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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

#131

Post by FooBarWidget »

vishnugupta wrote: post #120
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…

> In other words, what has changed It's often a series of mis-steps that lead to catastrophic failures such as being suffered by Srilanka. Here are a few that come to my mind, in no particular order. 1. Tourism took a big hit due to COVID lockdowns. 2. They took on huge debt from China to fund their massive infrastructure developments with close to zero plan as to how to reap the benefit of that infrastructure. For i…

#2 is actually false. Only ~10% of Sri Lanka's debt is Chinese. The majority is from western private market lenders. Chinese debt also have lower interest than western ones.

See this detailed report by The Atlantic: The Chinese ‘Debt Trap’ Is a Myth https://www.theatlantic.com/international/archive/2021/02/ch...

And this study by British campaign charity Debt Justice, which found that the situation in Africa is similar: https://debtjustice.org.uk/press-release/african-governments...

The Chinese debt trap is a lie made by mainstream media, who for some reason blindly writes negative China articles without any kind of factual investigation. Worse, these lies distract us from actual debt traps initiated by western actors — over we which we have far more control than China. If we actually care about these countries then we need to first demand from the media that they do factually correct reporting.

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

#132

Post by lostlogin »

robbiep wrote: post #101
ktaylora wrote: post #39

Earlier 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…

Not to be rude but did you bother to think before writing that post? Sri Lanka is a net importer of food. It is not self sufficient. You can’t get a organic premium if you can’t feed your own people, and organic food has a well known yield reduction. It was abundantly transparent to all commentators at the time that this was purely to try and reduce capital outflows.

What if you sell the organic produce and use the money to buy beer non/organic imported food?

It might be more profitable in the long term, but a hard cutover sure isn’t.

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

#133

Post by ravel-bar-foo »

lottin wrote: post #125
bradleybuda wrote: post #100

Earlier quoted context omitted.

That's the nice thing about free trade and free markets - everyone is running a decentralized version of that experiment and incrementally updating the data live. If you make both paths available (organic vs fertilizer) and let the farmers whose livelihoods are on the line choose, then they are very likely to make the best choice.

The best choice for farmers isn't necessarily the best choice for society as a whole.

If society values agricultural output or having income in rural areas it's a lot better to have farmers making the choices themselves than to chose whatever non-farmer/urban/plutocrat politicians would mandate.

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

#134

Post by afterburner »

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…

They wanted to cut taxes. To cut taxes, they needed to cut costs. Not paying for fertilizer would be one way. But of course it would destroy the economy.

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

#136

Post by dmix »

lkrubner wrote: post #87
nostromo wrote: post #30

Earlier quoted context omitted.

> The US is actually lucky to understand this at the deepest levels of policy and law making, with massive aid packages to prevent total collapse. The current inflation crisis suggests that even the US economy can reach its limit with endless money printing and stimulus. With the cost of borrowing going up, the executive and congress are going to start feeling pressure to cut spending or dramatically raise taxes.

The current spike in inflation is a world-wide phenomena, effecting every country on Earth, and therefore it seems unlikely to have much to do with the USA's creation of new money. The USA printed trillions of dollars of new money after 2008 and yet inflation remained very low for the next decade. If, now, the USA's printing of money is having some new effect, you have to explain why Argentina, South Africa, India, V…

Is there a single western country which didn’t print massive amounts of money following COVID and prior to that with 2008?

I remember seeing tons of economics articles talking about how the consequences of monetary expansion were historically being overrated by economists in the past and that countries have far more capacity than previously thought. But that was easily said during the good times when spending is high.

Blaming it all on a war in Eastern Europe seems to be convenient excuse but there’s a reason you don’t spend wildly during good times, so you have the capacity to spend during the bad times. This has consistent been a critique of modern monetarist and Keynes policy (although you could argue it’s far more monetarist since a Keynesian approach would be via things like infrastructure investments for working class jobs, instead of just endless spending on backchannel megacorporate dealing in thousand page bills).

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

#137

Post by whythre »

ampdepolymerase wrote: post #105
MonkeyMalarky wrote: post #85

Earlier quoted context omitted.

Lysenkoism should be taught in schools as an example of how extremely dangerous pseudo science can be.

More specifically pseudo science not guided by empiricism. The line between science and pseudo science is very thin. Scientific theories are often incorrect, especially in life science, but we refine upon them based in empirical and observed data.

You are right, but when results are falsified because of political expedience, that refining process will be subverted or discarded altogether.

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

#139

Post by dmix »

brigandish wrote: post #50
walrus01 wrote: post #23

Earlier quoted context omitted.

What's funny is the deepest red counties in the reddest states are also the largest recipients of US domestic agriculture subsidies and benefit programs. Then you have other things like Walmart and similar McJobs where the government is indirectly subsidizing the companies, by various child food aid, healthcare and benefits to employees because the company doesn't pay enough for its employees to live without aid.

That's why subsidies bad and subsidies good are a false dilemma. "Spending money well" might seem like an obvious solution but it runs up against the problem of corrupt politicians, of which there are many. Hence, we have (worldwide) politicians handing out money to places they are (probably) needed (in your example, the agriculture subsidies) and places they are not (Walmart and similar McJobs), and it's possible th…

> would say that the only way it may be possible is small government. Not because subsidies are bad, but the only way to watch government closely enough to keep corruption low is to make it small enough to watch in entirety

Well said, this sort of thinking needs to both be better understood on the right (all gov spending, taxation, and intervention isn’t immediately bad) and on the left (every critique of government doesn’t mean the only alternative people want is some radical anarcho-capitalist zero government fantasy world).

Instead it’s smaller and more effective government but still strongly supporting it where it makes sense ie subsidized education, healthcare, and other places with uncontrolled externalities that markets can’t properly serve.

More about being cheerleaders for what works, not just lazily pushing a government spending free for all nor a “stop everything” approach where only soft targets get reduced like teachers salaries instead of subsidies to billion dollar companies.

It’s harder and nuanced, but still worth fighting for.

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

#140

Post by murukesh_s »

sumanthvepa wrote: post #112
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.

Sri Lanka is not a dictatorship. They have regular elections. The Rajapakshas might have been authoritarian, even corrupt. But they won the last election in a landslide. Sri Lankans cannot entirely absolve themselves of blame for repeatedly electing a populist regime.

i think its an unfortunate combination of many things, covid being the main. this shows that democracies are not immune to leaders resorting to populist measures to win elections.. hope its a good lesson to lankans and rest of us.
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