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Dear fellow eCitizens,

I would like to devote an article on the recent developments on the eUNL monetary market and our gold price. Please note that this contains my personal opinion (except ofcourse exchange rates and other numbers, which can be considered facts) which is based on real life finance education and experience. However, you are ofcourse totally free to disagree with my statements and to leave a comment or start a discussion! (But keep it neat: http://www.erepublik.com/en/article/asking-a-favor-of-all-citizens-you-can-make-a-difference--956862/1/20 )

- Summarizing
In short: I predict that the monetary market will stabilize again towards the 1 NLG = 0,016 G. I feel we do not need a big short-term governmental intervention anymore, but a long-term solution by slowly bringing more NLG to the market by “normal” spending should be maintained (like salaries for UNL employees).

- Crisis: historical observations.
I have monitored the monetary market quite closely lately (tried trading there a bit to get a profit, so I got a basic understanding of how it works). The exchange rate rose from 0,016 to 0,019/0,020 in a short amount of time. I guess this was mainly a result of investor’s distress about the huge amount owned by foreign investors. We have seen that over time it stabilized itself again and went to 0,017. Currently, there is about 20.000 NLG for offer at 0,017; and regularly offers of 0,016 appear.

- Crisis: my guess on the future.
The buying prize is at 1 G = 63 G, so offers of 0,016 will occur more and more the few days. Therefore, I predict that we will have an exchange rate of 0,016 again in about a week. I understand that exporting companies are lobbying for a government intervention, but I think this intervention would be too late. If we would have done that, it should have been done when the rate was at 0,019 (offering NLG at for example 0,018 to get it stable more quickly than it did now).

- If it doesn't get back to 0,016, would 0,017 be too high?
Even if it would not stabilize to 0,016; a price of 0,017 is not that bad. If we look at job offers in a few random countries around us (I have taken Manufacturing, skill 7+ as example), the best offers would be:
eUNL: 30 NLG x 0,017 G = 0,51 G
Hungary: 18,7 HUF x 0,031 G = 0,58 G
France: 28,2 FRF x 0,021 G = 0,59 G
UK: 21 GBP x 0,034 G = 0,71 G
Germany: 35 DEM x 0,019 G = 0,67 G

So you see, that even with a price of 0,017 (!), our employees are getting paid relatively low in gold, compared to other countries. Imagine what it would be when the exchange rate is 0,016. No, wait! Don’t all run off to a neighboring country now: this does not say that living there is cheaper. After all, if food it more expensive, you know where your extra salary goes to.

- Government intervention: Issuing on the monetary market
If we would still want to issue NLG on the market directly, I would suggest a rate of 0,017; so we don’t disturb the “healing” process towards the 0,016 which is currently going on. I feel selling cheaper could lead to new unrest on the monetary market. However, I seriously doubt if this would be needed, as we have other more balanced opportunities (see below). In the future, if something like this happens again, I think the government should act quickly when the price goes to an extreme. To enable this, we should always have an amount of NLG in stock. If we get an exchange rate of 0,019 again, the government could issue these NLG for 0,018 fast. Two advantages are that the market will stabilize quicker and return to “normal”, and the government can sell the NLG for a good price (compared to now). That’s only in future cases, though!

- Government intervention 2: "Issuing" through UNL-company salaries
Don’t get me wrong: I agree that we do need new NLG, however! There have been a lot more users, and not that many money issuing on the market. In addition, if a citizen stops playing, the NLG are lost on the account. So while NLG slowly disappear (supply gets less), new users emerge and evolve (and thus demand for NLG gets bigger). However, I think the government should “issue” this money not directly on the market, but through our state companies. We have just printed a lot of NLG. By paying the salaries of our employees, this money will become available to the market (as they buy food, weapons, etc. with it) slowly over time. No big market shocks, but a good and solid adjustment to the amount of NLG.

Thanks for reading this far 😉
I’d like to close of with the following remark: for an economic analysis like above, this is ofcourse a “nice” period to see what happens in the market. However, please note that these turbulent times have a huge impact on (exporting) companies. I take my hat off for all those great managers who do their job fantastically by keeping their company alive!