Egypt Printing Money To Cover Deficit, Inflation Rises

[Economy 52,834]

https://www.reuters.com/world/africa/deficit-soars-egypt-expands-money-supply-fuelling-inflation-2023-07-14/

 

Egypt's Central Bank has increased money printing to keep up with high deficits and money printing further escalating the Countries high inflation

 

Money supply has increased at an annual rate of 31.9%

[AsleepOnTheCeiling 6,938]

Is inflation a good thing for the rich that keep their money in other, more stable and strong currencies?

[RAMROD 116,991]

Printing mkre money to cover ip?? Someone in Egyptian government didn't know that not how economy and inflation works?

[Economy 52,834]

4 minutes ago, RAMROD said:

Printing mkre money to cover ip?? Someone in Egyptian government didn't know that not how economy and inflation works?

I mean, the developed world including the US kind of did the same thing with QE and we did a lot of it during the pandemic. And what do we have now? Sh*t load high inflation!

 

Yes Ukraine war played a role and so did supply chain disruptions but the effects of that have largely Wayne's and the high money supply I think is largely to blame too as it was many trillions that were printed

 

Only Egypt did it to a greater degree (relative to the size of their economy) and they are not seen as a reserve or stable currency so moves like this spook investors even more who dump the currency and make the devaluation even more extreme 

[Economy 52,834]

1 hour ago, TortureMeOnReplay said:

Is inflation a good thing for the rich that keep their money in other, more stable and strong currencies?

I guess if u invest outside your Nation yes there may be some benefits since likely your investments will rise more quickly than inflation will eat it

 

Like if ur currency exchange falls 30%... U may at first only feel 15% inflation because some of your economy is domestic (not trade) and it takes time for the fallen exchange rate to triple thru entire thing economy

 

However it's not just the exchange rate relative to other currencies. They have more currency in circulation in their economy so it's not just investors dumping the currency. So they will feel a lot of inflation domestically too

 

So I don't know that the rich in Egypt in this case would necessarily would benefit THAT much from this by holding foreign currency but they would at the very least be able to preserve the value of their net worth better than the average citizen by at least not loosing much either

[Emvee 8,824]

46 minutes ago, Economy said:

I mean, the developed world including the US kind of did the same thing with QE and we did a lot of it during the pandemic. And what do we have now? Sh*t load high inflation!

 

Yes Ukraine war played a role and so did supply chain disruptions but the effects of that have largely Wayne's and the high money supply I think is largely to blame too as it was many trillions that were printed

 

Only Egypt did it to a greater degree (relative to the size of their economy) and they are not seen as a reserve or stable currency so moves like this spook investors even more who dump the currency and make the devaluation even more extreme 

 

You say the effects the war and supply chain issues have waned. Can you explain that a bit more? 
 

As far as I can tell, the war is still on-going. Russian goods and energy are still being sanctioned. Ukrainian exports are still heavily disrupted. Supply chains are still an issue. The US is still very much engaged in a trade war/divestment from Chinese manufacturing. 
 

And you blame QE during the pandemic… which largely happened two years ago. Most of these policies have expired. How could they still have an impact on consumer spending and be causing shortages to this day? Not to mention, inflation also hit countries that did not do any sort of stimulus. 

[Economy 52,834]

9 hours ago, Emvee said:

 

You say the effects the war and supply chain issues have waned. Can you explain that a bit more? 
 

As far as I can tell, the war is still on-going. Russian goods and energy are still being sanctioned. Ukrainian exports are still heavily disrupted. Supply chains are still an issue. The US is still very much engaged in a trade war/divestment from Chinese manufacturing. 
 

And you blame QE during the pandemic… which largely happened two years ago. Most of these policies have expired. How could they still have an impact on consumer spending and be causing shortages to this day? Not to mention, inflation also hit countries that did not do any sort of stimulus. 

Because as far as the war goes, there was a shock that reduces the supply of some goods. But a reduced supply of something usually has an immediate impact on its prices. Like they exported a lot of Wheat. So what shot up. It might for example go up 50%... But it's not gonna go up 50% every year. The surge in price from a reduced supply largely goes up at once right from the beggining. So once u measure the inflation for that item one year, it's not going to keep compounding every year. Yes they price will stay higher while that disruption is in place, but if u already measured the increase once, you already captured the increase in the numbers. You do not need to keep factoring in the increase of wheat in next year's inflation if you already measured the increase the year before

 

As for QE yes it happened years ago but money supply isn't the only factor. There's also something called "money velocity" which is how much money is actually spent and moving around

 

A lot of money was printed (and savings increases during pandemic) but due to limited ways you could spend the money and ppl were saving also due to economic concerns, much of that money was going unspent and so we didn't feel it's impacts in demand. The equity markets certainly got inflated but the real economy not so much at first

 

Now that ppl have actually been spending that money suddenly all that currency is unleashed and quantitative tightening to remove the currency and increased interest rates will take some time.

 

Like besides any lingering impacts of war (tho again I think most of that inflation has already been felt and numbered) the transition from pandemic away from spending in durable goods back to services that shrunk in capacity also has something to do with it too

 

But definitely QE money printing was a factor. The increase in money supply was quite significant especially since the entire world was in on it. Europe did it too and even Canada which largely had stayed away from that also did QE during pandemic

 

I'm not saying it was wrong to do it. If we had not prevented a shock the consequences likely would have been worse. But either way there's a cost that comes with it. U can't really print wealth, goods and services produced are your wealth, currency is just a means to trade them. So if you increase money supply that may in the short term soften demand shocks but in the long term you will never be wealthier for it. You pay that back with inflation 

[bionic 50,111]

feels like the world is going to have another 30s style great depression

[Economy 52,834]

7 hours ago, bionic said:

feels like the world is going to have another 30s style great depression

Who knows. I'm not quite that pessimistic yet but there could be a rough couple years ahead. Let's see what happens