4 Play:

Printing money is only justifiable, if ever, where the economy faces serious threat of deflation.

In that case, we are as condemnable as the Yanks who also printed money for bailout.

I dont think money supply is the overriding issue here (with regards to inflation/deflation argument). If it was, we still have enough leverage to cut interest rates rather than resort to borrowing or quantitative easing.

I just believe the nucca had a blackhole of N420bn to fill (for bailout), and his option was between borrowing and printing.

I am not saying printing is better than borrowing. I dont know. Both still have devaluating effect on the Naira.

Can you have Sanusi print more of those papers money, I like to use them decorate my wall, jare-o!
How do you say inflation, Zimbabwe, or Islamic bunking?

Sanusi is walking disaster, the man needs to go! may be they can transfer him to PHCN.

Ibime:

In that case, we are as condemnable as the Yanks who also printed money for bailout.

Inflation in the US has been negative since March '09, hence the printing of money as the Fed fund rates have reached their nadir. Nigeria is absolutely not in the same position. Did anyone in Nigeria tell you that the price of goods have been falling? We're taking the copycat mentality to absurd levels.

really absurd levels

well. . . . . I would like to know any suggestions as to how a collapse
of the banking system would have been averted without pumping money
into the banking system.

Whether through printing money or through borrowing money or whatever means anyone
thought was better, it was a case of damned if you do, damned if you don't.

JOB OFFER FOR EVERY ONE INTRESTING PERSONNEL SHOULD LOG ON www.naijajobprovider..com

doyin13:

well. . . . . I would like to know any suggestions as to how a collapse
of the banking system would have been averted without pumping money
into the banking system.

Whether through printing money or through borrowing money or whatever means anyone
thought was better, it was a case of damned if you do, damned if you don't.

Don't you think thats a bit being dramatic? There are two sides to the coin, it is best to allow any dust raised to settle, as well as the resolution of all legal issues; then we'll be able to see clearly enough to make judgements one way or the other; its too early right now.

This whole drama don dey tire person.

no be only you.me sef don tire

I forsee the army boys coming back to power!

Sanusi is a disaster in the making. Does he have to take the whole country down with him??

doyin13:

well. . . . . I would like to know any suggestions as to how a collapse
of the banking system would have been averted without pumping money
into the banking system.

Whether through printing money or through borrowing money or whatever means anyone
thought was better, it was a case of damned if you do, damned if you don't.

Truth be told, the banking system poses little risk to the economy as a whole.

In quantitative terms, since the banks are suffering a credit freeze and inflation is still healthy, that means supply of money in Naija is still fairly liquid irrespective of the health of the banks. Thats because lenders (banks) do not permeate the real economy; and because nuccas still keep cash money under their pillow. Hence there is no reason to bail any bank out.

I think the question of bailout is more one of preventing an unquantifiable loss of trust in the Nigerian banking system from foreign and local investors, especially considering that the banking system is still in its infancy.


@ Jarus/4Play,

Do you support bailout of any of these banks?

Ibime:

In that case, we are as condemnable as the Yanks who also printed money for bailout.

I dont think money supply is the overriding issue here (with regards to inflation/deflation argument). If it was, we still have enough leverage to cut interest rates rather than resort to borrowing or quantitative easing.

I just believe the nucca had a blackhole of N420bn to fill (for bailout), and his option was between borrowing and printing.

I am not saying printing is better than borrowing. I dont know. Both still have devaluating effect on the Naira.

Ibime

US did not print notes for the bail out. Stop mis-informing us.

Thinking about it. Sanusi resumed as CBN guv in June 2009, injected 420billion (printed) on August 14,2009.

How long did it take to print the money (bearing in mind that the printing was done overseas). I bet u, it took more than 4 weeks to print such huge sum of money.

When did Sanusi conduct the examination of the five banks? When did he ascertain that N420 billion would be required? When was the order for the notes issued?

Something tells me that the first intruction Sanusi gave as CBN guv was the printing of the N420 billion.

The actor is good, but it is badly written script.

Xavier.:

Ibime

US did not print notes for the bail out. Stop mis-informing us.

What did they print it for then?

Pls answer.

Havent u heard of the TARP fund? Not every country spen all they earn.

Xavier.:

Havent u heard of the TARP fund?

And buying Troubled Assets from troubled banks does not constitute "bailing them out".

What did Sanusi buy from our troubled banks?

4Play made the point on inflation and liquidity of money supply which is correct. I dont know what point you're making.

Ibime

U re deviating frm the point. TARP fund was set aside by the US congress to address the credit crisis in the country in 2008. The Fed reserve didnt just wake up one morning and decide to start rolling out dollars. No one went to mint to print out billions of dollars.

Bail out is good, but its got to be strategic and well planned, not one man's superman initiative.

The big question is when was the order for the print given (weeks before August 14, I reckon)? If so, how did Sanusi know he would be needing exactly N420 billion? Or was he already planning all these before he joined CBN?

These are really disturbing questions begging for answers.

Xavier.:

Ibime

U re deviating frm the point. TARP fund was set aside by the US congress to address the credit crisis in the country in 2008. The Fed reserve didnt just wake up one morning and decide to start rolling out dollars.

Stop dribbling yourself. Since you agree that the TARP fund was a 'bailout', how can you claim that money was not created by fiat for a bailout?

Your argument is incoherent to say the least. TARP is a bailout, Sanusi's buying of assets is also a bailout.

Xavier.:

The big question is when was the order for the print given (weeks before August 14, I reckon)? If so, how did Sanusi know he would be needing exactly N420 billion? Or was he already planning all these before he joined CBN?

Order for print? This thing was done electronically.

Like I said, I dont get your point.

The valid point against quantitative easing was given by 4Play and that concerns the fact that inflation is still healthy, meaning that the banks in question pose little risk to the supply of money in the economy. Sanusi claims supply of money was negative in the first half of the year, hence his resort to quantitative easing. I believe that there may be a disconnect somewhere because a negative supply of money should be reflected by strong disinflation or even deflation.

All these leave me with a few questions, and I hope someone can answer these:

(1.) Basically, what is the "strategic risk" posed to the economy by the failure of the banks? Sanusi says the risk is strong. However, is the economy that dependent on the credit they provide to it?

Ibime

Apparently, u re not well informed about current happenings in Nigeria.

Havent u heard that Sanusi spent N100bn printing out the N420bn, so where does electronic thing come in?

Unlike in the UK, where the quantive easing was carried out via electronic injection of capital into the economy, Sanusi decided to PRINT OUT N420 billion.

Dont get it wrong, am not against bail out, infact am in full support of it. But i dont think adding N420billion piece of paper to the economy consititutes a bail out. Total value of money in circulation remains constant, all u ve done is to more paper.

I might not owe a PhD in Islamic Ecomonomics, nor be as articulate as Ibime, but i understand basic economics.

Xavier.:

Ibime

Apparently, u re not well informed about current happenings in Nigeria.

Havent u heard that Sanusi spent N100bn printing out the N420bn, so where does electronic thing come in?

Unlike in the UK, where the quantive easing was carried out via electronic injection of capital into the economy, Sanusi decided to PRINT OUT N420 billion.

Are you sure about this. . . . I read the report that the process cost N100bn and I have every reason to take it with a pinch of salt. .  . .you know what Nigerian journalists are like. . .

Sanusis words were "We basically created extra assets on the balance sheet". . . . the printing of money may not be physical.

Anyway, I await confirmation from CBN whether the money was physically printed or not. I am 80% sure it was not.

It would do you good to read this post:

chuckvyl:

The CBN has the ultimate power to print money without recourse to the national assembly.

The guy who was saying that it took the congress of America weeks to approve  the 700 billion dollar injection into the economy; Does America and Nigeria have the same constitution?

Anyway what the US congress approved was Obama's economic policy to borrow money from the Fed Reserve and then use it to re-engineer the economy.what they approved was the content of the economic policy which has nothing to do with Fed Reserve's ability to print money.

The Fed Reserve never got approval to print money from the congress.The way it works is,as soon as the policy was approved by the government,the government now turned to the ultimate lender(Fed Reserve) which serves as America's central bank to print money bc America has no reserve being in debt of over 1 trillion dollars already.(mind you  they have the advantage of borrowing in their own currency)

It smacks of ignorance and financial illiteracy when somebody in this forum said that it costs 400 billion to print 400 billion.Infact the total amount of printed cash in circulation is always far lower than the total amount of liquidity in the system at any point in time.

No paper money is printed dude.The central bank will just credit the accounts of those banks with the value injected bc every commercial bank in the land maintains an account with the central bank just like every customer of a bank has an account with a bank.for example,if you apply for loan or overdraft and your bank approves it,do they really give you cash?Your account will be credited with the value of the loan electonically.

The central bank controls liquidity in the country by either recalling money by selling bills(paper debts or gilts) or by printing money(lending to banks)

Xavier.:

Dont get it wrong, am not against bail out, infact am in full support of it.

I would feel better if you were not in support of bailout.

Im may not in support of bailout until someone answers this question:

(1.) What is the "strategic risk" posed to the economy by the failure of the banks? Sanusi says the risk is strong. However, is the economy that dependent on the credit they provide to it?

Ibime:

Truth be told, the banking system poses little risk to the economy as a whole.

In quantitative terms, since the banks are suffering a credit freeze and inflation is still healthy, that means supply of money in Naija is still fairly liquid irrespective of the health of the banks. Thats because lenders (banks) do not permeate the real economy; and because nuccas still keep cash money under their pillow. Hence there is no reason to bail any bank out.

I think the question of bailout is more one of preventing an unquantifiable loss of trust in the Nigerian banking system from foreign and local investors, especially considering that the banking system is still in its infancy.


@ Jarus/4Play,

Do you support bailout of any of these banks?

Why do you like in getting into what you know next to nothing about or am I misunderstanding your comments ?

My friend, take away the banking system and the whole economy will grind to a halt, I mean sudden halt with fully applied brakes. Actually it will go into full reverse.

The other time you also thought that printing money to inject into banks would lead to a trade deficit. (Ok maybe with Germany since we print the money in Germany)

You also confused affordability with availability and refused to accept that many factors like continuous employment affect continuous affordability (leading to loan defaults) and implied that demand tracked house prices rather than house prices tracking demand and available supply.

Dude, go and really read that your "demand - Supply curve" page again. O.K maybe you should read the whole chapter in order to get better information. While you are at it, try Trade deficits and surpluses.

Oh, lest I forget, also check how money supply expansion is mainly used as a tool of counter recession/depression.

By the way, the bulk US bailout money came from govt borrowings, bonds and IOUs.

FACE:

Why do you like in getting into what you know next to nothing about or[b] am I misunderstanding your comments [/b] ?

I think its fair to say that the latter is the case.

You have completely misrespresented my positions and twisted my words to suit whatever you fancy. Hence you twisted my words in the other thread only to come back to agree with me that fallout from the mortgage crisis would be nuanced by Islamic banking.

If I say banking system, I am talking about these 5 banks in particular. Ambiguous perhaps.

As for all your other yarnings about affordability/availability/artificial demand, Im tired of trashing same issues with you. If you wanna continue that, you can step to the other thread.

Xavier.:


I might not owe a PhD in Islamic Ecomonomics, ,  but i understand basic economics.

hmmmmmm  

Ok own.

The CBN did not PHYSICALLY PRINT any new notes. This money was already in the system with the banks in form of their indebtedness to the CBN through the expanded discount window.

What the CBN did was to turn this to a long term loan to be paid back over a long period of time. Basically an adjustment on the CBN's and the bank's balance sheets. This is similar to your bank turning a #1m overdraft (repayable on demand) to a 10 year loan. Technically it is still called 'Printing Money' or the more modern and preferred jargon 'quantitative easing'.

Adint

That was everyone's tot until Sanusi revealed "We PRINTED the money" during a press conference.

The ill-effect of this unguided act cannot be over-emphasied. Imagine addional N420 billion more currency in circulation.

Heard they re now mopping money from circulation. Y re we going this way and that way all at once.

The Nigerian economy is essentially anchored on the price of oil. We would have survived the collapse of those 5 banks.

Inflation is probably running at double digits at a time GDP growth is barely positive. The last thing we need is another injection of N420bn. Looks like the lunatics are back in charge of the asylum.

4 Play:

The Nigerian economy is essentially anchored on the price of oil. We would have survived the collapse of those 5 banks.

Inflation is probably running at double digits at a time GDP growth is barely positive. The last thing we need is another injection of N420bn. Looks like the lunatics are back in charge of the asylum.

Lol. . . . . This reminds me of just prior to the Lehman collapse.

We all know how that turned out.

Regardless of how reliant the economy is on oil, I don't see how
the country could go forward with uncertainty on both the domestic
and foreign fronts over the health of our banks. We already have
enough of a challenge attracting investment, without the baggage
of the collapse of some of the most visible financial institutions in
the country.

There seems to be a great deal of uncertainty over the source of these funds.

Some say, the money was printed, our clueless legislators say it came from money that should have been appropriated,
now I hear it is from money the banks already had available to them throught the discount window. Can someone
just clarify once and for all, though I suspect its the last.

doyin13:

Lol. . . . . This reminds me of just prior to the Lehman collapse.

We all know how that turned out.

Regardless of how reliant the economy is on oil, I don't see how
the country could go forward with uncertainty on both the domestic
and foreign fronts over the health of our banks. We already have
enough of a challenge attracting investment, without the baggage
of the collapse of some of the most visible financial institutions in
the country.

Nigeria is not the US with a sophisticated and outsized banking system. History shows we have had major bank failures, they are indeed a norm, without consequent shock to the economy. There is a tendency for people to juxtapose logic and events relevant in the West with Nigeria.

We simply can't afford zombie banks. Not even the US can as they are bound to find in years to come.

4 Play:

Nigeria is not the US with a sophisticated and outsized banking system. History shows we have had major bank failures, they are indeed a norm, without consequent shock to the economy. There is a tendency for people to juxtapose logic and events relevant in the West with Nigeria.

We simply can't afford zombie banks. Not even the US can as they are bound to find in years to come.

Nigeria has not become quite as sophisticated as the US but it surely has matured post consolidation,
whether to the extent the collapse of the five banks would have caused systemic risk, is a moot point
at worst.

On the topic of flooding the banks with money. Well, I do not envisage a vertiginous climb in inflation.
The amounts in question is a minute percentage of GDP. I do not expect aggregate demand to jump through
the roof since much of the funds would probably be gobbled up by a very very minute portion of the population.