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BBKing · 13-03-2009, 00:05

Musing on economies, I notice that Switzerland has started printing money, too, following in the footsteps of economic titans like Gordon Brown and Robert Mugabe.

The reason for this is that deflation is a Bad Thing, and devaluing your currency (by printing a lot more of it) prevents deflation, partly by keeping the value of imports high as well as the usual inflationary effect of giving everyone wads of crisp fivers to spend, which they hopefully won't spend abroad since it now doesn't buy them very much. Result: more poonds circulating round the UK, which generates inflation to counteract the deflationary effects of the economy going down the crapper and everyone cutting back on spending. When your interest rates are down near zero, this is basically all you can do - you've already made it pointless to save and (at least nominally) cost less to borrow.

You actually get more return from spending money on infrastructure rather than giving it to people, but we didn't have much in the way of infrastructure projects to spend it on*, plus there's all these bust banks, there's not a lot else we can do.

However, surely if everyone devalues, we're back where we started?

Incidentally, one thing Ireland would dearly like to do now is devalue, but they can't because they're in the Euro. This isn't going to be pleasant for them. Us being out of it, we can effectively print money, devalue first and fastest and hopefully steer clear of the deflation trap, which is a sod to get out of. This is all a bit hard on the parts of the world which can't, but there you go, there has to be a loser. No one (except British tabloid readers) currently wants their currency to appreciate in value, since that's a recipe for dropping into a deflationary spiral. This is the mirror world, where a strong currency weakens your economy.

* We are *really* lucky to have the Olympics. Seriously. We should probably be gold-plating the stadium, too, and inventing some new sports so we can build venues**. Indoor Zorbing, perhaps?

** People laughed at the Millennium Dome, remember? Now look at it.

13-03-2009, 00:05	#1
BBKing R.I.P. Join Date: Jun 2003 Location: London Services: 20Mb VM CM, Virgin TV Posts: 5,983	What Happens If We All Devalue At Once? Musing on economies, I notice that Switzerland has started printing money, too, following in the footsteps of economic titans like Gordon Brown and Robert Mugabe. The reason for this is that deflation is a Bad Thing, and devaluing your currency (by printing a lot more of it) prevents deflation, partly by keeping the value of imports high as well as the usual inflationary effect of giving everyone wads of crisp fivers to spend, which they hopefully won't spend abroad since it now doesn't buy them very much. Result: more poonds circulating round the UK, which generates inflation to counteract the deflationary effects of the economy going down the crapper and everyone cutting back on spending. When your interest rates are down near zero, this is basically all you can do - you've already made it pointless to save and (at least nominally) cost less to borrow. You actually get more return from spending money on infrastructure rather than giving it to people, but we didn't have much in the way of infrastructure projects to spend it on, plus there's all these bust banks, there's not a lot else we can do. However, surely if everyone devalues, we're back where we started? Incidentally, one thing Ireland would dearly like to do now is devalue, but they can't because they're in the Euro. This isn't going to be pleasant for them. Us being out of it, we can effectively print money, devalue first and fastest and hopefully steer clear of the deflation trap, which is a sod to get out of. This is all a bit hard on the parts of the world which can't, but there you go, there has to be a loser. No one (except British tabloid readers) currently wants their currency to appreciate in value, since that's a recipe for dropping into a deflationary spiral. This is the mirror world, where a strong currency weakens your economy. We are really lucky to have the Olympics. Seriously. We should probably be gold-plating the stadium, too, and inventing some new sports so we can build venues. Indoor Zorbing, perhaps? People laughed at the Millennium Dome, remember? Now look at it.