BY: Chier Akueny Anyithiec, JUBA, MAY/02/2015, SSN;
Suggestion of currency devaluation is a total nightmare that it would be the best way to destroy the lingering economic quickly. By a continuing process of inflation, the solution wouldn’t be at the first place a suggestion of currency devaluation.
It was a useful proposal, but I felt like, I wonder in other way if I list down the shortcoming when suggestion is adopted. The proposer would send me an academic paper showing that devaluation currencies were often associated with shrinkages or running away economy.
I would write responding that I wasn’t disputing that; instead, I was saying that devaluations made economic adjustments easier; this is simple and its simplicity complicates everything in the process.
Is it showing that devaluations would little bit help relieve the situation? The inflationism (devaluation) has serious impoverished effect, not less than of the proletariat (people employed).
As the inflation proceeds and the value of the currency fluctuates wildly from time to time in frequent, all permanent relations between debtors and creditors, which form the ultimate foundation of entrepreneurship, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a bet and a raffle.
There is subtler here; is there no surer means of overturning the existing problem in the country than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in this Country will able to establish influence.
The quotation of well known Economist Keynes is perfect here. It does such a good job of succinctly describing why currency devaluation is a destructive policy, both economically and socially because it undermines both sides in such confused and fragile economy like such of South Sudan today.
It seems that Keynes understood the problems fashioned by policies designed to debauch (devalue) the currency, the modern-day economic followers never see this one the solution to shrinking economy.
Instead, the degree of sense has been discarded by the Keynesians of today in favour of a total focus on “aggregate demand”.
If you wrongly believe that economy to be a vague blob driven by changes in “aggregate demand”, then you are looking at the economy through a quilt that creates such a distorted view of the world that what you perceive is the opposite of reality.
When looking through such medium, currency-devaluation policy can appear to be unjustifiable process economic anodyne.
Yes, we know that currency devaluation makes local exporters more competitive; but what are we exporting from this country?
I think, according to my meager knowledge of economic; a country devalues the currency to promote her local exports. The problem immensely, we are consumers rather than exporters and so, it would seriously be at our EXPENSE as consumers and importers.
There can be no net benefit to our trembling economy and indeed such act may lead economic to total oblivion.
The reason is that a persistent reduction in a currency’s value on the foreign exchange market requires relatively high monetary inflation, which leads to rises in domestic prices that not only counteract any benefit to exporters from the exchange-rate decline, but also distort relative prices in a way that makes the overall economy less efficient.
The real policy stands that you devalue your currency in some stable countries in case to increase the exports if reaches her trade deficits but are we trading/exporting?
According to orthodoxy of real economists, every dollar that flows out of the country due to a trade deficit is a dollar less of spending within the domestic economy, which, in turn, leads to a weaker domestic economy and higher unemployment.
Indeed, even-though our employment rate is at nutshell, then it would be better for us to maintain the same tract and make sure we adjust some misplaced policies for us to regain.
There is a need for the redirection of these policies to make sure that consumers and importers are favoured and by doing this; we made sure there is a reduction too to net loss of jobs. I always wonder to why people jump the same hole in this country because this very same hole will be forcing you to unnecessary/wanted hurdles.
The first face of economic reform would be support of local productions that include set employment policies of the country to make sure that there are little bit itches of inputs to our society.
Here if currency devaluation is achieved then, it would be a veracity that you have added hands to killing real wages and thus gets around the problem that the nominal price of labour tends to be ‘sticky’.
The idea is that insignificant wage rates are excessively slow to fall in response to reduced demand for workers, and that currency devaluation helps by furtively reducing the real price of labour. So, are we intending to reduce the price of wages or to increase wages in this dilapidated war torn country?
I request the real economists to assist me here!
Second, the sticking of wages is not only the problem such severe economic downturn but we have to unequivocally consider another point that government indirect payments to the unemployed can reduce the incentive for able-bodied people to accept lower wages to re-enter the workforce. In other words, if nominal wages are problematically ‘sticky’ it is because of government intervention.
Third, the knowledge that modern money relentlessly loses purchasing power over time would tend to make nominal wages ‘stickier’ than they would otherwise be but how do we lose the purchasing power? The answer is low value of the coin you have at hand.
I would agree with proposer to disagree with him that the primary problem with currency devaluation is that it always leads to non-uniform changes in prices throughout the economy.
In effect, the of devaluation policy send false price signals into the economy, which leads to more investing mistakes than would otherwise happen. As a result of the greater number of investing mistakes, there ends up being less wealth to the country, but are we ready stand with less wealth when we do not have wealth already?
I remember the policy of economy on the proverbial “slippery slope; I think you want to put this country to this slippery slope if you are longing for currency devaluation.
In summary, Keynes wasn’t right about much, but early in his career he was absolutely right about currency devaluation. It is a process that engages all the hidden forces of economic law on the side of destruction, and it does it in a manner that not one man in a million will be able to diagnose.
The currency devaluation policy is the root cause of worldly fixation on “inequality”. Unfortunately, none of the most popular writers on this topic understand the cause of the perceived problem.
But we can you do, you have to go ahead with you suggestion of solving one problem so that you get more problems. Therefore; I don’t support currency devaluation at the expenses of average consumers.
BY: Chier Akueny Anyithiec,
Currently living in Juba,
Reach me at: email@example.com