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How can I fix my exchange rate?

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Aero87
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Post: #1
How can I fix my exchange rate?

I've tried high interest rates already.

27.02.2013 07:31
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Helsworth
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Post: #2
RE: How can I fix my exchange rate?

You're playing the USA template. You can have a hard currency even with 1% nominal interest and a huge trade deficit.
You've amounted a lot of budget reserves and you have a pretty consistent budget surplus. Why? Increase the money supply, decrease nominal interest rate, decrease taxation, increase spending, including pensions and welfare.
Let your economy grow. A government net deficit is a net surplus for the private sector (business and households). In reality, if the government doesn't run a deficit in the course of the business cycle, the economy will permanently stand still. A man's surplus, is another man's deficit. A man's asset is another man's liability. A man's savings is another man's loans. A man's payments is another man's incomes.
Get your economy to perform, and your currency will perform as well.


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This post was last modified: 27.02.2013 08:24 by Helsworth.

27.02.2013 08:22
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Lord Alexander
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Post: #3
RE: How can I fix my exchange rate?

Helsworth’s advice is correct, but unfortunately there is good chance that it will not help your currency anyway. It is nearly impossible to sufficiently improve the Exchange rate when it is already so low.

To maximize economic growth you should concentrate on decreasing the Taxes on capital and on increasing PE administration and PE subsidies, but you also should not allow Money supply to be much lower than Gross Domestic Product or it will slow down the growth of economy. I am not sure should you lower Nominal interest or not. On the one hand decreasing it would be good for growth, but on the other hand it also may stimulate inflation, and inflation is bad for the Exchange rate.


EDIT: Forget what I have said earlier, trivialities like the Exchange rate are absolutely not important because your economy is already working like a clock! There is no unemployment in Amox, and even for USA template it is great achievement!! Simply continue to do what you are already doing, because your state right now is very close to perfection!!! thumbsup

This post was last modified: 27.02.2013 15:17 by Lord Alexander.

27.02.2013 14:38
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Helsworth
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Post: #4
RE: How can I fix my exchange rate?

Actually, if he works toward a budget deficit, his nominal interest will go down on its own. That money influx of money that enters the economy is like an excess of reserves, which are going to be turned into savings and loans. Seeing as how he's playing the USA template, the nominal interest won't impact his currency. I ran an exchange rate of 2.0 with a huge trade deficit, big difference between MS and GDP, 1% nominal interest rate, and basically near 0 fiscality. Wink
His money supply is bellow his GDP. His currency is so low because he initiated MR 2.


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This post was last modified: 27.02.2013 15:20 by Helsworth.

27.02.2013 15:17
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Lord Alexander
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Post: #5
RE: How can I fix my exchange rate?

Helsworth Wrote:
Actually, if he works toward a budget deficit, his nominal interest will go down on its own. That money influx of money that enters the economy is like an excess of reserves, which are going to be turned into savings and loans. Seeing as how he's playing the USA template, the nominal interest won't impact his currency. I ran an exchange rate of 2.0 with a huge trade deficit, big difference between MS and GDP, 1% nominal interest rate, and basically near 0 fiscality. Wink
His money supply is bellow his GDP. His currency is so low because he initiated MR 2.

Money Reform II was implemented long time ago. Right now the ratio of Money supply to GDP is still tolerable for USA template, but I agree that it may be good idea to expand it somewhat to stay inside the safe zone.

In any case you should remember that it is much harder to increase the Exchange rate when it already has fallen very low. But taking into account the near-zero unemployment in Amox I do not think that it is good idea to modify too much in the existing economic policy. It already brings very good results!

27.02.2013 15:52
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Helsworth
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Post: #6
RE: How can I fix my exchange rate?

AR is far from being realistic, but it's the most realistic sim out there. There's tons of growth to be had even if already at full employment, especially with the USA template.


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27.02.2013 16:44
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Lord Alexander
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Post: #7
RE: How can I fix my exchange rate?

I am not saying that it is impossible to have more growth in Amox. I just fear that straying from current policies may lead to deterioration of the employment situation. Full employment achieved without appropriate Reforms, Apprenticeships Task and excessive spending on Projects is too impressive achievement to exchange it for a simple acceleration of economic growth.

27.02.2013 18:24
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Helsworth
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Post: #8
RE: How can I fix my exchange rate?

Lord Alexander Wrote:
I am not saying that it is impossible to have more growth in Amox. I just fear that straying from current policies may lead to deterioration of the employment situation. Full employment achieved without appropriate Reforms, Apprenticeships Task and excessive spending on Projects is too impressive achievement to exchange it for a simple acceleration of economic growth.

Well it does happen in some particular situations with the USA template state. Unemployment is most easy to tackle with this template state, more so than any other. But I see no reason for not focusing on running a deficit. He can very well afford it. That translates into a better living standard, less crime and shadow economy, more equality of opportunity, a lower GINI, better social stats etc.


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27.02.2013 18:44
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