I am not an economist. But I have a basic question regarding the current financial crisis.
Why the financial system of a country is liquid? To put in other way why a country cannot increase the volume of its currency to overcome financial downturn?
Every country has its own currency. That currency is also released by its own country. Then why is it not possible? It sounds rediculous.. Even thinking about it I laughed at myself!!!
Let me put it by an example. Suppose a country has a total of x unit of its currency. All this currency would have been printed or manufactured by an institution of that country. A general person or lets say bank has y unit of that currency. If that institution releases additional nx unit of currency and distribute it to that person or bank then the total currency with them will be proportionally incresed by ny amount. Now they can invest or spend ny amount in other countries as the currencies are interchangeable. People want money to fulfil their basic needs as well as to do what they want. They can do anything with this money as the world is open.
I agree that we have limitation of our exports. We cannot export money in lieu of commodities. Every country has the limitation of its resources but an independent country can release money to buy anything they need from a country where that resource is in surplus. What is the limitation? Everything comes at a price!! Some at high cost and some at low.
Well the answer may be here. Population is increasing and resource is limited. We cannot stop time to make population stagnant. Nor we can increase the resources of the world as a total. A country cannot export more by reducing its consumption lower than a threshold. So the total consumpion is limited to make resources sustainable for future use. If inbalance occurs it may create havoc in the world.
But coming to the present situation in US, the crisis is due to unavailability of liquidity. Can America do this tricky thing to overcome its crisis? Who will regulate? If they print huge amount of dollars and inject it to bank then everything will be fine for them. Can they do it for short term solution to make suffer other developing countries in long term? Let's wait and watch!!!
4 comments:
It seems as in this period of economic recession, everything comes at a price......Now this template looks better than the previous one.
thnx buddy..
Hey Aditya, Rahul Here, I think I can make small comment. If you put more money in the market that will go to people and they will start buying, that will increase demand and in effect price of commodities and goods. That will increase inflation and again demand for more money. This will be a vicious cycle which will lead to a very high rate of inflation, as happened in some countries. There are other reasons also, you need to have the amount of gold equivalent to value of money you are printing. And without that value of your currency will come down against the currency of other countries.
I thought to say same what Rahul said about Gold deposit and Inflation threats.
Does anybody thoughts how this recession comes around and where the currency gone what was sufficient earlier.
In my view some developed and developing country made this situation purposely. May be it is for optimization of resources including currency for long future purpose and major motive is to make people interested in government sector job so that Government sector also get the talented people who are moving to the corporate sector only. Every developing and developed countries are facing this talent filtration by the monopoly of corporate sector. Here corporate sectors are not the losers as they become habituated to optimized resources. At present not any client asking for reserve bench strength to the company being project offered. Then why any company give salary to idle people on bench.
The most amazing point is recently the election has been done for 1100 millions people of our country and there is no agenda of recession for any political party. At the same time surveys being delivered to us that Rahul Gandhi's youth factor worked more in favor of Congress the ruling party. On the other hand the youth of this country mostly effected because of recession.
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