I have been pondering this question for sometime but still cannot make out the difference except that the Money in Loans from these bodies is in Dollars and draws Interest payments, hence Profits for these bodies. While Central Bank printed notes are not in Dollars but they are supposed to be for the development of the country also. They could attract profits in interest payments from the issue of Bonds to the general PUBLIC ( You ). In this case, the interest payments and the taxes paid by those employed in the jobs the money has created will be used to regulate the money supply. And the country WILL NOT be paying interest to these external bodies; money we can use to provide 24/7 utilities!
Please my country folks, tell me if my thinking is WRONG! If we need dollars, we can get them through the sale of our oil and other natural resources to the foreigners! So my brethren, why should we obtain LOANS from these EXTERNAL BODIES?
My answer? Because all those concern EARN COMMISSIONs FOR NEGOTIATING THE LOANS - ALL THE PARLIAMENTARIANS!
WHAT IS YOUR TAKE?
In order words you are wondering why a nation can obtain loans from external bodies when its central bank can actually print the money internally. Excess liquidity causes inflation and so the central bank cannot just begin to print more money. It is preferable to borrow to make up for any shortfall in money supply than to print, which will reduce the value of money thereby causing galloping inflation.
Hi Charles. I am confused here! Are you telling me that the loan is not entered in the Current Account or is not part of the Balance Sheet? Think about that again my learned friend. If it is entered in the books, there is no difference then in us printing the money ourselves!
You say the nation cannot print more money not to cause galloping inflation; correct? What do you think Quantitative Easing is? Also what do you associate Stimulus Package with? They are both the Printing of Extra Notes by the State To Combat the threat of Unemployment! You see, they tell us these things through their text books we have read but in practice, they know the writings are trash while we hang on to them because we have read them!
When I was in the institutions of Higher Learning, INFLATION was described as " SUPPLY & DEMAND; IF DEMAND IS GREATER THAN SUPPLY, IT CAUSES INFLATION". That is what I was taught and read in their Economics text books! But you know as well as I do that some of our market women and traders do not get to SELL a single item sometimes because the peoples do not have the cash to buy with; what do you categorise that as; over supply of money or lack of it?
What we need to understand is that there is Price Inflation and Consumer Inflation. This is the reason why in the UK, the Bank of England is keeping the interest rates the way it is otherwise it would affect the recovery from the recession! Companies are putting up prices because of claims of higher world prices they had to pay. At the same time, nobody is spending money and the stores have to reduce prices to get people to spend! Therefore when you talk about inflation, you talk about it by the knowledge you have gained from reading their text books. The text books are tools that teach us the basic. But with us, we accept things literally just as we accept the things in the Bible and Koran without trying to investigate and see it they are practical! When foodstuff rot on the hawkers' stands, WE MUST USE OUR COMMON SENSE to see that we need an injection of cash to make the market revolve back to the farmers. With people buying from the tradrs, the traders will order stuff for sale; and all goes round, as long as the peoples have cash in their pocket to buy the goods!
The money printed is gradually taken out of circulation by people paying taxes from their earnings and from profits made from their businesses. If the government prints debt-free notes, it can always balance the book at the end of the financial year. But if we are involved with external agencies like the World Bank, IMF, and BIS, we would not be able to write off the debts and that is the reason why Greece cannot write off its debt because it belongs to the EURO CURRENCY family!
So my dear friend, do not let their text books confuse you because they are just guidelines, may apply sometimes and may not many other times. For instance, Hitler DID NOT BORROW A SINGLE MARK TO SERVICE THE WAR, HE PRINTED GOVERNMENT DEBT-FREE NOTES, WHILE THE WEST BORROWED BILLIONS FROM THE BANKS TO FINANCE THE WAR! WITHOUT ANY FOREIGN DEBTS, GERMANY WAS ABLE TO REGAIN ITS DOMINANT STATUS AGAIN WHILE EUROPE WAS AIDED BY THE BANKS THROUGH THE MARSHALL PLAN!
As a masters student in economics this is one question I have answered myself over and over again . I plot all scenerios and I ended up at the perfect answer..THE COST OF PRINTING MONEY , You see as easy as it sound it is patent to point out that money is not a comodity that is immobile , money is a very complex commodity , money is highly mobile.If as you said we should keep printing money have you tought of cost needed to print the money , then what about the insecurity that will come with excessive printing of money(as many individual might discover the know how)
In addition Nigeria money market is a very bad example in analysing the economics of money; NIgerian money supply is highly affected by money laundry and so many criminal activities .That is one reason for the the rise in inflation and rise in unemployment(these parameters should be indirect) .As a matter of fact this money laundry activities can be likened to printing of money.In develop countries the economics can be well understood as money in these countries are highly liquid (since no one is storing 1billion dollar in the bank for selfish reasons) in countries like this the money reaches the ordinary pple pretty fast and if they print money it will result in hyperinflation(as in the case of most part of europe after the War)
And Hitler wasnt printing money as excessive as you tought , The first thing he did was take over all investment of the jews(the jews were the richest set of people in Europe then) and also he made use of resources of countries he invaded , lastly he stimulated the german economy by a simple economics of mass machinery and weapon production(most weapons were locally produced, so all needed was resources not even money) NB the Nazist were not capitalist(they dont need to pay tax or for labourers , hence the cost of production is absolutely insignificant, you can call it slavery ) .After the fall of the Nazist ,Germany struggled with hyperinflation with most part of europe(Due to the idea of money printing)
So why the stress when you can simply borrow the money and pay back( as in bonds) , this will reduce the production cost of money itself IT IS BETTER TO PRINT A MONEY WITHOUT RISK THAN ONE WITH RISK (we print the money we borrow not money we dont have )
I am sorry Kola, you got it all wrong. I will recommend for you to go and get a copy of "The History of Economics past and present By Kenneth Galbraith. You will know that name if you read many books on economics and follow the topic of money on the Internet! He was also an adviser to President John F Kennedy!
When Hitler took over power in Germany, the country was bankcrupt and he blamed the Jews for it (remember The Money Changers in the Bible story)! I doubt if you are a masters student by what you have written here. I believe you have gathered opinions and have tried to express it here. Your history of Europe after the war is incorrect and by the way, Hitler still had to pay for everything - the mass machinery and weapon production! How did he pay for it if not by money?
You made mention of Bonds. Well, the government can borrow money from us through the issue of bonds. If they can do that, why then still import 'money' from the WB, IMF, and BIS! They can also put in measures of compulsory saving schemes to redcuce the circulation of money if it wants to. As I have already alluded to, you have heard of Quantitative Easing and Stymulus Packages in the west. These are nothing but "The Printing of Monies"!
I am also flabbagasted by your point about the 'Cost of Printing Money' and all else you mentioned about money; laundering and counterfeiting. But these are already in play as I write and, not new factors since we already print the money! Do you know how much money we gave to the 'Paris Club' to settle our debts when Obasanjo was in power; over $18 billion dollars! Why borrow all these money when we have natural resourcers bringing in money into the current account?
Finally, I will advise you to do more research on your studies because in my view and speaking objectively, you need a lot more to do before you collect your Masters in the subject. Maybe Nigerian master degree is different and of different standard hence I may be wrong. If not, I sincerely hope you will go and read up more about the history of money, the printing of bank notes, and the aims of 'the money changers'. If you type in 'Money Changers' into google, you will learn much more than you know right now. Go and check this link out.
Like I said I put this in perspective away from all theories :) ..like you said if I will go by the history of money then you will also know that the money we spend(the note)has virtually no value it just fiat money like in the history of money you will remember(I guess you know cos you claim to know so much) in the past countries as a base to what is called money which was GOLD , so what does that tell you that you cant print money more than the GOLD in your reserve..SAME AS YOU CANT PRINT WHAT YOU DONT HAVE
Secondly like most Nigeria you attacked someone with a view way of yours cos you feel you know so much(I wont belabor on that) , do you know the cost of printing a dollar note(you can check it on the net) and also assume the cost of printing a naira note..Now lets do simple maths imagine you dont have 80 naira on you and you want to print 500 naira but it will cost you 80 naira to print 500 naira(this is my analogy) NOW ASK YOUR SELF , SMART MAN YOU EFFING NEED MONEY TO PRINT MONEY
And if I might ask you , you keep saying the goverment should sell us bond right , so are you telling me you can stick your neck out for such bonds(do you know what risk is) plus the same question set in what will the public use to buy this bond(garri or rice I dont understand you) ..and if I might ask do you know how money is being injected into the economy , do you know what MPC is ..hmmmmm You amaze me
Now you keep talking about using the available resources (do you mean using this to print money , elaborate) , Just imagine yourself using money you get from a resouces to print more money(it sounds stupid) ..so instead as dumb as most of us are we just use the resources as a colleteral and borrow(Nigeria have oil we so lucky) , and we dont borrow always the gap in budget is basically due to flunctuation in price of the comodity which we make our money from(oil) ,Nigeria is a real case (I wish I can write a lot ) you can read about the ECA you will know why Nigeria is a big joke
And about Hitler Really am sure you can read , I didnt say he didnt print money but not as much as you think , the money printing was done after the first world war and the germans needed to fund thier debt so they started printing debt free money and hyperinflation sets in .But if you know the history as you claim then you will know that there was the second hyperinflation in germany and few counttries in Europe after the second world war (please try and read about the GREAT DEPRESSION) .HITLER DIDNT NEED SO MUCH MONEY TO FUND THE WAR HE NEEDED MORE OF RESOURCES CHIEF OF WHICH IS THE HUMAN RESOURCES(he didnt have to pay pple working , he didnt have to )
So lastly yeah I have a masters in economics(not from a Nigerian university ) GUSH YOU RIDICULOUS , Tell me one thing I said that goes out of an ordinary thinking( I wrote all I wrote based on personal perspective that is what education is all about) ..is this some kind of Academic challenge hmmm, Am sure if we will meet man to man and discuss such issues maybe you will understand me better (I hate the net atimes it makes some pple soooooo smart)
smart man you can pick errors in my language construction , I wrote this with disgust
If you read my post properly, I did not devalue your comments I just said that you got some of your facts wrong!
You do you talk about the cost of printing money when one is talking about macro economics! Also, you still talk about Hitler and his rebuilding of Germany. Please read your post again because it does not make sense!
In your first post, you said you are a student of economics and now you say you are a graduate of economics. You have read tit-bits about money and about finance but you are not very verse in the subject. You introduced Bonds in the writings and not I! As I have alluded to, there are MANY ways we can raise money without using external agencies like the World Bank, IMF, and the Bank of International Settlement (BIS). The costs of printing money, like you keep referring to cannot exceed the interest repayments on external loans!
An finally, by the way, ALL Governments print their monies and that is why they have Quantitative Easing and Stimulus Packages! If you can remember, I believe I wrote that in my post, who gave the banks money during this present crisis? I WILL NEVER UNDERMINE ANOTHER because we acquire knowledge as we go along unless people want to close their mind to this fact. I am sure hyou have learnt a thing or two from me during the postings!
Yes, metal was used before money came alomng, just as we used cowries in Africa and before then it was trade by battar! The Roman Money Changers through their Emperors introduced coinage of money and the issue of paper money began in America in the 19th century. It was free for all at the beginning until order was brought in by Congress. Companies actually issued their own monies for workers which was then used by the workers to pay their rent and buy food from the issuing companies! I am not going to go into the history of money coinage, the evovement into notes, the creation of the Greenback, and the battle between the government and the bankers for the Copntrol of Money! As they say, " The One That Controls Money Controls The World!"
This is why the BANKERS CONTROL the World through the World Bank, IMF, and BIS! Who is in control, or should I say who heads these organisation, THE US of A!
I Have a masters in Economics , I work hard for it OK ,,I feel bad when I get look down own I respect everyones view OK ...I accept your view the Bankers rule the world no doubt about it .But the basic issue is THE BIG WORD CALL CAPITALISM , Yes that is what the problem is and personally I think linking capitalism with democracy is one of the tools the west is using to rule every humans pocket . But the fact remains that your post was basically about the difference between international aid and locally printed money(I and many friends have had this argument over and over really) and my own submission was what I said about the cost of money , Cos really for me it is stupid that the goverment cant just print certain money and for instance use it to feed the poor but like one of my Professor said he said life most always be in istostacy, he was saying when someone is falling someone most be rising , when there is money being made somewhere, money must be lost in another , same as when there is a rich country there must be a poor country ..Everyone cant be rich , everyone cant have a job , infact without a poor student there wont be an excellent student ,So I think generally the idea of paying for everything(privatizing in disguise) is the main problem , You might see how difficult printing of ordinary voters registers was a big problem durring the last elections and you could see the cost , so I think even you printing 100billion naira in the case of Nigeria it wont mean anything , The basic problem is when pple refuse to make money move , if the economy is booming , shops are full , people are employed , you will realize this argument wont be needed at all ,But like I said money is a very funny comodity and also a dynamic phenomenon
You could see the balancing effect now china has the fastest growth , they have the money , so what happens they are the ones Borrowing others , cos they want it all to go in circle ,
But personally I think as a Nigerian what we should think about is the rate the naira trades in the world market , I ask myself many times Nigeria hardly export any other thing except oil and the price of oil is determined regardless of country exchange rate , so why cant we just revalue the naira I think this will help our economy , since we dont export so much of finished product and in this way Nigerians will have higher purchasing power and probably we can stop the brain drain .hmmm exactly what Soludo wanted to do but many Nigerians said NO hmmmm
Nigerian economy as surpassed most economic terminologies and theory
I am sorry to say, the problem with African countries is that they will not listen to their own black people such as Wole Soyinka. I have read some of his comments on Nigeria but nobody is listening to him!
We claim to be a dynamic country and one that is democratic yet we cannot do simple things rightly. You see, all these government in the west that practises their democracy and want us to follow are already developed! They can afford to spend all that money on electioneering to divide their peoples. After their elections, nothing really changes with the exception of few ideologies on internal issues! You do not see them change their views on the UN, WB, BIS, etc!
But African countries, Nigeria included, have still to reach their standard of western development and yet want to emulate them because we want to be in their club. We spend huge money on elections, money that should be spent on developing the nations; a nation that is already divided on Tribal, Cultural, Traditional, and the other imported divisive element, Religions.
In conversations I have with my friends, I always refer to our politicians as educated illiterates because they cannot see or begin to compare the countries in Africa with those in the developed west. They travel about in the west and when they get home, they are not able to implement what they have observed in their travels! When Marco Polo, Walter Raleigh, Francis Drake and Christopher Columbus travelled the world in their voyages of discovery, they saw that the natives had no defence hence they told their goverments. They returned and took our forefather and mothers as slaves and also introduced the Bible to our people! Since then, we have been stupid peoples always listening to their advices and aping everything these white peoples do; calling them Gods and asking them to Save us in the names of Jesus and Mohammed! That is why I refer to them as educated illeterates! Which western leader or poplitician have you ever heard refer to God in their speaches? But our peoples and leaders do this all of the time and the west laughs at us; I know because I am with them most of the time! They do not believe in Jesus or Mohammed as their saviour except the Islamic countries who still believe they are being persecuted as you have seen in Iraq, Afghanistan, and Palestine! What has their so called Allah and Mohammed done with tyhe issues on the ground in Palestine - Fools too!
UNTIL WE RID OUR MINDS FROM COLONIAL MENTAL SLAVERY, WE WILL NEVER IMPROVE IN AFRICA!