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The problems Turkey has had due to this are due to misaligned global-trade incentives, though, no? (I.e., having low interest rates during inflation, and so int
by derefr 3y ago
The problems Turkey has had due to this are due to misaligned global-trade incentives, though, no? (I.e., having low interest rates during inflation, and so intentionally tanking your currency's foreign valuation, makes your exports even more worthless and your imports even more costly.) There might well be some kind of positive internal-macroeconomic effects, but they'd be impossible to detect through (and mostly irrelevant due to) the overriding external-macroeconomic impacts of these policies.
It would be interesting to see whether a country that had little-to-no dependence on global trade — North Korea, say — would actually see its internal economy benefit from low interest rates during an inflationary crisis.
- mucle6 3y agoWouldn't a falling currency (say compared to USD) make the exports more valuable (compared to USD)?
- dilyevsky 3y agoYes devaluing currency is good for exports. Someone’s “worthless” is somebody else’s “good deal”
- onlyrealcuzzo 3y agoIf you don't think lowering interest rates causes the value of money to go down, ask what would happen if the central bank set the interest rate to negative 10%. Nothing happens in a vacuum. Things can't be reduced so much. But the idea that lowering interest rates will bring down inflation is not mainstream for a reason.
- deleted 3y ago[deleted]
- imtringued 3y ago>If you don't think lowering interest rates causes the value of money to go down, ask what would happen if the central bank set the interest rate to negative 10%. Lowering the interest rate below zero means that QE becomes irrelevant and that the central bank should undo all of it. Afterwards the central bank should raise the minimum reserve requirements above 50% and tighten its money supply as much as feasible. As holders of bank balances want to avoid negative interest fees, they will choose to invest in certificate of deposit accounts. The original borrowers now have an incentive to refinance their debts with this source and repay the money creating loans they have gotten from their banks which ultimately reduces the circulating money supply. If lenders refuse to accept a -10% return and instead lend at the rate of inflation, then borrowers will know when to stop without the government or central bank telling them to restrain themselves.
- olalonde 3y ago"You Have Dollar, We Have Allah!" - Erdoğan Erdoğan has invoked religion multiple times to justify his insistence on low interest rates (Islamic finance prohibits interest). I don't know whether it's a genuine belief but it's his stated one.
- beebmam 3y agoIncredible to me that these kinds of statements don't get people removed from power.
- TeMPOraL 3y agoThere's a huge chunk of society more or less susceptible to such messages. In the secular West, this is usually phrased as "money doesn't buy happiness", or "there is more to life than material wealth", or "money can't buy me love, can't buy me looo-oove!", etc. And of course Christianity has its own set of memes around it. The difference is, perhaps, that I haven't heard of a Western politician using such phrases directly when addressing the people - but that might just be because such politician would be considered a hypocrite. It works differently when religion is involved, too.
- niemandhier 3y agoIslam would also dictate a gold/silver bound currency
- unmole 3y ago> Islamic finance prohibits interest Islam prohibits Riba which roughly translates to usury or unjust gains. While today it's widely believed to mean all forms of interest, that wasn't always the case. Even Caliph Umar was of the opinion that the definition of riba was ambiguous. The bulk of Islamic finance today involves structuring financing arrangements that are functionally equivalent to interest bearing loans but let everyone pretend otherwise.
- throwaway2037 3y agoWeirdly, North Korea is hugely dependent upon external trade for their mafia-like economy to survive. Except, when I say "external trade", I'm not talking about trading widgets for widgets. The only way they can pay for energy imports is to maintain a huge overseas organized crime syndicate to produce, traffic, sell illegal drugs and launder money. They are also involved in counterfeit money printing -- see "superdollar" on Wiki. I am sure they are involved in crypto mining and as well as crypto ransom.
- simonebrunozzi 3y agoSources for all of this activity from NK ?