Mostrando entradas con la etiqueta money back. Mostrar todas las entradas
Mostrando entradas con la etiqueta money back. Mostrar todas las entradas

jueves, 4 de abril de 2013

The austerity policy is not necessary, a thesis different from traditional concepts of monetary policy


Index
1. Extract
2. Why austerity?
3. Why devaluation?
4. What to do to avoid the austerity policies?
5. What to do to avoid currency devaluation?
6. Conclusion
1. Extract
Austerity and currency devaluation are two policies currently affecting several countries. Austerity is the main problem of economic policy of the United States and the countries of Southern Europe, Portugal, Spain, Cyprus, Italy and Greece, while devaluation is present in Latin American countries such as Venezuela and Argentina. These facts make it clear that millions of people around the world suffer the consequences of austerity and devaluation.
2. Why austerity?
Governments impose austerity policies due to lack of money to meet the needs of society.
3. Why currency devaluation?
Governments devalue the currencies of their countries for two main reasons:
a) To get more money in national currency, since the amount of money in circulation theoretically should be in relation to the amount of international reserves which consist dollars USA and /or gold, and
b) To compete more effectively in international markets, since currency devaluation reduces prices of their export products.
4. What to do to avoid the austerity?
The austerity solution is very simple:
a) Issuing more money in national currency to meet the requirements of the factors involved in the economic process.
b) No international organization or any country has the authority to impose on another country how much money issue or not.
c) The only limitation for the countries is the availability of foreign currency, i.e. the amount of dollars to buy into international markets.
d) If a country does not have enough foreign currency ---dollars --- a problem arise because it cannot pay its external commitments. In that case, countries have two options:
- Produce more, better and at a competitive price to sell more in international markets and so to obtain extra dollars and / or
- Borrow money to the financial system, which ultimately is bad for the country, because international debts tend to become eternal, as it is very difficult to pay them in full because of the burden of interest.
e) We affirm therefore that governments are free to issue all the money in local currency to meet the needs of their economies and for that reason are not justified to subject people to the painful effects of the austerity policies. The concept of inorganic money is something absurd without intellectual base basis in reality, because money cannot be inorganic; money is simply a medium of exchange.
f) The gold backing of money is an illusion, because all the gold in the world would not be enough to support all of the money in circulation. Money is a trust instrument, i.e., paper and coins with no intrinsic value that circulate through the good faith and acceptance as a means of payment on the part of economic actors, nothing more.
g) The dollar of the United States of America does not have enough gold backing; consequently, all the world's currencies using the dollar as a backup not have enough support.
5. What to do to avoid currency devaluation?
a) The devaluation to address the fiscal deficit does not make sense because if it is true that governments get more money in first instance, at medium term they lose because of the inflation of all goods and services they buy. Therefore, devaluation for fiscal purposes is absurd.
b) Furthermore, the devaluation to improve competitiveness in international markets is not justified, because markets do their purchases in base not only of lower prices but also on factors such as quality and security of supply. Price is one of the variables that determine the buying decision in foreign markets but it is not the only or the most important.
6. Conclusion
Lack of money should not limit economic growth and should not be the cause of the poverty of nations. The reason is very simple: because countries are free to issue all the money in local currency that require their economies.

martes, 27 de noviembre de 2012

Is there a limit to the amount of money that an economy can to issue? A reflection on the U.S. fiscal cliff


The lack of money is a major cause of the economic problems of the nations. But money is a creation of human beings. Money has not intrinsic value but which assigned people.
The function of money is to serve as an instrument for the settlement of transactions in the economy. If the economy grows money needs also grow and vice versa, if the economy stagnates or decrease cash needs decrease.
In the modern world the only legal currency issuers are governments, states. When economic needs increase governments are forced to print more money.
It is therefore important the following question: Is there a limit to the amount of money that an economy can to issue?
The answer is no, there is no limit to the amount of money that governments can issue in their national currency.
What is the money back?
Theoretically, the national currencies of the countries are backed by gold and foreign reserves, specifically, dollars of the United States of America, which is used as a reserve currency for most countries central banks.
As such we can formulate the following questions:
What is the U.S. dollar backing?
The backing of the U.S. dollar is the people faith in the currency that is internationally accepted as payment instrument, nothing more.
What is the real value of gold?
The value of gold is relative and is also based on its acceptance as a mean of store of value and in jewelry, nothing else.
From this we can infer that the support of other currencies of other countries of the world is also the faith of the people in those currencies as a medium of exchange, nothing more.
The amount of money circulating in an economy determines the expansion or stagnation of the economy. For that reason, monetary policy is the most important instrument of economic policy.
The U.S. government prints more money to satisfy the needs of its economy and the global economy since the dollar is the international currency exchange. So it is a mistake and an exaggeration to talk about U.S. fiscal cliff.
Those who say that the United States is in a fiscal cliff are causing great harm to the reliability of the dollar as international reserve currency and payment and this and this could generate an intense global monetary crisis.
United States is not in a fiscal cliff, the government of that country is only serving the needs of its economy and the world economy.
Links:
Money is only metal and paper without intrinsic value
Fiscal deficit and size of the economy
The debt is not a problem for the United States
http://pablorafaelgonzalez.blogspot.com/2011/04/debt-is-not-problem-for-us-neither.html