Don't borrow money, print more.

[Pitbull]

I assume the posters above that think the idea is SO CRAZY have never heard of "Quantitative easing". Which is what most the 1st world economies resorted to.

I think ANY method should be investigated. And people should rather inform themselves before resorting to the tired Zim 2.0 comments.

:erm:

You know what this "Quantitative easing" is you are talking about?

 

[DreamKing]

Pulling it out would more efficient

 

[sox63]

:erm:

You know what this "Quantitative easing" is you are talking about?

Basically the increased flow of cash into the market, by the reserve bank. How they do it, is up to the gurus to decide, but at the end of the day, it comes down to printing more money.

 

[Kosmik]

I assume the posters above that think the idea is SO CRAZY have never heard of "Quantitative easing". Which is what most the 1st world economies resorted to.

I think ANY method should be investigated. And people should rather inform themselves before resorting to the tired Zim 2.0 comments.

Creating more money, causes a fictional increase in wealth on a amount level but proportionately devalues the currency. This country use to be a major exporter. We now import the majority of our goods and give away resources to fools like Bob. Zim is an example of currency devaluation but not actually the one that first came to mind. I was thinking more about Soviet Russia or Germany when people used wheel barrows to carry notes.

And investigating is one thing, advocating it before investigation is another.

 

[Pitbull]

Basically the increased flow of cash into the market, by the reserve bank. How they do it, is up to the gurus to decide, but at the end of the day, it comes down to printing more money.

No, the Reserve bank don't Print money they don't have. This creates a stable ecconomy. That money they lend out to the banks to lend out to you. The moment you print money you don't have there is an influx of wealth (False sense of wealth) The moment the reality hits you sit where America was with printing money they didn't have.

Think about it:

Let's open the Mint and let everyone who wants money go there and get bags full of it. What does that do to the suppliers of goods? They up the prices. That is where you end up paying R 1 000 a bread. Which is exactly what happened in ZIM. Now that causes foreign investors to withdraw their investments. Now you have now foreign currency coming in and you sit with paper worth fsck all. (Again, ZIM)

Now how can you say that everyone seeing this even the ecconomists are wrong and have no idea what they are talking about

 

[MidnightWizard]

Mint

No, the Reserve bank don't Print money they don't have.

The MINT prints money and stamps coin

The link between the Commercial banks / Reserve Bank / Mint is poorly understood ( by most of us )

Who owns them what do they do how does the system work.

ALL very important questions


MW

 

[WilD_CaT]

No, the Reserve bank don't Print money they don't have. This creates a stable ecconomy. That money they lend out to the banks to lend out to you. The moment you print money you don't have there is an influx of wealth (False sense of wealth) The moment the reality hits you sit where America was with printing money they didn't have.

Think about it:

Let's open the Mint and let everyone who wants money go there and get bags full of it. What does that do to the suppliers of goods? They up the prices. That is where you end up paying R 1 000 a bread. Which is exactly what happened in ZIM. Now that causes foreign investors to withdraw their investments. Now you have now foreign currency coming in and you sit with paper worth fsck all. (Again, ZIM)

Now how can you say that everyone seeing this even the ecconomists are wrong and have no idea what they are talking about

We operate the fractional reserve banking and fiat money system just like in the states. I think the general reserve requirement in SA is 20% unlike the states which sits at 10%. This makes it slightly more difficult to print vast quantities of money than the U.S but not by much.

Since its fractional reserve the majority of money from all loans (80%) is created out of nothing, essentially from thin air.

Basically if I am the bank and you deposit R100 with me, I can lend out R80 (20% reserve) and when I lend out R80 and the guy deposits it with the bank (me) I now R180 in deposits. (R100 from the initial guy and R80 from the 2nd dude).

There is no actual transfer of R80 from one account to the next, they create the R80 that can be lent out from nothing.

So now I have R180 in deposits. I need a reserve of 20% and I can lend out R144 (If my maths is right?) which when deposited forms part of the reserves etc. etc.

Thats essentially fractional reserve banking in its simplest form and why there will always be an increase in the money supply which will usually lead to inflation.

 

[Morgoth]

The MINT prints money and stamps coin

The link between the Commercial banks / Reserve Bank / Mint is poorly understood ( by most of us )

Who owns them what do they do how does the system work.

ALL very important questions


MW

afaik the reserve bank determines the amount of money that needs be printed, its determined by monitoring the commercial bank's results, this the mind prints it and we have inflation. The more money printed = the more inflation, that is how I understand it as well

Argentina during the 1980's had the second biggest GDP in all of the Americas due to the large amount of silver deposits in the country (Argentina means land of silver), the country fell into heavy resection and inflation though, due to the fact that it lend bonds to the private sectors, money it didn't have ( sounds much like the current resection). So basically inflation skyrocketed, the country had the highest one in the history of the world ( only beaten by our lovely uncle bob next door a few years ago). In order for a country to keep up with inflation it has to print more money physically, so the economy can be stabalized, the Argentine printers went on strike, and couldn't keep up, this the country became one of the poorest in South America, causing a lot of unemployment and leaving it to where it is today.....stuck in the 3rd world. Uncle Bob drove his own economy out, inflation went up and boomb another Argintina (only worse,)


What does inflation and printing money mean for the consumer and company, well basically if inflating gets to zim level, where prices increase about 3 times per day then theoretically the business and companies won't make a profit unless they buy and resell all their stock within the same day. This forces more companies to close down, meaning more unemployment and less goods for us to buy until finally the economy comes to a still stand (depression/wall street crash!).


so yes printing money is the cause of bad, bad ,bad, bad management and bond mismanagement. (something I wouldn't find unfamiliar with the ANC)

 

[WilD_CaT]

In order for a country to keep up with inflation it has to print more money physically, so the economy can be stabalized.

When inflation gets out of control in order for people to have the money to carry on spending you need to keep printing which drives inflation upwards, further destablizing the economy, not stabilizing it.

In order to get the economy in balance you need to stop printing. How you do this is to increase interest rates and make it so expensive to borrow money that no one will borrow. This stops the fractional money creation process.

Once this happens no one has the money to carry on spending what they spent previously. The recession is a result.

A recessions is the markets way of correcting the problems created by central bank or government and fractional reserve banking. Many people think recessions are terrible things that need to be avoided at all costs.

If you are sick the medicine may taste bad but it well make you better.

Same with a recession. The problem was too much borrowing and malinvestment, the medicine is the recession. The recession itself is not the problem.

 

[WilD_CaT]

The MINT prints money and stamps coin

The link between the Commercial banks / Reserve Bank / Mint is poorly understood ( by most of us )

Who owns them what do they do how does the system work.

ALL very important questions


MW

Have no idea if I posted this before.

The Reserve Bank of SA is technically "owned" by shareholders like any other public company.

However as the Reserve Bank was created under the constitution the "rules" that apply to public companies don't apply to the Reserve Bank.

Also the constitution gives government the ability to appoint the Governor. Compare this with public companies where the shareholders pick who runs the company.

As far as I am aware anyone can go into the Reserve Bank (Not in the vault) and buy shares. I think its a fixed price at R10 a pop. Since essentially there is no risk involved (The bank can just print money to pay dividends) the return on the shares are very, very low.

So privately owned company (Technically) but run by government. The primary goal of the Reserve Bank is to keep the economy stable. So no drastic changes to the interest rate. No 0% one day and 8% the next.

 

[WilD_CaT]

The moment you print money you don't have there is an influx of wealth (False sense of wealth) The moment the reality hits you sit where America was with printing money they didn't have.

I think you meant that when you "print" money, you have more money but not more wealth.

Best way to think of how money supply and inflation works is to think of the scales of justice.

The scales always need to be in balance. So if you have all goods and services generated on one plate and all the total money in existance on another they will balance out, regardless of the amount of money in existance, the value is always = to the amount of products and services.

E.G. Assume on the 1 side you have a car. Assume on the other side you have R100.

The car is essentially worth R100. You cannot charge more for it as there isn't enough money to buy it.

Now lets say you "print" another R100.

So on the one plate you have the car. On the other you now have R200. They must always be in balance.

So now the car = R200 and bingo, we have inflation.

 

[krycor]

The US is setting a bad precedent as 3rd world countries desperately need their currency to be worth less and the dollar seems to be going only one way.

 

[MyWorld]

I was just sitting here rattling my brain, is there a country on earth that does not have debt?

And looking at first world countries for lessons on economics is like looking to Ozzy for marriage counselling. They are in a bigger mess than we are atm.

The government wants to encourage us not to make debt, but they themselves cannot "function" without it. They have absolutely no intention to ever repay it, have you seen a beggar returning a "loan" to you?

It always feels to me like our country is one of those beggars on a street corner, no money, no food, no work, millions to feed - God bless!
I makes me ashamed to think that we cannot utilize out natural resources and help ourselves. If we (government) worked instead of begging for handouts maybe we will get somewhere.

But alas, I have worked with beggars before and all you need is one handout and you are doomed to never to want to work again, someone else gave me money for mahala, I do not have to work.

We need to make some drastic changes to this economy and country for us to become debt free, financially independent and healthy.

 

[WilD_CaT]

Debt is not necessarily a bad thing. If you have an idea for a business but not the capital you need to get capital. There are 2 ways. If you want the rewards of your business to accrue to you only, you must take on the risk of debt.

You might default, but if you make profits they become yours. Risk and reward.

Or you have investors or shareholders. They offer up capital and they assume the risk of losing their capital. However if you make large profits, the profits accrue to the investors or shareholders and not to you. Less risk and less rewards.

The major problem is that it is impossible to predict with 100% certainty whether or not a business will fail. Its always risky.

We make educated guesses. Estimates tend to be more reliable if monetary policy is stable, I.E fixed, the interest rate doesn't change or changes very little.

If become more difficult if the interest rate changes often. Interest rates might be low one day, so you borrow lots, then to curb inflation created by lots of people borrowing (Due to low interest) the banks have to raise interest rates. Now you get screwed because if you haven't planned or budgeted for the increase you tend to lose everything.

Lots of borrowing creates lots of malinvestment, to correct this you get a recession.