks.

Exchange rates are quite tricky to understand and calculate, bank rates are based on mid market rates, which is the average of buy and sell rates. You should also note that when converting a currency as an individual, you are technically buying money from an agency, so a commission is placed on it, all these factors can influence the exchange value.
Banks also implement fiscal policies to affect the economy, such as OMO ~ open market operations, QE ~ quantitative easing etcetera, so the inter bank rate is regulated.

Black market rates are usually more accurate and reflect changes in the economy more.
This is an excerpt from an article posted in July;

I ordered a few boxes of pizza today, and the total bill was 3200 SDG. That's close to about $55. Imagine if you suddenly have to pay thousands of bucks for a few boxes of pizza, that would be madness for locals. Sudan has really been hit with bad, uncontrollable inflation that spirals up by two digit percentages every year. I should mention that the government thinks printing more money is going to solve the sky-high (at least for local residsnts) bread and gas prices. Which is causing shortages of those items to the point that keep selling out quickly. (I felt my share of those.) Before 2019, there wasn't a banknote printed larger than 50 SDG. And all of a sudden, I start seeing 100 and 500 SDG banknotes printed in large batches, what in the world is going to back the value of this currency? Nobody is going to buy SDG bonds.

Speculators aren't helping improve this situation, just as with any other inflated currency. They keep shorting the Sudanese Pound and costing the central bank a lot of money, since in the Forex market, when somebody wins, someone else on the other side loses. These's even a crackdown on people who are holding US dollars you can read about here: https://allafrica.com/stories/202006190164.html

Inflation's up to 114% according to that link. Considering how it's been climbing up thr last several months, I don't expect it to get better at all in the future. This is part of the reason I started accumulating bitcoins, because it is immune to inflation. I just can't buy anything here with it.

And yet, the USD/SDG exchange rate is stuck at 55 since Feburary (and I also felt my share of price hikes when that happened). Doesn't inflation also cause exchange rates to increase, in an inflationary way?