hey.. need help urgently with a macroeco question... any help will be greatly.. enormously... tremendously .. basically highly appreciated...


1. the banking community tends to favor government policies which limit inflation even if these policies generate higher unemployment( which reduces income and results in lower demand for loans by households and businesses) explain the reasoning underlyning the banking community;s position.
thankx in advance!!

DISCLAIMER: UTTAR NAMILE MA CHIPLEDHUNGA JAWAFDEHI HUNE CHAINA..lekhnai birseko aghi :)

thankx for taking time out chipledhunga.. you;re soooo soo chweet.... first ko ques chahi submit gare second ko naswer chahi aafaile jpt garera submit garde... ali chilo bhayo answer paauda paudai..
keep it up !!...... we need ppl like you here @ sajha..

dhilo*

Economics... hmm...

The only thing I seem to remember about it is, this one professor thumping his considerable authority on us ignorant with these words, "Economics is a CHAIN. Everything and anything we talk from henceforth is interrelated with one another although we might talk about it independently at times."

Since then, all i can think of is a round circle, sel roti jastai ke whenever someone talks about economics. I swear that "Economics is a CHAIN," phrase got stuck in me.

It'ld be great if you can bring YOUR argument and tread the water here, instead of just balantly asking for an opnion on your assignment. Afno bichar bhana ani see if someone can present something you can either add on, or something, you-know.

Later,
Indisguise:)

Afno bichar = YOUR HYPOTHESIS.

After all what would be a econ discussion be without hypothesis. hehehe je bhande ni bhayo ;)

This is , thus that. If this, then that, theorefore this. yeta jau uta jau, tyai ta ho ni. Roti. ;) Ani feri What if? blah blah blah... hahaha

IndisGuise:)

While everyone is talking about economics.

I never understood the process of printing money. How does that work? Why doesn't a country print as much money as they want? What is there to stop them?

Let's say Nepal decided to print a lot of money so that they could give a million rupees each and every nepali.
The dollar to nepal value is 1 usd = 70 rs (approx)

Why is that not possible?

The reasons being...

1) Hyper inflation - plummeting value of any given currency.
2) "I promise to pay the bearer on demand the sum of ..." - in essence increasing debt of any given nation. It is a legal tender payable by the promisor to the promisee. ( Issuing nation to the bearer)

Not to mention the fact that only printing money is whatever capacity does not mean a solution in itself.

Money to be, act and perform what money does have to have following criterias:

i) Stability in value.
ii) Should act as medium of exchange such that it becomes a slandered of deferred payment.
ii) Has a storage value.

So on and so forth.

There are countries that did as they pleased. History has taught us that printing money in abundance is not the solution. Say-like countries such as Argentina, Mexico and Brazil did try it in some way or form in the past with disastrous consequence.

I was more curious if there are any laws that make each country abide by some kind of international law. I presume there must be some guidelines, but it is the prerogative of each nation to act as they please. Well not really, but they can if they want to. But at WHAT COST?

Thus, the bottom line is, it is not that it is NOT possible, but just because it IS, does NOT mean one should.

IndisGuise:)

interesting...
lets keep this thread rolling on guys... j hosh there are a lot of economists here... good to know.. yeso kehi question le dukkha diyo bhane i know where to go now.. :)

I wish we had internet and Sajha when I took SLC! :D

Khuru khuru afno assignment aafai nagarera, Sajha ma cheat paper maagna aune? Thuiyya! :p

Low inflation = lower interest rates charged by banks for loans = people borrow more money from the banks at low interest rates.

High inflation = higher interest charged by banks = demand for loan drops at such high rates of interest and the bank loses its customer base.

Conclusion:
Limiting inflation which results in higher unemployment and lower demand for loans is only an initial, short-term reaction. In due time (there?s usually a lag between the time a policy is implemented and its effect felt), lower or stable inflation means lower interest rates charged by the banks. This results in greater consumer and business borrowing which is beneficial to the banking community.

Hahahaha... chantu chalakh cha jasto cha iamme. Hahahaha... Hasaucha!

Why don't you follow these guidelines?

A) Ask the Professor- anything and everything.
B) Do research in journals.
C) Other internet sources.
D) Ask your peers.
E) Use library and brainstrome with other learned or learnign ones, whoever they might be.
F) READ YOUR BOOKS :P

And if you still have problem, then come to sajha and asks the Sajhaities. But then we shall not believe you. I mean if you did all of the above, you migth find a cure for Aids ;). LIAR :D - you do not want to be eh?

Hehehe...

Later,
IndisGuise:)

"Limiting inflation which results in higher unemployment and lower demand for loans is only an initial, short-term reaction."

Yes!

In the long run it is more or less independent of each other and reaches the equilibrium. (Corect me if I am wrong, this is what rem.)

Phillip curve illustrates all of these.

hey pontee... beleive it or not i do try to do all my assingments by myself :).. that's one thing i am proud of.. :)!!! its just that last week was a pretty black one... didn't do a shit in the class .. dont ask why.. the reason is silly.. tyehi pani i could answer those questions... but you know how sometimes you need that "backup" thing.. ... that you're doing it right bhanera.. ..there;s none around who can do that for me.. so just thoguht of posting it in sajha.. partly for fun... and NOT to hear your "thuiikaa".. get it!!
and indisguise thnkx for thr guidelines... :)

let peace prevail here @ sajha... NOT thiuikkaas..

It's been ages since I last attended macroecon class. Iamme lay kasto boring subject liyeko hola.

Tara Nepal ko context ma bhannu parda, my banker friends are least bothered about a double-digit unemployment. So why should the banking community give a rat's ass if limiting inflation generates unemployment. Inflation (unanticipated) hurts the creditor more, so why not limit it, hoina ra? The government also benefits from limiting inflation, since inflation eats up a lion's share of their real revenue generatated through taxation, hoina ra?. maile remember gareko bhaneko yi dui buda matra ho.

Sarkar lai real revenu chahiyeko chha - the more the merrier - so that it can employ gundas to destroy the democratic institutions of the country or import weapons. Inflation ta sarkar ko public enemy number 1 bhaihalincha ni ahile ko awastha ma. Jaba banking community ko ra government ko interests coincide garcha, who the hell cares about unemployment.

Higher unemployment lowers demands for loans ray, ho ra? If you had higher income, why would you need loans in the first place. Too buy Maruti because the bank doesn't extend consumer loans unless you show they proof of your employment and earnings. But there is also another side to this coin, hoina ra. Many unemployed in Nepal (because they have liquid cash income) are mortgaging their land and property (assets) to take out loans from banks or loan sharks, to finance their trips to Gulf countries. Remittances lay pani Nepali ko economy prop up gareko halla suninchha. Unemployment ra Gulf countries ko liberal labor market lay ta kehi had samma Nepal ko arthatantra lai faida garekai jasto lagchha - if you push it.

Herda ta win-win situation jasto po lagcha. Banking community gains (from low inflation), government gains (from low inflation), lucky unemployed (now employed in the Gulf gains from domestic unemployment, speaking sarcastically with some stretch of imagination hai), hoina ra?

The unlucky unemployed who cannot afford trips to the Gulf countries throw stones at the police on the streets of Kathmandul. Hoina ra?

hey chipledhunga.. thankx so so so so so very much.... you were right boaut the inflation walla answer.. got back the paper today...!!! 10/10 hehe.... :) :) :) :) :)
aru sabai lai pani dherai dherai dhanyabad!!
sajha rocks!

sepcial thankx to indisguise... karampa...u_day.. zalim.. mystichacker

Text book economy and real life economy may not match!!!!!!

e.g. American growth going strongl but american interest rate at a low level

So while talking about economics, or anything else like football, cricket, prostitution etc, there may be many factors acting at the same time and you never know in which direction the resultant force is heading.

About the original question, i guess the answer have been already been given in some way or other by chipledhunga, indisguise and karmapa. So I am going to adress the issue raised by cryptonite, banking on whatever little knowledge i have.

His/her question lies thus:

@@@@@
I never understood the process of printing money. How does that work? Why doesn't a country print as much money as they want? What is there to stop them?

Let's say Nepal decided to print a lot of money so that they could give a million rupees each and every nepali.
The dollar to nepal value is 1 usd = 70 rs (approx)

Why is that not possible
@@@@@@

Lets assume Nepal govt prints a lot of money ( other things eg. productivity remaining the same).

There will be overflow of money in Nepali's pocket (when government spends money in the form of general spending and development spending). Too much Nepali Rupees flowing without productivity would lead to inflation ( as you would be willing to pay, say,m Rs. 50 for a cup of tea) plus Nepali currency will depriciate against other foreing currency. 1 dollar would equal to say, 500 Nepalese Rupess. Thus in the end, things will only be worse, not better.

On the other hand, if the government prints lot of money and the nepalese work their ass off proportionately to produce more products and services ( with more efficiency among other things), I woudl say, exchange rate would not change and foreign products would be cheaper and we all would be happy. But the bottom line is we have to work ur ass off or we have to work with more efficiency to match with the currencies produced by the government.

p.s. Hushpuppy was claiming in some thread of havi9ng done mba in finance. Maybe she could help us?

Now let me say something about the original question. The question has been constructed possibly with an advanced economy in mind. BECAUSE, though the text book economy may say that higher employment may lead to higher demand for loan, in the case of Nepal, unemployment may not mean that people will not want more loan to go to Arab countries (as Karmapa has already said).

Now I focus towards another issue. The banks in Nepal may want to have higher inflation atfter all BECAUSE more than 50 % of deposits are in fixed (time deposits with fixed interest rates) whereas the banks reserve the right to revise interest rates whenever they so desire in ALL of their loans. So if the inflation is, say, 200 % for a given period, most probably followed by a very high interest rate (only in their loans!), the banks should be openign bottles of champagne everyday.

khai ke ho ke ho yo economics bhanne chij pani....too many hypothesis!

Again may be Hushpuppy can help us as she has an MBA in finance as she said.

Iamme, you are most welcome :)

Any new question for your next assignment :)