Comments for Pete's blog http://www.prnixon.org Musings about the world and the kitchen Wed, 10 Mar 2010 06:42:43 +0000 http://wordpress.org/?v=2.3.1 Comment on An idiot’s guide to interest rates and money supply by Pete http://www.prnixon.org/2008/04/09/an-idiots-guide-to-interest-rates-and-money-supply/#comment-1985 Pete Fri, 19 Feb 2010 17:46:22 +0000 http://www.prnixon.org/2008/04/09/an-idiots-guide-to-interest-rates-and-money-supply/#comment-1985 If you lower interest rates, you make everyone with debt happier. Also lowering interest rates stimulates spending, giving the overall economy a little bit of a boost. So people's debt is cheaper and the economy looks better - everything to make the government look good. But lowering interest rates will make your currency weaker (see above for explanation), this would make imported goods more expensive and would make people unhappy with you. But if you sell your foreign exchange reserves at the same time, it will strengthen your currency (you are selling the foreign currency and buying your own currency) and counteract the effect of the lower interest rates. If you lower interest rates, you make everyone with debt happier. Also lowering interest rates stimulates spending, giving the overall economy a little bit of a boost.
So people’s debt is cheaper and the economy looks better - everything to make the government look good.
But lowering interest rates will make your currency weaker (see above for explanation), this would make imported goods more expensive and would make people unhappy with you. But if you sell your foreign exchange reserves at the same time, it will strengthen your currency (you are selling the foreign currency and buying your own currency) and counteract the effect of the lower interest rates.

]]> Comment on An idiot’s guide to interest rates and money supply by pkw http://www.prnixon.org/2008/04/09/an-idiots-guide-to-interest-rates-and-money-supply/#comment-1984 pkw Fri, 19 Feb 2010 09:06:39 +0000 http://www.prnixon.org/2008/04/09/an-idiots-guide-to-interest-rates-and-money-supply/#comment-1984 before the election time period, why central banks tend to lower interest rate to increase money supply and sell foreign exchange reserve at the same time? before the election time period, why central banks tend to lower interest rate to increase money supply and sell foreign exchange reserve at the same time?

]]> Comment on An idiot’s guide to interest rates and money supply by Pete http://www.prnixon.org/2008/04/09/an-idiots-guide-to-interest-rates-and-money-supply/#comment-1845 Pete Mon, 30 Nov 2009 16:39:26 +0000 http://www.prnixon.org/2008/04/09/an-idiots-guide-to-interest-rates-and-money-supply/#comment-1845 The relationship between interest rates and exchange rates is a highly complex one. But the very simple explanation is that if you raise your interest rates, your currency strengthens. This is for two reasons, local demand for goods drops so imports will also drop; and second because overseas people are attracted to invest into your country by the higher returns. So higher interest rate = fewer imports, better current account + more investment, better capital account = stronger currency. And the opposite applies: lower interest rate = more imports, less investment = weaker currency. But that's the easy textbook answer. The reality is way more complicated, where relative interest rates, interest rate cycles, relative sizes of import and export markets, credit ratings and political risk all play a part. And all sorts of long term adjustments can happen. The relationship between interest rates and exchange rates is a highly complex one. But the very simple explanation is that if you raise your interest rates, your currency strengthens. This is for two reasons, local demand for goods drops so imports will also drop; and second because overseas people are attracted to invest into your country by the higher returns. So higher interest rate = fewer imports, better current account + more investment, better capital account = stronger currency. And the opposite applies: lower interest rate = more imports, less investment = weaker currency.

But that’s the easy textbook answer. The reality is way more complicated, where relative interest rates, interest rate cycles, relative sizes of import and export markets, credit ratings and political risk all play a part. And all sorts of long term adjustments can happen.

]]> Comment on About by jayraj http://www.prnixon.org/about/#comment-1844 jayraj Mon, 30 Nov 2009 07:12:18 +0000 http://www.prnixon.org/about/#comment-1844 you are genius , i would like to be in touch with u to enhance my knowledge. you are genius , i would like to be in touch with u to enhance my knowledge.

]]> Comment on An idiot’s guide to interest rates and money supply by jayraj http://www.prnixon.org/2008/04/09/an-idiots-guide-to-interest-rates-and-money-supply/#comment-1843 jayraj Mon, 30 Nov 2009 06:53:07 +0000 http://www.prnixon.org/2008/04/09/an-idiots-guide-to-interest-rates-and-money-supply/#comment-1843 i understood the relation between interest rates and money supply thanks for such an easy explanation. I am MBA finance student and i want to know how interest rates in turn affects exchange rates and vice versa. pls give me some example explaining the concept. i understood the relation between interest rates and money supply thanks for such an easy explanation. I am MBA finance student and i want to know how interest rates in turn affects exchange rates and vice versa. pls give me some example explaining the concept.

]]> Comment on An idiot’s guide to interest rates and money supply by Pete http://www.prnixon.org/2008/04/09/an-idiots-guide-to-interest-rates-and-money-supply/#comment-1840 Pete Tue, 24 Nov 2009 20:25:42 +0000 http://www.prnixon.org/2008/04/09/an-idiots-guide-to-interest-rates-and-money-supply/#comment-1840 Interest rates are controlled, they only increase/decrease when the central bank decides. If you have an increase in money supply and you leave interest rates fixed, you will probably get inflation. If you increase interest rates, this will counteract the inflation and reduce the amount of inflation you got with the increase in money supply. Interest rates are controlled, they only increase/decrease when the central bank decides. If you have an increase in money supply and you leave interest rates fixed, you will probably get inflation. If you increase interest rates, this will counteract the inflation and reduce the amount of inflation you got with the increase in money supply.

]]> Comment on An idiot’s guide to interest rates and money supply by leen http://www.prnixon.org/2008/04/09/an-idiots-guide-to-interest-rates-and-money-supply/#comment-1839 leen Tue, 24 Nov 2009 18:46:37 +0000 http://www.prnixon.org/2008/04/09/an-idiots-guide-to-interest-rates-and-money-supply/#comment-1839 If money supply increased, then inflation increases, so shouldnt nominal interest rate increase too? If money supply increased, then inflation increases, so shouldnt nominal interest rate increase too?

]]> Comment on Bond Markets: The Key to Africa’s Financial Independence? by Bond Issues to Finance Future African Development. » Development Afrique http://www.prnixon.org/2008/04/10/bond-markets-the-key-to-africa%e2%80%99s-financial-independence/#comment-1761 Bond Issues to Finance Future African Development. » Development Afrique Tue, 17 Nov 2009 08:21:54 +0000 http://www.prnixon.org/2008/04/10/bond-markets-the-key-to-africa%e2%80%99s-financial-independence/#comment-1761 [...] have a thriving domestic bond market, there must be a strong banking and financial system, but more importantly, the savings rate in the economy must be h... (savings to GDP ratio is key), high savings allow for more liquidity and use of those savings to [...] […] have a thriving domestic bond market, there must be a strong banking and financial system, but more importantly, the savings rate in the economy must be h… (savings to GDP ratio is key), high savings allow for more liquidity and use of those savings to […]

]]> Comment on Bring back the death penalty! by Pete http://www.prnixon.org/2008/03/09/bring-back-the-death-penalty/#comment-1124 Pete Wed, 26 Aug 2009 07:51:25 +0000 http://www.prnixon.org/2008/03/09/bring-back-the-death-penalty/#comment-1124 The death penalty has nothing to do with saving lives, the lives have already been lost. And yes, violent crime is not always about poverty, but the death penalty is very much about poverty. The wealthiest murderer can afford the best lawyers to fight or delay his death penalty convinction indefinitely. A poor person has no money to fight his convinction, whether he is innocent or guilty. Poor people will bear the brunt of the death penalty. How many of those 25000 murderers were convicted and how many of those 25000 murders were by previous murderers who had been released from jail? I would far rather spend the money that would be wasted on reimplementing the death penalty on improving the justice and prison system. If we get to the stage of a 95% conviction rate on violent crimes and a 0% escape rate from prisons, and yet there is still a high percentage of murder, <strong>then</strong> talk to me about bringing in the death penalty. And interesting that you should bring up Botswana, because Botswana might have the death penalty, but it also has very strict gun control laws. Notably Botswana's murder rate has been on the increase lately, blamed largely on the smuggling in of guns from Zimbabwe and South Africa. The death penalty has nothing to do with saving lives, the lives have already been lost. And yes, violent crime is not always about poverty, but the death penalty is very much about poverty. The wealthiest murderer can afford the best lawyers to fight or delay his death penalty convinction indefinitely. A poor person has no money to fight his convinction, whether he is innocent or guilty. Poor people will bear the brunt of the death penalty.
How many of those 25000 murderers were convicted and how many of those 25000 murders were by previous murderers who had been released from jail?
I would far rather spend the money that would be wasted on reimplementing the death penalty on improving the justice and prison system.
If we get to the stage of a 95% conviction rate on violent crimes and a 0% escape rate from prisons, and yet there is still a high percentage of murder, then talk to me about bringing in the death penalty.

And interesting that you should bring up Botswana, because Botswana might have the death penalty, but it also has very strict gun control laws. Notably Botswana’s murder rate has been on the increase lately, blamed largely on the smuggling in of guns from Zimbabwe and South Africa.

]]> Comment on Bring back the death penalty! by Steve http://www.prnixon.org/2008/03/09/bring-back-the-death-penalty/#comment-1113 Steve Tue, 25 Aug 2009 10:15:41 +0000 http://www.prnixon.org/2008/03/09/bring-back-the-death-penalty/#comment-1113 have you read any real studies on crime? the death penalty is NOT ABOUT executing people, but maybe saving a few of the 25000 people murdered last year in South Africa.... 25000 were murdered, if the death penalty brought that down to 24000 , that is 1000 lives saved... and you claim to know for absolutely certain that it wouldn't? violent crime has NOTHING to do with poverty.... why is botswana so much safer than SA? please get some real info friend.... , and stop believing the liberal leftist propaganda machine.... someone murders your wife and children in front of you, and your justice is, to pay your tax and pay for their incarceration? someone is busy stabbing your wife to death? will you kill them then? and isnt that a 'death penalty'... think it properly through, justice doesn't become less just, because time has elapsed after a violent crime have you read any real studies on crime?

the death penalty is NOT ABOUT executing people, but maybe saving a few of the 25000 people murdered last year in South Africa….

25000 were murdered, if the death penalty brought that down to 24000 , that is 1000 lives saved…

and you claim to know for absolutely certain that it wouldn’t?

violent crime has NOTHING to do with poverty….

why is botswana so much safer than SA?

please get some real info friend…. , and stop believing the liberal leftist propaganda machine….

someone murders your wife and children in front of you, and your justice is, to pay your tax and pay for their incarceration?

someone is busy stabbing your wife to death? will you kill them then? and isnt that a ‘death penalty’…

think it properly through, justice doesn’t become less just, because time has elapsed after a violent crime

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