Economic Lessons
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by patton
Several economic issues first addressed in the Exchange Market Stabalized article which I would like to address here.
Economics is basically the study of scarcity. ImaNewbie has kept IEP off the market so the IEP has dramatically increased in value. I for one am glad that the IEP has increased though I would propose a small change. I think maybe a small daily infusion of IEP on the exchange market would eb for the best because as of now there is almost no IEP that can be bought. In this case ImaNewbie cold act as a National Bank. The daily amount would be small to limit inflation anywhere from 25-50 IEP.
The ISG group commented in the last article that because our IEP was so valuable we would be flooded with foreign imports and our exports would dry up. Del Muerte addressed this " We aren't being dumped on - small local industries aren't fighting off excessive imports and irish exports are (afaik) doing rather well due (in small part - the low wages help big time) to the exchange rates. This is obviously correct our markets our fine and I know my exports are still doing well. This is all because of Ireland's two rounds of price cuts. The first carried out during my administration and the second during Michael Collin's. According to Kaleb's Economic League Table Ireland has had the lowest prices in all of erepublik for months !( Not sure now)
Like I was saying our economy is doing great but if you could put a wee bit more on the market that would be great. From what it seems industry does need it and yes that includes myself I am extremely IEP poor.
On a side note: Anyone with large amounts of IEP wanting gold message me
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Comments
The recommended exchange rate is just a measure of how much the currency is worth in terms of the goods produced in that country. The numbers to look at when concerned with imports and exports are what the currencies are actually selling for in terms of gold. Like you\'ve said the actual gold value of IEP has increased quite a bit. This is good if you want to turn your IEP into gold (foreign imports) but bad if you want to turn your gold into IEP (Irish exporters). Our exporters now are getting significantly less IEP when converting back from foreign currency.
There is no denying the fact that when a currency appreciates exports fall and imports rise.
Patton, I am not refusing people IEP, Most of the paid taxes are spent on the exchange market to buy gold. But yes, there is a possibility to put some of the state cash reserve into the system. Nothing sudden however.
Canada\'s Government has sold Gold at the RER over the last while and brought it\'s Gold CAD Rate in line with the RER, when previously it was 2.5 x RER.
We don\'t have significant enough Gold reserves to do this imo, but it could be considered.
@ Collins - Our Gold Rate should be at or around the RER, at the moment it is bad for importers to Ireland, not good. The RER is 8.76, get they are getting 3 x less than that when trying to turn their IEP into Gold, as you said the RER is based on commodities prices, so effectively they are getting 3x less than the commodities are worth in Gold terms.
It is good for our exporters because most countries Gold to local currency rate is much closer to their RER so they can convert local currency to Gold at a fair (close to RER rate) and then turn it into IEP at 3 x the RER rate.
I for one would like to see our Gold IEP rate at or close to the RER.
Inq
Assuming prices and exchange rates remain static in other countries, the more IEP appreciates in terms of gold, the worse for our exporters, because they are now getting less IEP back from the gold they make selling in other countries. Similarly importers now get more gold for their IEP that they receive here.
This is true in case someone keeps an IEP reserve for a prolonged period of time.
I can still manage export because I divide sales between foreign and domestic markets but I definitely dont have the IEP I used to. I remember back when I had probably around the tune of 1500 IEP of course the couldnt buy you but 1 Gold piece.
ImaNewbie I wasnt saying you were refusing I was supporting your policy. You just have not injected new cash.