Sri Lanka is having a textbook currency crisis, triggered by policy mistakes • Hacker News Board

Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes

#61

Post by epistasis » Wed, Jul 13, 2022, 2:27 AM UTC

nostromo wrote: post #40

kumarvvr wrote: post #15

The drastic move to organic farming is puzzling. Any level headed person , forget a politician , would want to experiment first, see the results, gauge and then expand selectively. That is common sense . I guess when you are a dictator ish government and you rule the country with an iron first, the institutions of the state stop being anything and simply become rubber stamps. This also underlines the importance of se…

This is a common feature of dictatorships: a boneheaded decision from a central government wreaks havoc on the people in the field that would know better. It reminds me of Mao ordering all sparrows be killed because they eat agriculture seeds. This of course caused a much bigger crisis with insects destroying crops - because everyone knows sparrows also eat lots of insects.

Well to be fair to Mao, sparrows are renowned for their bourgeois capitalists tendencies.

Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes

#62

Post by chii » Wed, Jul 13, 2022, 2:28 AM UTC

rlt wrote: post #55

Perhaps a dumb question: why does every little country need its own currency? Are they all just addicted to printing money? Ignoring the volatility and environmental concerns, why shouldn’t all these small to medium-sized countries standardize on a cryptocurrency?

and so who controls that crypto? The biggest country of the group? Or the wealthiest?

What happens if one of the countries needs to print some money to get out of a bind?

What happens if external countries don't want to receive the crypto in exchange for imports/exports?

I dont think crypto makes any of the above any better than an existing currency owned by the fiat banking system.

Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes

#63

Post by mpyne » Wed, Jul 13, 2022, 2:29 AM UTC

rlt wrote: post #55

Perhaps a dumb question: why does every little country need its own currency? Are they all just addicted to printing money? Ignoring the volatility and environmental concerns, why shouldn’t all these small to medium-sized countries standardize on a cryptocurrency?

> why does every little country need its own currency? Are they all just addicted to printing money?

Controlling your money supply can be needed to improve your country's position with regard to foreign trade. Greece would probably have been better able to manage its recent debt crisis had it controlled its own currency rather than being tied to the Euro, for example.

> Ignoring the volatility and environmental concerns, why shouldn’t all these small to medium-sized countries standardize on a cryptocurrency?

Because people still need to be able to transact with something, which is not a function well-served by cryptocurrencies, most of which have the bulk of trade in them carried on off-chain or via stablecoins that track a fiat currency.

Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes

#64

Post by thematrixturtle » Wed, Jul 13, 2022, 2:29 AM UTC

walrus01 wrote: post #21

The first part of the article about how Sri Lanka would get foreign currency (swap, export or borrow) almost completely ignores the well documented devastation of the tourist industry, where people bring euros or dollars, due to covid19 and shutdowns of travel. Yes I suppose it falls into the category of swap, because people bring euros and exchange them for local currency to buy local goods and services. But it was…

It's mentioned later in the article, and while it's certainly a factor, there are a lot of other countries with an even larger dependence on tourism (Maldives, Fiji, Thailand, etc) that did not suffer a full blown economic crisis as a result.

Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes

#65

Post by likecarter » Wed, Jul 13, 2022, 2:29 AM UTC

rlt wrote: post #55

Perhaps a dumb question: why does every little country need its own currency? Are they all just addicted to printing money? Ignoring the volatility and environmental concerns, why shouldn’t all these small to medium-sized countries standardize on a cryptocurrency?

The whole purpose of fiat currency is so the central bank can literally dictate interest rates and "print money" in times of crisis. Pegging currencies to the USD has been tried and usually fails.

Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes

#66

Post by IG_Semmelweiss » Wed, Jul 13, 2022, 2:30 AM UTC

I would love to go deeper into the rabbit hole here.

What is MIA in the Sri Lanka discussion is the underlying reasons for the situation.

It seems one of them was misguided govt policy, in that they banned common fertilizers in favor of ESG-friendly fertilizer. It seems said fertilizer collapsed output, which meant less exports, less hard currency to import (late on the game) regular fertilizer.

I still sont know why ESG was favored. I also dont know what was the upside for sri Lanka to do this.

Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes

#67

Post by andrewmutz » Wed, Jul 13, 2022, 2:30 AM UTC

rlt wrote: post #55

Perhaps a dumb question: why does every little country need its own currency? Are they all just addicted to printing money? Ignoring the volatility and environmental concerns, why shouldn’t all these small to medium-sized countries standardize on a cryptocurrency?

Most countries are better off with a money supply that can adapt to local economic conditions (local unemployment and inflation). Having a fixed currency prevents that. During economic crises, it is critical to be able to increase the money supply.

Also, most countries end up managing their currency reasonably well (better than having a fixed money supply). Sri Lanka is in the news for failing, but most nations are quietly doing reasonably well.

Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes

#68

Post by socialdemocrat » Wed, Jul 13, 2022, 2:30 AM UTC

asciiresort wrote: post #33

tlear wrote: post #25

Earlier quoted context omitted.

Population grew. In Japan agriculture is heavily subsidized, in particular rice production. Stuff that is not heavily subsidized focuses on high margin premium. They can't compete on volume/price but can on quality. After eating expensive apples or grapes there nothing really compares anywhere else

That’s my point about Japan. Rice, unlike tea, is a defensive measure for times of crisis. Even as Japan imports food, the point is whether the country can quickly mobilize and ramp up to essential food crops. The point is having options and a hedge, which allows you leverage during economic negotiations for other things. The percentage of imports you can have should be bounded by the runway and time horizon you have…

Same deal in Norway where I live. We maintain an agricultural sector in a rocky subarctic climate at exorbitant prices which probably makes Japanese agriculture look like a bargain.

We have had enough bad experiences in the past however to give up having some level of self-sufficiency.

If you ever wondered why nearly every European country is in the EU, except Norway well there you got part of it he reason.

Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes

#69

Post by rmatt2000 » Wed, Jul 13, 2022, 2:31 AM UTC

epistasis wrote: post #61

nostromo wrote: post #40

Earlier quoted context omitted.

This is a common feature of dictatorships: a boneheaded decision from a central government wreaks havoc on the people in the field that would know better. It reminds me of Mao ordering all sparrows be killed because they eat agriculture seeds. This of course caused a much bigger crisis with insects destroying crops - because everyone knows sparrows also eat lots of insects.

Well to be fair to Mao, sparrows are renowned for their bourgeois capitalists tendencies.

The sparrows in my yard have been exploiting and oppressing the wrens for years.

Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes

#70

Post by likecarter » Wed, Jul 13, 2022, 2:31 AM UTC

digianarchist wrote: post #56

rlt wrote: post #55

Perhaps a dumb question: why does every little country need its own currency? Are they all just addicted to printing money? Ignoring the volatility and environmental concerns, why shouldn’t all these small to medium-sized countries standardize on a cryptocurrency?

Only rich countries can afford to peg their currencies.

Even then, not a good idea for them, hence very few rich countries do it (unless they are very small).

Controlling interest rates is incredibly important, especially in times of crisis. If you were pegged to the USD right now (which is skyrocketing relative to most other currencies), you would be in trouble.