The third world!?
ok take africa for example. some of their countries are in serious debt and have the consequences of starvation etc etc.
i know that other countries 'lend' them money!
but what i dont understand is
1. the majority of governments say that they are going to help fight poverty in the third world, so why cant they all just clear the debt and help them! although i have the idea in my head that some countries may have done this.
the next part is what i really dont understand and what i want to know!
2. . WHO determines how much money a country has. what i mean is, where ever they print of the lovely crispy notes and make the coins, who tells them how much they are allowed to do! and why cant the third world countries 'print off a few more'!! i am not saying that they should just print off a few more, obviously its not that simple! but who is behind the 'budget'.
Answer:
To understand this you just need to start by thinking of a highly-indebted poor family, then scale up to an economy.
If a family is poor, and in debt, then someone paying off their debt might help for a bit. But it wont stop them being poor. To stop being poor they need an income. That means making something themselves they can sell or, more likely, doing a job for someone else who is willing to pay them a decent income for it. Lets go back to countries - a rich country might have scarce natural resources it can sell, or it might make lots of manufactures or it might sell the services of a skilled labour force. The UK does all 3 (oil, manufacturing, financial services). Some African countries have natural resources which are valuable - oil (Libya, Algeria etc), diamonds (Botswana), gold (South Africa) or tourism (Kenya) - the problem in those countries is distributing the wealth because it doesnt take that many people to produce those commodities. But manufacturing is less developed in Africa and poor education means that the labour force is largely unskilled. Most people there have or can produce nothing that anyone else wants to buy - thats why they are poor. The traditional life is subsistence farming - but that is, and always has been, a very poor existence.
Now, if you pay off a poor persons debts what is most likely to happen? Some will just get into debt again, others will find that - having been bailed out - no one will ever lend to them when they need it most. For a person to stop being poor they need to invest time and money in training themselves up to work. So a country needs to invest - and it needs to borrow. But it needs to do so wisely or it cant pay back its debts and it just gets poorer.
The best answer for such countries is for richer countries to invest there and take advantage of the unskilled labour at low wages. That provides an income and starts people on the road upwards. You'll understand that globalisation - the thing that everybody cites as a demon - is actually the only route for these people out of poverty.
The amount of money is irrelevant. As a person I can go out and earn £ - if in the US you can earn $. I could make up IOUs but no one would take them as worth anything unless I can secure them on my assets. i cant print $ or £ to buy other peoples goods and services with. So for a country - the government of a country can print as much money as it likes - but it can only be worth something in proportion to what the country makes. Print too much and its value in $ or £ just goes down. Only the US govt can print $ and only the UK govt can print £. Those govts print just enough to keep price inflation low and steady.
So its not easy but neither is it quite as complicated or as sinister as others may make out. To stop being poor you have to earn a living - that applies to countries as well as people. (And countries can inherit wealth just like people - and squander their inheritance just like people too!)
If you give money to a dictator he will just put it in his own bank accounts. If you wipe off the debt he will borrow money and put it in his own bank accounts.
You can print as much money as you like. Mugabe in Zimbawe and Bush in USA are doing this right now. The problem is it means your money is then worth less (in terms of goods), so prices go up (inflation), and your foreign exchange rate is weakened, so it costs more dollars to import goods from abroad.
The World Bank has a program underway to forgive the debt owed by 38 poor countries mostly in Africa. This is called the HIPC program for highly indebted poor countries. However as a condition of debt forgiveness, these countries and the World Bank have to agree on an economic reform program that will help to reduce poverty.
There will be more things to confuse u as u try to understand more about one world divided into three worlds of economics.
Start with those above me; are they simply interested in name calling or is it really true that NGOs exist?
Who decides (1) where the goods are cheapest to produce, and (2) who dominates power over the price of goods produced in the world of economics?
Culture; lets say u r native of supremest culture do u like to see other cultures shoe off in a Major way?.
A dominant country is only dominant if there is a submissive country. Debtors only exist if there are lenders. A lender who gets nothing back from a debtor will not lend to that debtor again. By not lending, a country dependent on outside help may become independent. It may sink or swim.
Printing money is a false economy if you are in government. Your money becomes devalued, and government loses trust.
In the UK money itself is defined by things like M0- notes and coins in circulation (or narrow money), or M4 - M0 plus credit balances and mortgages.
M0 appears to increase by about 3% each year currently, whereas M4 is running at about 14%-20%.
Clearly the problem with money is definition. M0 is controlled by the central bank. M4 is not controlled directly by government. The main influence on M4 is via the lending rate from the central bank to the retail banks.
Hike up short term interest rates and M4 growth should slow down. This will also result in a reduction of consumer spending. It will also cause house price inflation to be controlled. We may see a slowdown in the economy.
In essence, it is the banks who are taking greater risks with their credibility. Not only that, when the bubble bursts or deflates there will be some main mortgage banks who will be financially in trouble. Either that or there will be a lot of people made homeless, with banks owning vast empires of bankrupt residential property.
The answers post by the user, for information only, FunQA.com does not guarantee the right.
More Questions and Answers: