My Views on the current US Policies
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by Pearlswine
“The power of accurate observation is commonly called cynicism by those who haven't got it.†- George Bernard Shaw
I disagree with the current administration's policies. There, I said it, read on to find out why.
Issue 1: Inflation
Overnight the value of a dollar relative to gold decreased by 60%. The current administration did this to eliminate foreign competitors from the US marketplace providing a quick stimulus to local businesses. Unfortunately there are short and long-term ramifications to this action.
In the short term, in the international market Americans are now some of the lowest paid workers in the world. This will cause many skilled American laborers to leave the US in seek of higher paying jobs in another country where they will be better compensated for their work. Secondly, also in the short term, the prices of goods on the American market are currently some of the lowest in the world. This makes it difficult for American companies to make a profit or recoup capital investments by selling on the American market. American companies will soon become forced to export their goods in order to make a profit.
Once American companies begin exporting and foreign companies stop selling on the American market, prices on the American market will begin to rise to that of the international market. As prices rise, business owners will resist increasing worker salaries making it harder for American workers to make a living.
Issue 2: Printing Money
A presidential order to print $20,000 was passed yesterday. This was put to congress with no prior announcement or reasoning. This order met little resistance and passed congress. This money will enter the US market and dilute the value of the US dollar increasing the rate of inflation.
Issue 3: Changing Taxes
Another bill made its way through congress yesterday, the VAT on gifts was eliminated. There was no warning that this going to be presented to congress and the reasoning behind this change was not detailed.
Overall, I completely disagree with the government sponsored inflation and lack of communication of congressional bills.
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Why should I vote \"yes\" to the print $20,000 motion?
You pointed out some problems that you think will occur, how do you suggest we fix them? Leave the economy as is?
Lowering wages is necessary to keep up with foreign companies who too had low wages. Workers won\'t leave the country for higher wages because Americans have been very well paid compared to other countries.
Yes, changing the exchange rate certainly increases inflation. However, the eRepublik economy as it stands now suffers from chronic deflation. Ideally, this will balance out and prices won\'t change too much.
I\'m no economics major, but I think taking action was a better move than doing nothing. I support what Nave has done so far. Just my two cents.
To fix the problems, first I suggest the US stop regulating the currency exchange. Market forces will dictate the price of gold. This will cause sudden deflation to near pre-election levels. Second, the government needs to create programs that promote cooperation in US businesses. This could range from buyouts to financial incentives to combine businesses.
As far as the lack of information and explanations for congressional proposals a press release or newspaper article needs to be made explaining why something is being proposed in congress before the proposition is made. This will allow an open debate on the merits of the proposal.
Pearlswine, you obviously don\'t know much about economics. There, I said it, read on to find out why.
As Michael Ingram pointed out, there is constant deflation happening in erepublik. It is the natural tendency of the competitive market, the effect of having all the goods of the same quality identical to one another. Adding money to the economy will just help to stabilize prices.
ISSUE ONE:
\"in the international market Americans are now some of the lowest paid workers in the world\" -- by what measure? Maybe if you use gold as the standard, yes. But if you look at purchasing power (the amount you can purchase with USD), not at all.
\"This will cause many skilled American laborers to leave the US in seek of higher paying jobs in another country where they will be better compensated for their work\" -- please, inform me when ONE account of this occurs.
\"the prices of goods on the American market are currently some of the lowest in the world\" -- yes, this will help American businesses export to foreign countries for a profit. Also, the GDP/Capita of America has been extremely low for months. Now, people can buy things for less money. Purchasing power! Also, this is terribly inconsistant with your inflation \"point\".
\"This makes it difficult for American companies to make a profit or recoup capital investments by selling on the American market. American companies will soon become forced to export their goods in order to make a profit.\" Only 3 companies had made enough money to pay back the gold it cost to start them. Now, they can export -- this opens THOUSANDS of new consumers. Companies have more opportunities to make money now than ever before. Your argument seems to prove it!
ISSUE TWO:
\"This was put to congress with no prior announcement or reasoning. This order met little resistance and passed congress.\" -- there is no easy way to communicate to everyone the point of this. It was necessary to regulate the exchange market. I am currently trying to find a congressman that will message every other congressman next time I put forth a vote.
\"This money will enter the US market and dilute the value of the US dollar increasing the rate of inflation.\" -- as you said before, you have no idea why I asked for more funds. You don\'t know that it\'s going into the economy. Also, if I do inject more USD into the economy, it will be to stabilize the prices. This quote is just ignorant on several levels.
ISSUE THREE:
\"the VAT on gifts was eliminated. There was no warning that this going to be presented to congress and the reasoning behind this change was not detailed.\" -- The less taxes there are, the more businesses make. The more businesses make, the more they can pay their workers. If you are opposed to economic growth, maybe you shouldn\'t comment on anything economy-related.
Also -- and any of you with an economics background can back me up here -- price level has nothing to do in the long term with general output. If we stimulate demand by opening exports, we increase how much companies can make, which in turn encourages them to produce more. That leads to more jobs -- better paying jobs.
AT YOUR COMMENT:
\"First I suggest the US stop regulating the currency exchange. Market forces will dictate the price of gold.\" -- Korbin\'s administration set the exchange rate at 12.5 USD to 1 gold. The purchasing power of gold is about 40. The natural price should be 40. I changed it to 50 to help US businesses. My rate is much closer to the natural rate than it was pre-election.
\"This will cause sudden deflation to near pre-election levels.\" -- deflation is bad. In fact, inflation often happens with economic growth. When was the last time RL America suffered from serious deflation? Oh yeah, the Great Depression.
\"This could range from buyouts to financial incentives to combine businesses.\" -- this would be highly interventionist AND hurt the economy.
\"As far as the lack of information and explanations for congressional proposals a press release or newspaper article needs to be made explaining why something is being proposed in congress before the proposition is made. This will allow an open debate on the merits of the proposal.\" -- I have already said I am working on that. Judging by the extremity of your economic ignorance (and you\'re probably not the worse), I will definitely make it a point to teach everyone some basic principles before I pass another one of my crazy, helpful bills. Sorry!
Pearlswine, I\'m not sure how you missed several posts in the recent press releases where we had these discussions, but I highly suggest reading the comments below the papers. They have been a great source of knowledge as to what is going on and what people are feeling. Also, if you need any help clarifying economic cause and effect, I will certainly respond.
First, the read on was to be for the multi-line preview seen in the media section, it was cut off.
I measure pay by gold. If you were to measure using PPP (say the UK as example), none of the changes you made had any effect. PP(USD) has been steadily on the rise over the past month. PP(gold) has shot up recently, but the majority of the US population does not deal in gold.
The GDP/capita is low for two reason, first the large number of dying and inactive players weigh down the number. Removing that value, it\'s lower than rival nations due to the young, unskilled US population compared to the larger, established populations.
Companies are now forced to export to make a profit. There is now no chance of making a profit in the domestic market. Instead of creating programs to promote efficient companies and letting market forces drive prices, inefficiency and a divided workforce are being promoted.
\"If we stimulate demand by opening exports, we increase how much companies can make, which in turn encourages them to produce more. That leads to more jobs -- better paying jobs.\" More jobs are not an issue. Picking up a current US classifieds, there are plenty of jobs available to both skilled and unskilled workers. Companies were already driven to produce as much as possible and to drive out competition. Once competition is eliminated exports can become successful.
Deflation is not inherently bad in eRepublik. Deflation here is good for businesses as it allows for growth.
Finally, I\'d like to say that I understand your argument and I understand that it will allow for short term gains. I do not believe that it will ensure the long-term viability of the eUSA.
I\'d like to thank you for your thought out response, but I still do not agree with your policies.
\"Companies are now forced to export to make a profit.\" -- not any more than they were before. The only difference is that now they have the option to export. I should know -- Food Industry Training was the most profitable company per day last month.
\" Instead of creating programs to promote efficient companies and letting market forces drive prices, inefficiency and a divided workforce are being promoted.\" -- I have no idea what you\'re talking about. The market is going to work the same way; the only difference is that businesses will have an easier time to make money. Is that a problem? How did any of this promote inefficiency or a divided workforce?
\"More jobs are not an issue.\" -- if that\'s the case, companies will start to pay their employees more to entice more workers. You said before that the opposite would happen.
\"Deflation is not inherently bad in eRepublik. Deflation here is good for businesses as it allows for growth.\" -- You have no proof or example here because that is simply wrong. Wages are rarely lowered; if deflation takes place, companies lose money and people lose their jobs.
\"I do not believe that it will ensure the long-term viability of the eUSA.\" -- And what was happening before was? America\'s economy was in a dire situation when I got into office. It will take a while until America becomes one of the top economic nations, but it could happen before next elections. My solutions weren\'t for the short-term at all.
\"I\'d like to thank you for your thought out response, but I still do not agree with your policies.\" -- You\'re welcome. I have a feeling we will disagree a lot until you learn a thing or two about economics. Good day.
Aw... how could I miss a congressional decision?? I never found out about the motion 😕'(
>You\'re welcome. I have a feeling we will disagree a lot until you learn a thing or two about economics. Good day.
Nave, he\'s being civil. Respond in kind. You\'re starting to act like me. I won\'t allow two Platonics per community.
@Platonic: Hahah, sorry -- I\'m trying to be polite, but it\'s time consuming and annoying to have to explain fairly simple economic subjects. Had Pearlswine opened up a econ textbook, it would have saved me fifteen minutes...
UGH
My article was written to present an alternative theory for a closed economic simulation that while often analogous to the real world market, contains distinct differences that set it apart in key areas. I\'d prefer if my idea were the only thing argued, you know nothing of my textbook economic knowledge, something I have refrained from using because it is not 100% applicable to a closed economic simulation that does not completely emulate the real world market.
It\'s hard to believe that you would propose OPPOSITE EFFECTS would happen in erepublik than real life. To the few people who know about these subjects, it just looked like you were an articulate kid who\'s postulating random effects without any background knowledge in the subject. Please look at my comments if you need to see where your logic is flawed... perhaps your textbook wasn\'t very good.