Usury, what is the solution?

[shiny!]

Re: Usury, what is the solution?

In normal practice, hyperinflation occurs because there is a huge external debt to devaluate.

If I may respectfully disagree.. High inflation can occur when there is a huge external debt to devaluate, but hyperinflation occurs when there is a loss of confidence in the currency. Hyperinflation can literally happen overnight, as people desperately try to exchange their currency for tangible goods which they perceive as a better store of value. High inflation is a monetary phenomenon. Hyperinflation is a social or psychological phenomenon.

[c1ue]

Re: Usury, what is the solution?

Herr Clue I was expecting others to chime in on your post. In regards to your comment that "hyperinflation occurs because there is a huge external debt to devaluate." I believe your statement implies there is a creditor whose interest in repayment of their claims are not too easily denied. That in itself discredits your statement because if it was so, the debtor could just print enough notes to satisfy the debt. Please delve into more detail for us to understand.

The examples I've looked at:

Russia
South Korea
Brazil (several instances)
Mexico (several instances)
Argentina
Weimar

Every single example had gigantic debts both external and internal. Some of them devalued the external debt via printing, some of them devalued the internal debt via printing, but the ultimate cause for the money printing and subsequent hyperinflation was the inability to pay the external debt.

Please provide your counterexample(s) since you seem to think differently.

Mugabe chose to print local currency to obtain foreign currency in order to buy weapons and war materiel to remain in power.

Please provide some proof of this.

Outside of Ebay sales of 100 trillion dollar notes, I do not believe any external individual or institution would accept Zimbabwe dollars.

To call Mugabe's actions austerity, is to say the drunkard is going reformed because the bottle is empty. Zimbabwe's was pillaged and could no longer even produce enough resources to sustain its local population.

Given that Zimbabwe was a massive exporter of food in the early '80s, it is extremely problematic to attribute its present food import status as being due to money printing.

Far more likely it was the societal impacts from the land redistribution policies Mugabe instituted after he came to power - specifically the switchover from largely white run farms to smaller black landholdings. While it is silly to say there is a race issue, it is quite likely the loss in food production arose from relative lack of capital, lack of training, and inexperience.

As for austerity - you don't have to take my word for it:

http://www.guardian.co.uk/world/2009...oan-mdc-mugabe

Zimbabwe's crippled economy received a boost when the IMF sanctioned a $510m (£311m) loan, its first to the country in a decade.
But the move stirred conflict between the partners in Zimbabwe's unity government amid fears it would used to shore up President Robert Mugabe's regime.
Gideon Gono, Zimbabwe's reserve bank governor, said the IMF had paid it $400m via a fund for developing countries hit by the global recession, with a further $110m to follow next week.
"I can confirm that the Reserve Bank of Zimbabwe did receive the funds," Gono told the state-owned Herald newspaper, adding that he and the finance minister, Tendai Biti, would discuss how to deploy the funds.
The money will be used to replenish Zimbabwe's dwindling foreign currency reserves and has been released on condition it is not diverted to other projects.
Political leaders hailed the decision as a sign that Zimbabwe's unity government is ending the country's spell in the international wilderness.
The IMF wound down its programme there 10 years ago and formally withdrew in 2002, adopting a "declaration of noncooperation" with Mugabe's government.
Eddie Cross, an economist and policy co-ordinator for the Movement for Democratic Change (MDC), said: "This is the first significant IMF involvement with Zimbabwe for more than a decade.
"The magnitude is very substantial, about half our total budget this year. It's a very large contribution."
But the MDC opposed Gono's appointment at the reserve bank and will be anxious to ensure he does not control the funds in case they are directed to the coffers of Mugabe's Zanu-PF party instead of the impoverished population.
"Gono is part of the reactionary elements fighting the unity government," said Cross. "He's been the principal culprit for the meltdown of the economy. We've been successful in … circumventing him and that's what we'll do with this money.
"It will be controlled very carefully, otherwise it will be used and abused and find its way to all sorts of nefarious activities and corrupt institutions."
Another MDC source added: "Gono has tried to take the money but Biti is trying to take charge." The source added that Zimbabwe may be unable to draw down the funds until it has shown it can repay a debt of $5.7bn to various creditors. "The funds will come but it will be in the context of Zimbabwe having committed to clearing these debts," he said.
The IMF told Zimbabwe two weeks ago, in a letter obtained by Reuters, that it would not receive the $510m until it repaid arrears of $142.2m. In a letter to Biti, the IMF's acting director for the African Department, Mark Plant, said countries with arrears would not receive aid until they had cleared them.
"Thus, although Zimbabwe is eligible to receive the SDR (Special Drawing Rights) under the general allocation, it will not receive its share under the special allocation ... until its arrears have been cleared."
G20 leaders agreed in April to treble to $750bn the IMF's capacity to help struggling economies. According to the IMF's website, all 186 members were eligible to receive the money from 28 August in proportion to their existing quotas with the fund.
Zimbabwe has suffered a decade of economic meltdown and record hyperinflation, worsened by the withdrawal of western aid over policy differences with Mugabe's previous administration, before he formed the unity government this year with rival Morgan Tsvangirai.
Western donors have demanded broad political and economic reforms before giving direct aid to the government. Donors currently provide only humanitarian aid. Dominique Davoux, the EU's head of economic co-operation and food security in Zimbabwe, told a business conference in Harare this week that efforts to restore ties were being made.
"Zimbabwe's international relations are on the mend, with bilateral and multilateral re-engagement efforts taking centre stage, starting with the prime minister's visit to Brussels in June," Davoux said. "It's moving very slowly and we want it speeded up to deal with areas of concern on both sides."
Davoux said any possible financial assistance to the unity government -which says it requires about $10bn to rebuild the economy – depended on successful negotiations.

http://af.reuters.com/article/topNew...BrandChannel=0

"Priority areas include reducing labor market rigidities, establishing security of land tenure, clarifying ownership requirements under the indigenisation legislation, and addressing concerns about governance in the diamond sector."

If I may respectfully disagree.. High inflation can occur when there is a huge external debt to devaluate, but hyperinflation occurs when there is a loss of confidence in the currency. Hyperinflation can literally happen overnight, as people desperately try to exchange their currency for tangible goods which they perceive as a better store of value. High inflation is a monetary phenomenon. Hyperinflation is a social or psychological phenomenon.

I use the iTulip hyperinflation definition, which is 100% or more inflation in one year or 10% or more inflation in one month. Neither of these have anything to do with confidence.

You clearly refer to the several thousand percent inflation (or higher). Frankly the only difference between 100% in 1 year and Weimar is time scale and digits.

The economic impact is identical - i.e. very bad.