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nations and alliances

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CAR12345
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Post: #1
nations and alliances

How do you make your currency more valuableNoplan

26.07.2013 18:15
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Globaltom
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Suedparadies
Post: #2
RE: nations and alliances

With less Inflation.

Normally high nominal interest rate ,
and redusing Money supply will rise currency


War schon beim Impfen
26.07.2013 18:20
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YacobiI
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Post: #3
Trading

Can someone explain the whole trading thing?

26.07.2013 18:38
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CAR12345
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Post: #4
RE: nations and alliances

Any detailed answers?

26.07.2013 21:32
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Helsworth
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Post: #5
RE: nations and alliances

Some weaker template states are designed to have weak currencies. But if you're running a USA or Germany template state, things are easier.
Globaltom was ambiguous. Inflation isn't always and everywhere a monetary phenomenon. If for some reasons the arabs where to cut off the oil supply, you'll have upward price changes regardless if you increase interest at 100% or not. That's because interest rates don't control inflation. Fiscal policy controls currency depreciation type of inflation - and that happens only if more money is chasing fewer goods. Which, here, is not the case.
Here's the CPI vs oil price.


That being said, in order to achieve a stronger currency, you'll have to attain that via task options and budget changes. And keeping your MS to GDP ratio around 1.1 to 1.2. Keep the MS slightly above the GDP to facilitate growth, but don't increase it by trillions of dollars over your GDP.
Currently, your currency is default average for the USA template. You have a high fiscality. Tax rate 37.52 % Public spending ratio 28.41 % If these stats were applied in the real world, your economy would have skyrocketing unemployment, reduced wages, and people would be liquidating assets in order to pay taxes to the government. At 1.3 trillion budget surplus, people would have already burnt through their over-time accumulated savings. Alas, AR is not realistic enough, but it's better than any other sim game out there.


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This post was last modified: 27.07.2013 09:34 by Helsworth.

27.07.2013 09:27
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fluffybunnypuff
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Post: #6
RE: nations and alliances

inflation= $ supply is increased. devalues the $. disincentivises long-term saveing. the inflated $ goes to gov and the rich first.
deflation= $ supply is decreased. increases $ value. most people, exspecially the poor, have less $.
more total wealth and valuable products and services=higher $ value.
3types of taxes: direct, inflation, and gov debt=code word for inflation.

03.10.2013 15:08
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Helsworth
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Post: #7
RE: nations and alliances

fluffybunnypuff Wrote:
inflation= $ supply is increased. devalues the $. disincentivises long-term saveing. the inflated $ goes to gov and the rich first.
deflation= $ supply is decreased. increases $ value. most people, exspecially the poor, have less $.
more total wealth and valuable products and services=higher $ value.
3types of taxes: direct, inflation, and gov debt=code word for inflation.

Absolutely untrue. Inflation is rarely caused by too much money chasing too few goods. And when this happens, you have currency depreciation. Price changes are caused by supply, cost, and demand. When an economy is functioning at full output (full employment) and the government is increasing its spending despite that - then yes, you'll have currency depreciation.
Government debt is no "code" word for inflation. Government debt is issued to control short term interest rates in the market, and it's a vehicle for institutional saving. It's no coincidence that aprox the whole government debt is equal to the money in pension funds.
And as for taxation... without it, the money would be utterly worthless. A government who has lost its ability to tax its own currency, destroys the value of that currency.

Here are a few words from Bill Mitchell.

Quote:
What is inflation?

In this blog I am only considering inflationary pressures that arise from nominal demand (spending) growth outstripping the real capacity of the economy to react to it with output responses. In other words, I am excluding inflation that may arise from supply shocks – such as a rise in an imported raw material (for example, oil). That is another issue altogether.

The reason I am excluding supply-driven inflationary impulses is because the mainstream attack on the current use fiscal policy (and monetary policy) is really about demand pressures. We are continually reading crude statements such as there is “too much money” in the system.

Further, the mechanisms through which the supply shocks manifest are different and this deserves a separate analysis, which will come in a subsequent blog (Inflation Part 2).

However, the solution to both sources of inflation is not that dissimilar although additional measures might be brought to bear to handle the case of a price hike in an imported raw material.

First we should make sure what we are talking about. Many conservative commentators think that when workers get a pay rise it is inflation. It is not. Those on the left think that when the corporate sector increase the price of a good or service it is inflation. It is not.

It is also not inflation when the exchange rate falls pushing the price of imports up a step. So a depreciation in the currency does not constitute inflation. It might stimulate inflation but is not in itself inflation.

It is also not inflation when the government increases a particular tax (say the VAT or GST) by x per cent to some new level.

So while a price rise is a necessary condition for inflation it is not a sufficient condition. Observing a price rise alone will not be sufficient to categorise the phenomena that you are observing as being an inflationary episode.

Inflation is the continuous rise in the price level. That is, the price level has to be rising each period that you observe it. So if the price level or a wage level rises by 10 per cent every month, then you have an inflationary episode. In this case, the inflation rate would be considered stable – a constant rise per period.

If the price level was rising by 10 per cent in month one, then 11 per cent in month two, then 12 per cent in month three and so on, then you have accelerating inflation. Alternatively, if the price level was rising by 10 per cent in month one, 9 per cent in month two etc then you have falling or decelerating inflation.

If the price level starts to continuously fall then we call that a deflationary episode.

Hyper-inflation is just inflation big-time!

So a price rise can become inflation but is not necessarily inflation. Many commentators and economists get this basic understanding wrong – often and continually.

Second, it also follows that cyclical adjustments in price levels by firms from what they are currently offering at depressed levels of activity to what the price levels that are defined at their normal operating capacity levels are not inflation. When the economy is in poor shape, firms cut prices in an attempt to increase capacity utilisation by temporarily suppressing their profit margins and hence maintain market share. As demand conditions become more favourable the firms start increasing the prices they offer until they get back to those levels that offer them the desired rate of return at normal capacity utilisation.

Firms are basically quantity adjusters if they have spare capacity. They will seek to maintain market share when nominal demand grows by increasing output where possible. Should nominal demand growth (supported in part by net public spending) outstrip this capacity then firms will become price adjusters, because they can no longer expand real output.

Bottlenecks in some sub-markets may occur before other sectors are at full capacity and so price pressures might emerge just before overall full capacity is reached. So, in reality, the aggregate supply response (which tells you how much real output will be forthcoming at each price level) may not be strictly reverse-L shaped (where price is on the vertical axis and output on the horizontal axis). The extent to which the reverse-L becomes a curve at at a point approaching full capacity is an empirical matter.

Inflation occurs when there is chronic excess demand relative to the real capacity of the economy to produce.


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03.10.2013 16:48
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