On Tue, Jan 24, 2012 at 6:53 PM, Srini RamaKrishnan <[email protected]> wrote: > On Tue, Jan 24, 2012 at 7:15 AM, Vinayak Hegde <[email protected]> wrote: >> Nothing tells about how high inflation is (the govt manipulated index >> notwithstanding) than how cheap is the metal that goes into making the >> coins.
> The idea of a fiat money is in itself a display of state power - > Somalis couldn't realistically expect to use their Somali shilling for > anything of importance - hence the US dollar is the defacto currency > in that region. I found this to be surprising true in some South East countries (Cambodia, Laos and to a lesser degree Vietnam - which has a fast growing economy and demographics on it's side). You can buy Knicknacks and other small / large things from the night markets (in non-touristic areas) and even from vendors on the street in rural area using US $. The only reason I had Riels (Cambodia) / Kip (Laos) / Dong (Vietnam) was to drive a hard bargain which was tougher to do using the dollar. (Sometimes it is hard to take India out of a man when it comes to bargaining). > The idea of each of us being wealth accumulating robots has gained the > high ground only in the last century or so, but at the end of the day > economic power too is merely a display of superiority in strength, > like the cat puffing up the hair on its back and rising on its toes. > When monetary economies meddle too much and weaken the signal with > inflation, and fake currency and overnight changes in wealth through > the vagaries of the market cycle it is time to move on. I read Boomerang by Michael Lewis (Good read on the impact of financial crises and how different were the causes and the effects in different countries - He also talks about the sociological and psychological reasons for the behavior of people before and after the crisis). A small excerpt from that book: "Michael Lewis is amazed by his stay in Greece, by far the country most surreal journey. Teachers are overpaid, trains costly and inefficient. The government used to manipulate its own figures – to remove the tomatoes from the index of consumer prices to control inflation! The author sympathizes with the former Finance Minister George Papaconstantinou – not a real Greek, he declares – until last June trying to clean up public finances by imposing an austerity plan." No wonder Greece is in the dumps as compared to other EU countries (which are not that well off either). India does such index engineering of it's own if you look for the right information under the hood of consumer price index and the wholesale price index. -- Vinayak
