mrmayor:

@Newgroom,

Why oh Why? Good Kweshon

Why does Nigeria have to sell Oil in Dollars? When we can print as much as we need and exchange for the Dollar

Who does Nigeria have to base our economy on Oil Sale? When we can easily Print more Naira, minimum wage can be set at 1m naira a week.

Why does a Nation need to Tax at all; Why Tax the money you printed, when you can print more?

I have a headache from too much kweshon

Iknow u joking right?

Nigeria has to sell oil in dollars because that is the most acceptable form of currency for taded commodities. Also serves as a check for balance of trade between trading nations.

You don't tax on the money printed, but on the value of what that money has created

DOLLAR IS ONE OF THE MOST ACCEPTABLE CURRENCIES ALL OVER THE GLOBE. BESIDES, NAIRA HAS NO VALUE AS COMPARE WITH DOLLAR.

@ newgroom, i think u are not an economist and sound as one who has not attended an economics lesson in sec. school for at least a year. Recently the nigerian council of states approved a new monthly minimum wage of N18,000 for civil servants in nigeria, when implementation starts, no one will tell minimum wage implementation has commence, u'll knw it alone from inflation of prices of goods and services. Now if govt print more money what do u think? It will violate some the principles of the xteristics of money. U need more?

T9ksy:

Quote from: newgroom Posted on: Today at 04:41:22 PM
Intelligent answers, ke? To an infantile question!!
What an oxymoron!!!

You contributed nothing to this wonderful thread. If you have nothing to say, why not shut up and learn?

Its possible to print money without inflation as long as the velocity of money is inversely proportional to money supply.

Sanusis bailout was a classic example as credit squeeze slowed the velocity of money. Likewise Bernanke seeing that the velocity of money is slowing has proferred quantitative easing over and over again as a panacea for yankees troubles.

There are ways a country can raise capital. Issue bonds, Borrow or increase supply ( print money). The latter is not always a good idea as this will cause yr currency to be devalued. Since yr currency losses value, it means that it will cost more to buy anything within the country, so prices go high, thus inflation. Also yr debts increase. Remember yr currency has lost value so you need to pay more to repay them. Also from an FX perspective, you currency losses value. Mainly supply and demand issue. This of cousre if demand remains the same. The reason why the US is printing money is because they cant get money lent to them and the Chinese, Saudi and Japan have lent a lot. Also the printing is a double edge sword. Keep in mind I said that the money gets devalued. Have a look at the US currency since they have started, you will see a fall when compared to other currencies. Now those who hold US paper ( bonds) when they get paid, get far less back.

So in short, can be helpful in the shorterm to kick start an economy and easy payment obligations internally, but it has a price.

@poster

are you okay with those posted analysis? The experts can't help and a country sjould emabrk of prevention rather than queer

@Ibime,

The real question is how much can a country really printed without causing inflation? Mugabe printed all the money he wanted, you know what happened to him, don't you?

Ibime:

Its possible to print money without inflation as long as the velocity of money is inversely proportional to money supply.

Sanusis bailout was a classic example as credit squeeze slowed the velocity of money. Likewise Bernanke seeing that the velocity of money is slowing has proferred quantitative easing over and over again as a panacea for yankees troubles.

Dont think he had an option. Do you see the Armageddon if all those banks would have failed? There would have been a mad rush for balances and people would have horded money in fear. No would would want to pay anything and monetary movement would have been at a standstill. Though in honesty I dont think Nigeria printed money , but stood as guarantor so to become shareholders. Remember some of these banks had eroded capital anyway.

Whats the difference between priniting and borrowing in the two case the same amount of money is coming in. And the cost of printing a thousand naira is not greater than 1,000 itself. So lets print and dont get it into circulation then we can use it for whatever we want instead of borrowing and paying more interest, or if the federal govt like borrowing let govt ask the CBN to print more money and then borrow from CBN and pay with interest CHIKENA!

PBundles:

There are ways a country can raise capital. Issue bonds, Borrow or increase supply ( print money). The latter is not always a good idea as this will cause yr currency to be devalued. Since yr currency losses value, it means that it will cost more to buy anything within the country, so prices go high, thus inflation. Also yr debts increase. Remember yr currency has lost value so you need to pay more to repay them. Also from an FX perspective, you currency losses value. Mainly supply and demand issue. This of cousre if demand remains the same.[b] The reason why the US is printing money is because they cant get money lent to them and the Chinese, Saudi and Japan have lent a lot. [/b]Also the printing is a double edge sword. Keep in mind I said that the money gets devalued. Have a look at the US currency since they have started, you will see a fall when compared to other currencies. Now those who hold US paper ( bonds) when they get paid, get far less back.

So in short, can be helpful in the shorterm to kick start an economy and easy payment obligations internally, but it has a price.

The US does not have any issues raising funds in the money markets. That issue is what Greece, Ireland faced. Secondly, the federal reserve is printing money to stimulate growth. A second consequence is the lower value of the dollar which has increased American exports.

Ireland just got bailed out ( Euro 85bn), Ireland didn't have the option of printing more money because she using the Euro, controlled by European Central Bank, if Ireland was still using the Irish Pounds (Punts) it would have printed more money but that would have destroyed its value. Countries that loved printing money ( Italy, Lira, Spain) had almost worthless currencies. Printing money causes Irresponsible spending, Ireland spent money it didn't have and has just been bailed out, would have been worse if Dublin could print all the money she wants.

Enjoy my Irish Joke.


A rich American arrives in a Irish village, walks into the only Bed & Breakfast, places a €100 note on the counter and asks to inspect the rooms with a view to deciding whether to stay the night.

The hotelier hands him a bunch of keys and, as the American disappears into the lift, runs next door to pay the €100 he owes the local butcher. The butcher runs across the road to pay the farmer to whom he owes €100. The farmer goes down to the pub to discharge the €100 debt he owes there. The publican gives the note to the local hooker, with whom he’s been doing some business, and she runs up to the hotel to settle the €100 bill she’s run up for rooms.

The American comes down after inspecting the rooms, which he found unsatisfactory. He returns to the desk, picks up the €100, walks out of the hotel and leaves town. The parable concludes: “No one produced anything, no one earned anything but the whole village is now out of debt and looking forward to the future with a lot more optimism”.

Print money ke? are you people insane?

PBundles:

Dont think he had an option. Do you see the Armageddon if all those banks would have failed? There would have been a mad rush for balances and people would have horded money in fear. No would would want to pay anything and monetary movement would have been at a standstill. Though in honesty I dont think Nigeria printed money , but stood as guarantor so to become shareholders. Remember some of these banks had eroded capital anyway.

Sanusi had no business using monetary policy to prop up failing banks. That was the responsibility of the government. It was up to the government to use fiscal policy to sort out that mess. No one, I repeat no one, prints money to bail out ailing corporations or banks. The problem with the banks was connected with mis-management, corruption, sharp practices, and nepotism. If more banks continue to employ such tactics, will Sanusi continue to print money to bail them out? It was the responsibility of the government to take appropriate action such as
1. Seizing assets of corrupt officials
2. Imprison fraudulent officials to serve as a deterrent
3. Bail ailing corporations by pumping funds into them, buying shares, and diluting the share holdings of such corporations ensuring that share holders do not lose out completely


This is what we get when both CBN and government officials do not understand monetary and fiscal policy. They are all a bunch of incompetent buffoons.

@ ibime, i don't think velocity of money can cause money shortage that will warrant printing more, as the money circulates it can't cause shortage. What u shld rather bring in is creation of money which u may knw is not always printed but through bank loans.

mrmayor:

@Ibime,

The real question is how much can a country really printed without causing inflation? Mugabe printed all the money he wanted, you know what happened to him, don't you?

There will be inflation but the question is 'what is the acceptable level of inflation that a government is willing to accept'? If inflation is at 1.2%, as it is in the US, and the set target inflation rate is 2%. The central bank will attempt to calculate how much it can release without going over 2% and it will work with the government to plan both fiscal and monetary policies that can be used to reign inflation in should it go above the target rate of inflation.

@ Katsumoto,

Bank bailouts are the most adequate scenario for printing.

Bernankes QE2 for example was seen as an asset swap rather than a straight up QE.

This scenario becomes possible because of two scenarios:

(1.) Bailout is not immediately followed by credit easing as banks become overcautious. So the velocity of money remains slow counterbalancing the effect of QE. In other words, there is a time lag before we see change in lending activity.

(2.) Secondly, bailout does not immediately increase money supply. Falsely priced assets are simply given real prices and passed on to Govt. Depositor and Savings activity does not change immediately, nor does spending.

Katsumoto:



This is what we get when both CBN and government officials do not understand monetary and fiscal policy. They are all a bunch of incompetent buffoons.

GBAM.
No separation. The CBN acts as if it operates from the Presidency.
What is the interest rate in Nigeria? Is it close to zero? QE only comes in if IR fails to address a worrying economic trend.

Lowering of interest rate is meant to stimulate lending. When this fails to impress bankers to lend, a government then attempts QE.

Without banks' disposition towards lending; no vibrant SMEs. Without SMEs, the economy becomes stagnant and unemployment rises.

Ibime:

@ Katsumoto,

Bank bailouts are the most adequate scenario for printing.

Bernankes QE2 for example was seen as an asset swap rather than a straight up QE.

This scenario becomes possible because of two scenarios:

(1.) Bailout is not immediately followed by credit easing as banks become overcautious. So the velocity of money remains slow counterbalancing the effect of QE. In other words, there is a time lag before we see change in lending activity.

(2.) Secondly, bailout does not immediately increase money supply. Falsely priced assets are simply given real prices and passed on to Govt. Depositor and Savings activity does not change immediately, nor does spending.

What assets did Bernanke buy? As far as I aware, QE2 is being used to purchase US treasuries. QE2 is not being used to bailout any corporations or banks. Also, if you state that QE is usually used to execute bailouts, please share with us what assets were bought with QE1 in the US or the two rounds of QE in England in 2009?

I think a lot of people confuse actual printing (QE with inter-bank lednding which increases the supply of money without any notes being printed. Inter-bank lending is simply a case of credit and debits in the system. When the central bank wants to increase lending, it lowers interest rates or the reserve requirements that banks hold with the Central bank. It does the opposite when it wants decrease the supply of money. Please see below for assets that will be bought in QE2.

(Reuters) - Federal Reserve officials said on Wednesday the U.S. central bank is likely to follow through on its entire $600 billion bond buying program based on an anticipated weak economic recovery.

"As the forecast looks right now it looks like we'll be purchasing at this pace through the end of the second quarter to add up to $600 billion," St. Louis Federal Reserve Bank President James Bullard told reporters on the sidelines of a conference.

The Fed announced a second round of extensive long-term bond buying in November to fire up tepid growth. The program has come under fire at home and abroad from critics who say the Fed is devaluing the dollar at the expense of trading partners, sowing the seeds of inflation and poaching on the turf of fiscal authorities.

http://www.reuters.com/article/idUSTRE6AG12Q20101117

ola olabiy:

GBAM.
No separation. The CBN acts as if it operates from the Presidency.
What is the exchange rate in Nigeria? Is it close to zero? QE only comes in if ER fails to adequately address a worrying economic trend.

Bernanke is being slaughtered for QE2 even though US inflation is approximately 1.2% while interest rates are approximately .50% yet Sanusi was printing money with inflation and interest rates in double digits in Nigeria and some are justifying it. It only shows that neither Sanusi nor the govt in Naija knows what they are doing.

Nigeria do not need to borrow, we can do with what we have if we have.

-Mostly what we borrow ends up in one's private account

Katsumoto:

Bernanke is being slaughtered for QE2 even though US inflation is approximately 1.2% while interest rates are approximately .50% yet Sanusi was printing money with inflation and interest rates in double digits in Nigeria and some are justifying it. It only shows that neither Sanusi nor the govt in Naija knows what they are doing.

Moreover, QE will never work in Nigeria. Where there is no checks and balances, QE is doomed.

This is what printing money leads to

ola olabiy:

Moreover, QE will never work in Nigeria. Where there is no checks and balances, QE is doomed.

Correct

The cost of the bailout in Nigeria is projected to reach 1 Trillion Naira, according to thisday. What fiscal or monetary policies will be used to mop up this extra cash considering inflation is about 16%. Neither Sanusi nor the govt said anything to this effect. All we heard from Sanusi was that he printed money.

The people in Nigeria will just keep complaining of increased cost of buying garri and tomato.

Sorry guys the image I wanted to post did not upload.  However this is the link about the dangers of money printing and hyperinflation in Zimbabwe.

http://www.dailymail.co.uk/news/article-482957/6million-dinner--shocking-price-inflation-Zimbabwe.html


$6million for dinner - the shocking price of inflation in Zimbabwe

Last updated at 09:47 21 September 2007


A diner pulls out a huge wad of bank notes to pay a $6million bill at a Harare restaurant, underlying the economic chaos caused by hyperinflation in Zimbabwe.

With Zimbabwe's international isolation growing, the country's rapidly depreciating dollar means there are acute shortages of food and the most basic goods.


Don't worry about the tip: a diner prepares to pay his bill in Harare

The southern African state has the world's highest official inflation of nearly 7,000 percent. Independent estimates put real inflation closer to 25,000 percent and the International Monetary Fund has forecast it reaching 100,000 percent by the end of the year.

And today British Airways announced it is halting all its flights to the country - citing mounting losses on the route as the southern African nation faces its worst economic crisis since independence in 1980.

The airline it will discontinue its three weekly round-trip services between Harare and London from 28 October.

Acute fuel shortages in Zimbabwe have forced the airline to bring in fuel by road and refuel its planes in neighboring countries.

State carrier Air Zimbabwe, South African Airways and two other African airlines will now be the only airlines flying to Harare.

Steve Harrison, British Airways commercial manager for southern Africa, said spiraling operating costs and falling passenger numbers left British Airways with "considerable" losses on the Harare route.

"The economic situation in Zimbabwe has contributed to a decline in market demand. The withdrawal of Harare flights is for commercial reasons as it is becoming increasingly difficult to justify our operation," Harrison said in the statement


Read more: http://www.dailymail.co.uk/news/article-482957/6million-dinner--shocking-price-inflation-Zimbabwe.html#ixzz16t5y7aWU

Addendum

On a lighter note when cowrie shells were first introduced to Uganda around 1800 just two shells were sufficient to pay the bride price of a new wife.  Thereafter wholesale importation of cowries caused inflation with the result that by 1860 one thousand cowries were needed by male suitors to tie the knot.

Katsumoto:

What assets did Bernanke buy? As far as I aware, QE2 is being used to purchase US treasuries. QE2 is not being used to bailout any corporations or banks. Also, if you state that QE is usually used to execute bailouts, please share with us what assets were bought with QE1 in the US or the two rounds of QE in England in 2009?

Funny that. Im just listening to Bloomberg right now, and a report just came out detailing the spending on QE1. QE1 was over a trillion dollars spent on Mortgage Backed Securities so that debunks your theory flatly.

Ibime:

Funny that. Im just listening to Bloomberg right now, and a report just came out detailing the spending on QE1. QE1 was over a trillion dollars spent on Mortgage Backed Securities so that debunks your theory flatly.

What is 'securities'? What did they say about securities? What is a bond? QE is mainly used to prop a comatose ecnomy.

Ibime:

Funny that. Im just listening to Bloomberg right now, and a report just came out detailing the spending on QE1. QE1 was over a trillion dollars spent on Mortgage Backed Securities so that debunks your theory flatly.

Ibime,

Nice try but no money changed hands. The Fed gave the banks paper credit and interest accrusing from the credit but the Fed used the printed money to buy treasuries on behalf of the banks. So basically, the banks account balances were inflated with credits from the QE but the money was actually used to buy US treasuries. See below for further information.

QE1 consisted of all sorts of liquidity efforts that went by various acronyms, but the main act was the accumulation of some $1.25 trillion in MBS and agency debt. Some might note that taking MBS paper off the hands of financial institutions, which then bought treasuries with the cash, is little different than the recently announced QE2 program because at the end of the day, money was printed and Treasuries were bought. In this regard, they’re right.

But let’s be clear about something: The first QE effort had the specific aim of repairing damaged bank balance sheets. That is, banks and other financial institutions had made some colossally poor and risky financial moves that didn’t work out for them. They needed some help, and the Fed was more than happy to oblige by handing them free money to patch up their losses.

Of course they didn’t do this outright by saying, “Here take this money!”; they did it somewhat sneakily. [b]But when the Fed hands you huge piles of money (for your dodgy debt) and then let’s you park that very same money in an interest-bearing account at the Fed, [/b]there’s really no difference between that and just handing banks free money.

http://www.whatamimissinghere.com/2010/11/17/qe2-will-either-fix-the-economy-or-destroy-it/

Katsumoto:

Ibime,

Nice try but no money changed hands. The Fed gave the banks paper credit and interest accrusing from the credit but the Fed used the printed money to buy treasuries on behalf of the banks. So basically, the banks account balances were inflated with credits from the QE but the money was actually used to buy US treasuries. See below for further information.

QE1 consisted of all sorts of liquidity efforts that went by various acronyms, but the main act was the accumulation of some $1.25 trillion in MBS and agency debt. Some might note that taking MBS paper off the hands of financial institutions, which then bought treasuries with the cash, is little different than the recently announced QE2 program because at the end of the day, money was printed and Treasuries were bought. In this regard, they’re right.

But let’s be clear about something: The first QE effort had the specific aim of repairing damaged bank balance sheets. That is, banks and other financial institutions had made some colossally poor and risky financial moves that didn’t work out for them. They needed some help, and the Fed was more than happy to oblige by handing them free money to patch up their losses.

Of course they didn’t do this outright by saying, “Here take this money!”; they did it somewhat sneakily. [b]But when the Fed hands you huge piles of money (for your dodgy debt) and then let’s you park that very same money in an interest-bearing account at the Fed, [/b]there’s really no difference between that and just handing banks free money.

http://www.whatamimissinghere.com/2010/11/17/qe2-will-either-fix-the-economy-or-destroy-it/

Running around in circles dude.

End of the day, QE was used to buy dodgy assets, exactly the same as SLS did. No money was physically created.

For the very same reason I stated previously, bailout of banks is an adequate scenario for QE if you dont wanna affect the velocity of money too detrimentally.

The difference between QE1 and QE2 is that QE2 has the added aim of fighting deflation (increase inflation), whilst QE1 did not affect inflation. It is hoped that QE2 would increase the velocity of money and subsequently inflation.

Likewise, SLS bailout had little or no effect on inflation for reasons I stated earlier because neither lending activity nor depositor activity was unduly affected in the short term.

poster

im sure someone must have posted this but i didnt read all the posts but the currency is backed by gold. Ever heard of fort knox?
if you print currency and you don't have the gold to back it up then your money becomes worthless. Which is why a person could bring 1$ to Nigeria and get hundreds of naira due to spending more than your govt is bringing in and then printing money you can't back up.

Quote from: slap1 Today at 06:31:58 PM

You contributed nothing to this wonderful thread. If you have nothing to say, why not shut up and learn?

Wonderful thread? Only a mo.ron like you will find this, interesting. what's there to learn? That
you don't just print money just because you are broke. In no time, your currency won't be worth the paper its written on.
Guess, you didn't know what Idi amin did to uganda, then?

Oh well, i can only hope you learn a thing or two from this "wonderful thread".
Fingers X.