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

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

#221

Post by FooBarWidget »

clarionbell wrote: post #169
InvertedRhodium wrote: post #143

Earlier quoted context omitted.

Are there any examples of western nations taking control of power grids, ports, etc, when those loans are defaulted on?

It used to be, mind you some decades ago, a normal policy for foreign government to keep what they have payed for. Take Panama or Suez canal. That being said, the practice is essentially colonialism and for various reasons it became taboo in the west. Publicly that is. If you are private company there is still a lot of things you can get away with, but you won't get gunboats to show up anymore. Simply put. China is d…

If the lending country is poor and one does not take the asset itself as collateral, then how does one lend to these countries? Don't lend at all? What should these countries do to acquire critical infrastructure?

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

#222

Post by LatteLazy »

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…

"A wise prince acts within that which constrains him"

The issue is that often people come to power based on unfulfillable promises and corruption. So the food supply is one constraint, but so is the fact you promises 1001 bribes and special favours. So now you have to deliver on the latter soon and the former can wait for months. So you do and desperately cling on.

There is fundamentally no difference between this happening in Sri Lanka or here in the UK with Brexit and Boris. The only difference is that the Pound devaluing doesn't cause food shortages etc where as the LKR does. In both cases, corrupt leaders picked by a corrupt electorate that think they can get something for nothing.

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

#223

Post by vinay427 »

socialdemocrat wrote: post #68
asciiresort wrote: post #33

Earlier quoted context omitted.

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.

> If you ever wondered why nearly every European country is in the EU

There are many others, to be fair: Iceland, Switzerland, most of the Balkans, parts of Eastern Europe, the UK, and at least 5 microstates.

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

#224

Post by nibbleshifter »

hunglee2 wrote: post #151
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.

'bad government must be authoritarian' meme is interesting to observe, as if it is impossible for bad governance to occur in democratic systems. Sri Lanka clearly is a democracy, albeit a degenerate one

Its entirely possible for democratic systems to be authoritarian.

Sri Lanka is a democracy, in that they have elections, but it is also hilariously corrupt, with extremely authoritarian governance.

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

#225

Post by lumost »

thematrixturtle wrote: post #72
lanstin wrote: post #32

Earlier quoted context omitted.

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…

Are there any neighboring countries which could reasonably assist in establishing a new government?

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

#226

Post by mannerheim »

plantain wrote: post #20
asciiresort wrote: post #8

> 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…

Well, not from producing copious quantities of tea. Globalization meant they (thought they) could specialize in growing tea and let someone else specialize in growing food. In theory - everyone wins.

Sri Lanka was self-sufficient in rice as recently as a few years ago. Banning fertiliser cut yields by 35%.

https://www.canr.msu.edu/prci/publications/Policy-Research-N...

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

#227

Post by mannerheim »

asciiresort wrote: post #34
aetherson wrote: post #19

Earlier quoted context omitted.

Sri Lanka's population is 2x what it was in 1965. https://www.macrotrends.net/countries/LKA/sri-lanka/populati... Japan imports about 60% of its food. https://www.merlofarminggroup.com/agri-view-japan%E2%80%99s-...

I am well aware that Japan imports food. The point is not about whether a country imports at all, but whether it can mobilize domestic production of essential food crops in times of crisis. Even China import and has rice reserves. There is a reason these government have and subsidized rice reserves rather tea reserves.

> whether it can mobilize domestic production of essential food crops in times of crisis.

Sri Lanka could, but not with the chemical fertiliser ban.

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

#228

Post by londons_explore »

noja wrote: post #219
pjc50 wrote: post #194

Earlier quoted context omitted.

(The original article is very good at providing a beginner's explanation of forex crises, and should be bookmarked for every time someone wants to talk about inflation) > A country ought to feed its people This is much harder than it sounds, not just for dense tiny countries like Singapore but for much of Western Europe. The UK hasn't been able to feed its population from native production only since before WW2. I se…

> The UK hasn't been able to feed its population from native production only since before WW2. What does this mean though? That the UK does not generate enough calories to meet a certain minimum baseline? That the UK does not generate enough calories to meet the current consumption? That the UK eats things that they do not grow?

The UK has a whole government department to answer your questions:

https://www.gov.uk/government/statistics/united-kingdom-food...

Result: The UK grows enough wheat alone to give enough calories to support its population, with plenty to spare. It also produces all the major food groups in quite large quantities. If cut off from the world, the UK people wouldn't starve, but they might have to switch out their caviar for something else.

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

#229

Post by nibbleshifter »

bergenty wrote: post #17
duxup wrote: post #12

Earlier quoted context omitted.

You would hope that someone wanting to switch to organic agriculture would encourage it … rather than just flip a switch…

Organic agriculture is where it belong. Mom and pop farms sold in stores where it costs 3x as much for no particular increase in nutritional value. Fertilizers are tangentially bad for the environment but not directly, only in that it causes algal blooms in water bodies. Pesticides are bad yes but the research should concentrate on finding pesticides that work well with the environment. We got close with glyphosate b…

If you use fertilizers and expect a bumper crop every harvest, eventually the soil gets fucked to a point where amendments to make it viable are too expensive, getting to a point where the soil loses integrity and is unusable.

To keep land arable in the longer term, you need to do crop/usage rotation, no-till farming, etc.

Agriculture is fun.

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

#230

Post by throwaway4good »

First of probably many countries that will fall victim to the high dollar price.

Don't get me wrong; it is necessary for the US stop the inflation spiral, in particular now that it is in a defacto war with Russia (whos resource rich economy benifits from inflation).

But imagine having your loans/expenses in US dollars and your income in Japanese yen.

https://www.tradingview.com/symbols/USDJPY/

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