I see a lot of parallels with Sri Lanka and Turkey. Dwindling foreign exchange reserves, crashing value of the Turkish Lira, trade deficit, arbitrary decision making, etc. Makes me scared for Turkey's future...
Sri Lanka is having a textbook currency crisis, triggered by policy mistakes
71–80 of 386 posts
Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes
#72The 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…
The Rajapaksa family gave out jobs based on nepotism not expertise, and weren’t the sharpest knives in the drawer. It is completely insane policy, as was flatly running out of currency before doing anything about it. It will be a long road to recovery. At least they have kicked out the family from the government, and have a pretty solid plan to reverse the authoritarian sections of the constitution put in place by th…
The immediate problem is that the entire legal order of succession (PM, president, Speaker etc) are Rajapaksa cronies who are busily getting the hell out of Dodge^W Colombo, so it's not at all sure who is going to form or lead the next government.
There are also a lot of unresolved tensions left over from the vicious civil war that devastated the island for decades, so it's sadly possible that things take a turn for the worse.
Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes
#73> Without imports, many Sri Lankans will quickly find themselves hungry, stranded How did these island nations sustain themselves before ? In other words, what has changed that they can’t live off the land anymore? And by that, I mean the sea. Has Sri Lanka’s fish been pillaged? Is it being exported to wealthier nations that command higher prices, even as there is a domestic food crisis? How much of this is because o…
Not producing enough food is pretty normal. In my native Norway we have not been self sufficient in hundreds of years. Only 2.5% of the land is arable. Any time there was a serious war and shipping lanes got blocked like in Napoleonic wars we got into deep trouble. Plenty of people died. Same deal in the Netherlands. They were not self sufficient in their Golden age. The Soviet Union was not self-sufficient. It was a…
> It can in principle print itself out of any problem.
Except inflation, as we are learning.
Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes
#74> But the most boneheaded, bizarre mistake that the Sri Lankan government made was a disastrous plan to shift the entire country to organic agriculture. In April of 2021 the government banned the import and use of pesticides and synthetic fertilizers. This devastated Sri Lankan agriculture, since, as it turns out, fertilizer is really really important. Production of tea — Sri Lanka’s main cash crop — fell by 18% in a…
>You don't get anything "for free", and cutting supports like this will inevitably doom a sputtering economy, when the actual solution was almost certainly more government spending, not less. Government spending isn't free magic money either. You increase the amount of money in circulation, hoping that people will produce more goods. Instead, you increase the size of the bullshit economy - low-effort activities that…
That’s when it goes bad, but borrowing against the future to kickstart today is also the principal behind innumerable success stories.
Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes
#75Perhaps 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?
Having your own currency is what lets you adjust the exchange between your country and another one. You should never use a currency you don’t control or cannot influence in any way. That sets you up for disaster.
Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes
#76> Without imports, many Sri Lankans will quickly find themselves hungry, stranded How did these island nations sustain themselves before ? In other words, what has changed that they can’t live off the land anymore? And by that, I mean the sea. Has Sri Lanka’s fish been pillaged? Is it being exported to wealthier nations that command higher prices, even as there is a domestic food crisis? How much of this is because o…
Not producing enough food is pretty normal. In my native Norway we have not been self sufficient in hundreds of years. Only 2.5% of the land is arable. Any time there was a serious war and shipping lanes got blocked like in Napoleonic wars we got into deep trouble. Plenty of people died. Same deal in the Netherlands. They were not self sufficient in their Golden age. The Soviet Union was not self-sufficient. It was a…
> The US cannot have this problem since it controls the world reserve-currency
you got that the wrong way around. The US has the world reserve _because_ it cannot have this problem (of not having enough domestic production of necessities).
The world isn't entirely controlled by the US - even though they do dictate a large portion of financial policy all over the world, the countries of the world decided to use the US currency as an intermediary because of the stability and assurances (that has recently been shocked by financial sanctions of magnitudes never seen before).
Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes
#77The 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.
It's not that, really. There are only so many boneheaded decisions that can come from a central government, and you risk over-weighting one person directly. More frequently, it's the indirect, created conditions typical of centralized power that allow sycophants and incompetents to run decision-making at lower levels -- where there is more impact and volume -- based on purely political and personal reasons.
Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes
#78Earlier 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.
Sometimes I think a huge percent of communism's economic overhead is simply everyone having to remember another dictionary's worth of current communist truths.
To the extent they have less mental free space to actually do work.
Even in abridged form... that's a lot. https://campbellmgold.co.uk/archive_definitive/red_book_chai...
Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes
#79Earlier quoted context omitted.
>You don't get anything "for free", and cutting supports like this will inevitably doom a sputtering economy, when the actual solution was almost certainly more government spending, not less. Government spending isn't free magic money either. You increase the amount of money in circulation, hoping that people will produce more goods. Instead, you increase the size of the bullshit economy - low-effort activities that…
That’s when it goes bad, but borrowing against the future to kickstart today is also the principal behind innumerable success stories.
May I humbly ask for an example? In my personal experience, trying to rush a short-term solution while ignoring the long-term implications always makes situation worse. Like eating planting stock to address immediate hunger would cause a devastating famine next season.
Re: Sri Lanka is having a textbook currency crisis, triggered by policy mistakes
#80Earlier quoted context omitted.
There's a premium that can be exacted from switching to organic agriculture that isn't be discussed in this article. Sri Lanka has a limited land mass available for food production and they mostly export commodities to other countries. We're talking ~25,000 sq-mi. For context, the US state of Kansas is ~82,000 sq-mi. If you cannot physically expand the footprint of agriculture in Sri Lanka to boost revenues, the thin…
If you are short on land, organic is not a good approach. It takes 40% more land compared to traditional farming.
And is it likely that buyers who favour organic produce would be looking at food miles and buying locally? Not sure if that's as relevant at export scale.