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

#161

Post by spaceman_2020 » Wed, Jul 13, 2022, 6:44 AM UTC

soldehierro wrote: post #22

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…

Believe me, the organic transition had nothing to do with agricultural practices and all to do with economics, with the logic being that fertilizer was an expensive import, and by banning fertilizer they could hemorrhage foreign exchange reserves a little less. Of course, they also earned a lot less because the bone-headed transition lead to a marked reduction in yield, only worsening the forex problem the ban of agr…

Very honestly, it might have worked out fine - organic produce fetches a much higher price overseas. If its already a somewhat niche product like tea, organic produce might go even higher and make up for the loss in yield.

For Sri Lanka, it was the perfect storm of covid decimating tourism AND overseas demand for their produce.

Without Covid, they might have been able to stay afloat on tourism dollars until the organic farming thing started showing results.

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

#162

Post by imtringued » Wed, Jul 13, 2022, 6:45 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?

>Perhaps a dumb question: why does every little country need its own currency? Are they all just addicted to printing money?

Because money has a liquidity premium that allows you to disregard location, to make money less liquid you have to bind it to a national economy, otherwise buyers might decide to only import products from a handful countries. Look at Greece they run a trade deficit because German products are cheaper, this means Greek debt is impossible to unwind until Germany starts importing from Greece.

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

#163

Post by imtringued » Wed, Jul 13, 2022, 6:46 AM UTC

zzleeper wrote: post #117

roody15 wrote: post #116

Earlier quoted context omitted.

Sri Lanka doesn’t have a currency problem. There population doubled since 1960 and they never industrialized. They simply don’t make anything to sell that has value other than tourism and natural resources. Trade imbalance has been an issue for decades and they simply hid the problem by taking out loans. They have simply run out of credit. My two cents

But it's not just that. With a free economy the problem would sort-of have solved itself, as there are a lot of poorer countries that don't have currency crises. To get as screwed up as this you can only achieve with centralized planning, where a single decisionmaker mistake can mess up the sustenance of millions.

What? Japan, South Korea and China are examples of planned industrialization.

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

#164

Post by spaceman_2020 » Wed, Jul 13, 2022, 6:48 AM UTC

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…

Not true about India. We had a spike in inflation but its now going down. Our latest print was 7.1%.

India also didn’t print much money in the pandemic. The effect is clear now. We only had a short lived inflation spike after the economy reopened and its now getting back to normal.

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

#165

Post by epups » Wed, Jul 13, 2022, 6:48 AM UTC

InvertedRhodium wrote: post #143

FooBarWidget wrote: post #131

Earlier quoted context omitted.

#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 simil…

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

Yes, privatization was heavily pushed by the IMF in Latin America and Africa as a condition for receiving loans [0].

[0] https://en.wikipedia.org/wiki/Structural_adjustment

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

#166

Post by imtringued » Wed, Jul 13, 2022, 6:49 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.

You can peg your currency down but you can't peg it up without external energy i.e. debt.

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

#167

Post by oblak » Wed, Jul 13, 2022, 6:54 AM UTC

When an entity fails this hard and the internet I consume is suddenly flooded with articles about it, I can't help but think: ok, who fucked them over?

Who are the biggest "friends" of Sri Lanka? The US, China? Who profits from a weaker Sri Lanka. That's the real question. I know this site has people from all over, so I'd love to read more from the people who are NOT on the other side of the world.

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

#168

Post by spaceman_2020 » Wed, Jul 13, 2022, 6:54 AM UTC

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…

Most countries are simply not meant to have as many people as they do. Its an aberration of history brought about by easy and cheap accessibility to fertilizers, genetically modified crops, and cheap oceanic transport.

The true cost of feeding the world is much higher once you take away the subsidies and security architecture that makes all of the above possible.

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

#169

Post by clarionbell » Wed, Jul 13, 2022, 6:56 AM UTC

InvertedRhodium wrote: post #143

FooBarWidget wrote: post #131

Earlier quoted context omitted.

#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 simil…

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 doing the same thing. Performing business like decisions on international scale. West has just decided that such approach is immoral and mostly abandoned it as a policy.

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

#170

Post by adrr » Wed, Jul 13, 2022, 6:58 AM UTC

themitigating wrote: post #11

afterburner wrote: post #7

> 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…

The US is very lucky as a significant amount of people have been taught that government aid/handouts are wrong, as in generally. I'm even impressed Trump spent a few trillion and still didn't get blasted for it by most people. The only two serious politicians who spoke up about it was Ben Sasse who in a conference call with constituents said "he spends like a drunken sailor" and Ted Cruise who at the end with the las…

People in the US are only against handouts to other people who aren't them. I wonder how many people would opt out Medicare or SSI if they could?

My mother in-law complained about letting refugees into the country and says we shouldn't allow due to the cost yet she is a war refugee herself. When asked about her situation, she says she deserved it.

Also how many companies opted out of PPP loans.