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G-20 Leaders In Effect Back Currency Depreciation as Stimulus Tool...
Sidenote: Personal observation that Ms. Lagarde spends too much time in the tanning booth. Is there an add-on tax in France for tanning booth owners; as in the U.S. ?
IMF chief Christine Lagarde suggested in an interview with UK's Guardian that the Greeks should pay their taxes. It turns out Ms. Lagarde—legitimately—doesn't pay them herself. In fact, her IMF salary of $467,940 plus an $83,760 additional allowance is not subject to any taxes.May 30, 2012
Currency devaluation is nothing new obviously but this strategy has been widely endorsed and discussed in the last 7 years.
I really don't see how the EU stays together under one currency in a "race to debase" as many countries export their inflation/deflation to others and if the EU is tied to one single currency, it means that that fiscal policy is COMPLETELY scatted with no coherent strategy and yet monetary policy is constrained.
It has never added up for me how you could make the Euro work and keep countries together.
Maybe Germany, Austria, Belgium, Denmark, Netherlands, France and Sweden can make something work together, but I don't see how those countries can be aligned with the PIIGS, et al.
How they devalue their currencies matters a great deal. Will they do it by printing more money? Perhaps they have done nothing more here than to agree that what many of them have been doing for the past two years is A-O.K., and .... carry on?
After all, how much of the 3+ trillion on the US Fed's balance sheet was accumulated by purchasing MBS, and Treasuries, and who knows what else, with newly-minted paper? No one knows except those inside. No independent audits are ever conducted.
And how does devaluation help the global debt picture? I should think it would make it more problematic.
And how does devaluation help the global debt picture? I should think it would make it more problematic.
Devaluation helps make it easier to pay back debt with cheaper and cheaper currency.
Nothing would really surprise me at this point in terms of monetary policy actions taken. Governments seem unwilling or unable to come up with any ideas beyond financial engineering. It really would appear to be me that the goal is avoiding economic Winter at all costs.
"Devaluation helps make it easier to pay back debt with cheaper and cheaper currency."
Well, that depends completely on what currency the debt is denominated in. For example, evidently quite a number of East Europeans borrowed from Swiss banks, with housing mortgages denominated in Swiss francs. When the Swiss recently untied their franc from the Euro, it rose radically in exchange value, effectively devaluing the Euro against the franc. So if you are in a Euro-based economy, and are paid in Euros, you now need a whole lot more Euros to repay your Swiss franc mortgage. The Euro may now be "cheaper", but it surely isn't easier to pay off your Swiss mortgage.
Or consider a country in the EU: if an entity there bought a $100 US bond while the exchange rate was €1 = $2, they would have paid €50 for that bond. If the Euro then devalued to €1 = $1 and the bond becomes due, the US treasury would pay $100, now equal to €100.
Or the reverse: if an EU entity bought US bonds while the exchange rate was €1 = $1, they would have paid €100 for a $100 bond. If the dollar devalued to €1 = $2 and the bond becomes due, the US treasury would still pay $100, now equal to €50.
A dangerous game, indeed.
(All exchange rates mentioned are hypothetical, for example only.)
Comments
The one on the left?
Edit... never mind, they took that one away...
IMF chief Christine Lagarde suggested in an interview with UK's Guardian that the Greeks should pay their taxes. It turns out Ms. Lagarde—legitimately—doesn't pay them herself. In fact, her IMF salary of $467,940 plus an $83,760 additional allowance is not subject to any taxes.May 30, 2012
Ah, some jobs/work have all of the perks.
Catch
Well, don't know about the public service part.
Some cultures or portions of that culture, consider that a prostitue provides a "public service".
I really don't see how the EU stays together under one currency in a "race to debase" as many countries export their inflation/deflation to others and if the EU is tied to one single currency, it means that that fiscal policy is COMPLETELY scatted with no coherent strategy and yet monetary policy is constrained.
It has never added up for me how you could make the Euro work and keep countries together.
Maybe Germany, Austria, Belgium, Denmark, Netherlands, France and Sweden can make something work together, but I don't see how those countries can be aligned with the PIIGS, et al.
After all, how much of the 3+ trillion on the US Fed's balance sheet was accumulated by purchasing MBS, and Treasuries, and who knows what else, with newly-minted paper? No one knows except those inside. No independent audits are ever conducted.
And how does devaluation help the global debt picture? I should think it would make it more problematic.
"Some cultures or portions of that culture, consider that a prostitue provides a "public service".
Mixing Christine Lagarde and prostitutes in the same sentence gives me the heeby jeebies. Please, I'm trying to have breakfast here.
Nothing would really surprise me at this point in terms of monetary policy actions taken. Governments seem unwilling or unable to come up with any ideas beyond financial engineering. It really would appear to be me that the goal is avoiding economic Winter at all costs.
Well, that depends completely on what currency the debt is denominated in. For example, evidently quite a number of East Europeans borrowed from Swiss banks, with housing mortgages denominated in Swiss francs. When the Swiss recently untied their franc from the Euro, it rose radically in exchange value, effectively devaluing the Euro against the franc. So if you are in a Euro-based economy, and are paid in Euros, you now need a whole lot more Euros to repay your Swiss franc mortgage. The Euro may now be "cheaper", but it surely isn't easier to pay off your Swiss mortgage.
Or consider a country in the EU: if an entity there bought a $100 US bond while the exchange rate was €1 = $2, they would have paid €50 for that bond. If the Euro then devalued to €1 = $1 and the bond becomes due, the US treasury would pay $100, now equal to €100.
Or the reverse: if an EU entity bought US bonds while the exchange rate was €1 = $1, they would have paid €100 for a $100 bond. If the dollar devalued to €1 = $2 and the bond becomes due, the US treasury would still pay $100, now equal to €50.
A dangerous game, indeed.
(All exchange rates mentioned are hypothetical, for example only.)
Quite true.
A lot of Russians took mortgages in other currencies.
http://www.businessinsider.com/some-russians-are-freaking-out-as-their-mortgages-soar-2015-1