Usage of Pakistani rupee banned in Afghanistan

[-xXx-]

Afghanistan has the right to do what it feels is best, but every action as a consequence. Don't pretend that this won't negatively affect Afghanistan, it will. Everything is going to get far more expensive in Afghanistan, and considering that things were already expensive, this will only hinder Afghanistan's economic growth.

Please explain how come strengthening of own currency cause inflation?

 

[Neutron]

Get rid of illegal Afghan residents from Pakistan

 

[tore]

Saab Afghanio daffa ho jao Pakistan se, bohat ho ghai. Tum se bardi begheraat qoom koi nahi. Khate Pakistan ka ho, gheet Bharat ke ghate ho In ghadoo ko itni akaal nahi he . BJP aur RSS wale Akhand bharaat ka khuaab/plan bana ke bethe hoe he aur jeg bhaarat ki madaad se pakistani terrotori lena chahte he . Ghadepaan ki koi haad hoti he, Lekin iss qooom ne to saari hadde baar kar di he.

Bhaarat/Hindustan wale chawanni attani inn ke mo me daal dete he to saab bhool jate he , je ihsaan paramoos koom. Inn ka ek i haal he. Seal the border complete. Dont let one single afghani in Pakistan.

Afghanistan jaa ke dekho pakistanio se kitni nafraat karte he je loog,, 40 saal ki mehman nawazi he baad.

Dunya ka koi bhi forum nahi chorte , jaha je loog Pakistan ke khilaaf bakwaas nahi karte.

 

[That Guy]

Please explain how come strengthening of own currency cause inflation?

Keep in mind, I'm not an expert, it's been years since I studied economics, and I'm probably wrong here, but...

If your currency costs more, your domestic products will cost more, due to more expensive labor; this leads to exporters having more difficulty exporting things, as transportation costs increase, and product prices increasing.

Let's take a can of coke, and say it costs 100 rupees, and let's say that 100 rupees is 1 US dollar. For the sake of simplification, that 100 rupees was calculated by adding the costs of ingredients, packaging, and labor.

Now let's say that the rupee has strengthened; the minimum wage of an employee is suddenly worth more, even though he's technically earning the same number. This means that his labor is worth more, which means the products he produces through his labor are worth more. So, the labor that produced the ingredients is worth more, the packaging is worth more and the labor in general is more expensive, due to strengthening of the currency.

Let's say that the rupee strengthens by 20% against the dollar, now the rupee is worth 80 against the dollar. that means, the can of coke is now worth $1.20.

Next, say you are an exporter, whom exports 200,000 cans of coke a month. Now, in the beginning, the cans of coke were worth $1.00, or 100 rupees. Let's say transport, refrigeration...etc costs per month, cost you around $100,000 (keep in mind, this isn't a real figure, it is only an example). 200,000 cans x $1 = $200,000 -$100,000 (cost of operation) = $100,000 profit (before taxes).

Say that the rupee strengthened by 20% (just like I mentioned before), per can, the cost of the coke is $1.20 or 80 rupees, and the cost of operation has also increased by 20%; You, as the exporter, choose to not change your prices and keep them at $1 per can.

1) if you choose to keep the price at $1, you're effectively taking a 20 cent (20 rupee) loss on each can of coke. If you choose to do take that 20% loss, you're effectively taking a $40,000 loss every month, so where you had a revenue of $200,000, now it is $160,000. This leads to part 2.

2) Even though you chose to subsidize the cost of your products, leading to a 20% loss, you will not be able to subsidize transport and operation costs. Now, because cost of operations has also had a 20% increase (due to appreciation of the rupee), costs of operation are now worth $120,000.

So, $160,000 (revenue) - $120,000 (cost of operation) = $40,000 profit.

So, you went from $100,000 (10,000,000 rupees) profit, all the way to $40,000 (4,000,000 rupees) profit.

Basically, you just saw a loss of up to 60% of your company profit, and that's BEFORE CORPORATE AND EXPORT TAXES, so the likely number is even lower.

In such cases, you'd be facing bankruptcy.

PART B--->>>

If you choose to NOT subsidize, and let the market dictate prices, the cost per can will be $1.20,

200,000 cans x $1.20 (cost per can) = $240,000 revenue.

The problem here is that the country you're exporting this to, now has to pay $40,000 more for the same amount of the exact same product, and there is no guarantee that there they'll stick with you. With the global economy so integrated, likely the customer nation will look elsewhere for a cheaper price.

With operational costs being $120,000, your total profit should be

$240,000 - $120,000 = $120,000, a $20,000 increase in profit (20% increase), ASSUMING you can convince your customers to stick with you, and not look for cheaper rates. It is unlikely you'll be able to compete, and your customers WILL look elsewhere.

ALL of this can be applied to domestic markets as well.

Saab Afghanio daffa ho jao Pakistan se, bohat ho ghai. Tum se bardi begheraat qoom koi nahi. Khate Pakistan ka ho, gheet Bharat ke ghate ho In ghadoo ko itni akaal nahi he . BJP aur RSS wale Akhand bharaat ka khuaab/plan bana ke bethe hoe he aur jeg bhaarat ki madaad se pakistani terrotori lena chahte he . Ghadepaan ki koi haad hoti he, Lekin iss qooom ne to saari hadde baar kar di he.

Bhaarat/Hindustan wale chawanni attani inn ke mo me daal dete he to saab bhool jate he , je ihsaan paramoos koom. Inn ka ek i haal he. Seal the border complete. Dont let one single afghani in Pakistan.

Afghanistan jaa ke dekho pakistanio se kitni nafraat karte he je loog,, 40 saal ki mehman nawazi he baad.

Dunya ka koi bhi forum nahi chorte , jaha je loog Pakistan ke khilaaf bakwaas nahi karte.

English please, this is an english forum.

 

[-xXx-]

Keep in mind, I'm not an expert, it's been years since I studied economics, and I'm probably wrong here, but...

If your currency costs more, your domestic products will cost more, due to more expensive labor; this leads to exporters having more difficulty exporting things, as transportation costs increase, and product prices increasing.

Let's take a can of coke, and say it costs 100 rupees, and let's say that 100 rupees is 1 US dollar. That 100 rupees was calculated by adding the costs of ingredients, packaging, and labor.

Now let's say that the rupee has strengthened; the minimum wage of an employee is suddenly worth more, even though he's technically earning the same number. This means that his labor is worth more, which means the products he produces through his labor are worth more. So, the labor that produced the ingredients is worth more, the packaging is worth more and the labor in general is more expensive, due to strengthening of the currency.

Let's say that the rupee strengthens by 20% against the dollar, now the rupee is worth 80 against the dollar. that means, the can of coke is now worth $1.20.

Next, say you are an exporter, whom exports 200,000 cans of coke a month. Now, in the beginning, the cans of coke were worth $1.00, or 100 rupees. Let's say transport, refrigeration...etc costs per month, cost you around $100,000 (keep in mind, this isn't a real figure, it is only an example). 200,000 cans x $1 = $200,000 -$100,000 (cost of operation) = $100,000 profit (before taxes).

Say that the rupee strengthened by 20% (just like I mentioned before), per can, the cost of the coke is $1.20 or 80 rupees, and the cost of operation has also increased by 20%; You, as the exporter, choose to not change your prices and keep them at $1 per can.

1) if you choose to keep the price at $1, you're effectively taking a 20 cent (20 rupee) loss on each can of coke. If you choose to do take that 20% loss, you're effectively taking a $40,000 loss every month, so where you had a revenue of $200,000, now it is $160,000. This leads to part 2.

2) Even though you chose to subsidize the cost of your products, leading to a 20% loss, you will not be able to subsidize transport and operation costs. Now, because cost of operations has also had a 20% increase (due to appreciation of the rupee), costs of operation are now worth $120,000.

So, $160,000 (revenue) - $120,000 (cost of operation) = $40,000 profit.

So, you went from $100,000 (10,000,000 rupees) profit, all the way to $40,000 (4,000,000 rupees) profit.

Basically, you just saw a loss of up to 60% of your company profit, and that's BEFORE CORPORATE AND EXPORT TAXES, so the likely number is even lower.

In such cases, you'd be facing bankruptcy.

Appreciate your effort to write down your thoughts in detail.

But as economy rule go, if your currency gets stronger, inflation goes down in most common cases

Strong currency means lessor amount can buy more. banning of Pakistani rupee will cause short of currency and as per supply and demand rule goes, currency will become more valuable. You can then buy more good from a grocer and he would happily trade you to get currency which is short in supply.

the basic fallacy in your argument is that labor cost and rest all will remain same in number. Why so? Minimum wages are based on the need of an individual to keep a minimum standard of living. If lessor amount of money can buy you more, the minimum wages will come down. Infact devaluation of currency lead to revision of minimum wages upward since people have to dole out more money for same good and thus the inflation.

The currency and inflation relation is much more complex and should not be generalized too much but individual cases need to be evaluated in isolation. In case of Afghanistan where we dont have too many people coming in and buying their goods and converting their currency to local, chances of strong currency and high inflation is very low. But with the less currency to buy more goods, inflation must come down.

Thats the most simplistic explanation I can give you for now.

 

[war&peace]

Ban Afghans in Pakistan.

Sir, I need your attention on some other thread immediately for some unjust ratings

 

[That Guy]

Appreciate your effort to write down your thoughts in detail.

But as economy rule go, if your currency gets stronger, inflation goes down in most common cases

Strong currency means lessor amount can buy more. banning of Pakistani rupee will cause shortage of currency and as per supply and demand rule goes, currency will become more valuable. You can then buy more good from a grocer and he would happily trade you to get currency which is short in supply.

That's assuming there is enough of the currency to keep the economy afloat.

First of all, I'm not arguing that inflation will increase, I'm arguing that deflation is actually not a good thing for export focused nations such as Afghanistan, and that is literally what happened, a deflation.

the basic fallacy in your argument is that labor cost and rest all will remain same in number. Why so? Minimum wages are based on the need of an individual to keep a minimum standard of living. If lessor amount of money can buy you more, the minimum wages will come down. Infact devaluation of currency lead to revision of minimum wages upward since people have to dole out more money for same good and thus the inflation.

Not a fallacy. Lowering minimum wage would be political suicide for any government, it will NEVER be done. In theory, minimum should directly be linked to inflation, in practice, it rarely is. There would be protests and perhaps even riots if the general population suddenly saw their paychecks get a 20% cut.

You're comment assumes that a "lesser amount" is literally that, a lesser amount, the reality is that despite the currency being worth less, it's inherent value as compared to the US dollar (which is what most currencies compete against), will be stronger. This means that not only exports, but also domestic markets (all of which, inevitably compete with the US dollar), will cost far more. This makes it harder for poorer families to get out of poverty, because their limited resources become EVEN MORE limited; while richer families will get even richer, because their assets and investments tend to increase in value; that is literally the problem with today's global economic inequality.

The currency and inflation relation is much more complex and should not be generalized too much but individual cases need to be evaluated in isolation. In case of Afghanistan where we dont have too many people coming in and buying their goods and converting their currency to local, chances of strong currency and high inflation is very low. But with the less currency to buy more goods, inflation must come down.

Thats the most simplistic explanation I can give you for now.

First of all, you're making a pretty big mistake. A stronger currency doesn't mean you can buy more goods with it, that is literally not how market value works. The price of a mango will NOT remain the same, because the labor behind it will get more expensive, thus the price of the mango will increase as well.

This is literally why western and european nations have FAR MORE expensive similar products than their eastern counter parts.

Afghanistan's main source of revenue is export of agricultural goods, a stronger currency will lead to a decrease in exports, which will lead to a decrease in government revenue, which will lead to the economy decreasing in value, and it could very well lead to currency deflation, which is BAD for Afghanistan.

 

[dadeechi]

How will this be enforced? What would be the penalty for violations?

 

[Śakra]

afghani is a stronger more stable currency than pk rupaiya

 

[Viper 94]

Congrajulation to aghanistan.

It had immediate effect by strenghthening of afghani currency. A step towards self independency.

a strong currency is bad for countries which want to be competitive prices for their exports.
Why do you think the chinese lower the value of their currency?

 

[-xXx-]

That's assuming there is enough of the currency to keep the economy afloat.

First of all, I'm not arguing that inflation will increase, I'm arguing that deflation is actually not a good thing for peoplenations such as Afghanistan, and that is literally what happened, a deflation.


Not a fallacy. Lowering minimum wage would be political suicide for any government, it will NEVER be done. In theory, minimum should directly be linked to inflation, in practice, it rarely is. There would be protests and perhaps even riots if the general population suddenly saw their paychecks get a 20% cut.

You're comment assumes that a "lesser amount" is literally that, a lesser amount, the reality is that despite the currency being worth less, it's inherent value as compared to the US dollar (which is what most currencies compete against), will be stronger. This means that not only exports, but also domestic markets (all of which, inevitably compete with the US dollar), will cost far more. This makes it harder for poorer families to get out of poverty, because their limited resources become EVEN MORE limited; while richer families will get even richer, because their assets and investments tend to increase in value; that is literally the problem with today's global economic inequality.


First of all, you're making a pretty big mistake. A stronger currency doesn't mean you can buy more goods with it, that is literally not how market value works. The price of a mango will NOT remain the same, because the labor behind it will get more expensive, thus the price of the mango will increase as well.

This is literally why western and european nations have FAR MORE expensive similar products than their eastern counter parts.

Afghanistan's main source of revenue is export of agricultural goods, a stronger currency will lead to a decrease in exports, which will lead to a decrease in government revenue, which will lead to the economy decreasing in value, and it could very well lead to currency deflation, which is BAD for Afghanistan.

@That Guy Sorry haven't read your full post yet, going for a sleep but read your first couple of lines so responding to them only.

Country can control the amount of currency in market to keep economy afloat easily through reserve bank and repo rate. They can maintain just enough to not devalue their currency which can cause inflation.

The situation becomes grim when there is already more money in public but the case is opposite in Afghanistan. They have a bit favourable situation but I doubt on the credetials of their reserve bank and financial institution if they can take the right decisions considering whole Afghanistan is not under their tight control.

Will continue later......

 

[Bossman]

stupid $hit, only Pakistani currency is used upto Jalalabad

 

[That Guy]

@That Guy Sorry haven't read your full post yet, going for a sleep but read your first couple of lines so responding to them only.

Country can control the amount of currency in market to keep economy afloat easily through reserve bank and repo rate. They can maintain just enough to not devalue their currency which can cause inflation.

The situation becomes grim when there is already more money in public but the case is opposite in Afghanistan. They have a bit favourable situation but I doubt on the credetials of their reserve bank and financial institution if they can take the right decisions considering whole Afghanistan is not under their tight control.

Will continue later......

In that case, I'll just reply to this and say good night.

Are you referring to manipulation their currencies? Not every nation is China and the US, they'd face major consequences if they were to try and do that.

If you're talking about economic stimulation, that can highly back fire, as we've seen in the US, where trillions of dollar have just evaporated into thin air, due to stimulus packages; which is why the US hardly grew after 2008.

Inflation isn't the only thing that currencies have to worry about, but DEFLATION as well. Deflation can have even worse consequences than inflation, because with deflation your economy is literally contracting. To get rid of a huge chunk of your available currency in circulation, without an immediate plan to replace the lost cash flow, your economy will shrink.

In Afghanistan's case, their economy will shrink from its already bad state, to a worse one. The loss of cash flow will be hard to replace.

 

[Pandora]

Every nation should have its own currency but situation wont change much near pak afghan border as no one in Pakistan will accept afghan currency for financial transactions.

Ah, erm. Great economic policy.
I suggest other countries follow suit i.e. Iran can ban dollars, the Vietnamese can ban the Chinese Yuan and so on.

They use Pakistani ruppe bcz they need it for financial transactions with Pakistan as areas around Pakistan afghan border are heavily dependent on Pakistani goods. This policy will back fire as no one will accept afghani currency for financial transactions in Pakistan.

 

[tore]

Keep in mind, I'm not an expert, it's been years since I studied economics, and I'm probably wrong here, but...

If your currency costs more, your domestic products will cost more, due to more expensive labor; this leads to exporters having more difficulty exporting things, as transportation costs increase, and product prices increasing.

Let's take a can of coke, and say it costs 100 rupees, and let's say that 100 rupees is 1 US dollar. For the sake of simplification, that 100 rupees was calculated by adding the costs of ingredients, packaging, and labor.

Now let's say that the rupee has strengthened; the minimum wage of an employee is suddenly worth more, even though he's technically earning the same number. This means that his labor is worth more, which means the products he produces through his labor are worth more. So, the labor that produced the ingredients is worth more, the packaging is worth more and the labor in general is more expensive, due to strengthening of the currency.

Let's say that the rupee strengthens by 20% against the dollar, now the rupee is worth 80 against the dollar. that means, the can of coke is now worth $1.20.

Next, say you are an exporter, whom exports 200,000 cans of coke a month. Now, in the beginning, the cans of coke were worth $1.00, or 100 rupees. Let's say transport, refrigeration...etc costs per month, cost you around $100,000 (keep in mind, this isn't a real figure, it is only an example). 200,000 cans x $1 = $200,000 -$100,000 (cost of operation) = $100,000 profit (before taxes).

Say that the rupee strengthened by 20% (just like I mentioned before), per can, the cost of the coke is $1.20 or 80 rupees, and the cost of operation has also increased by 20%; You, as the exporter, choose to not change your prices and keep them at $1 per can.

1) if you choose to keep the price at $1, you're effectively taking a 20 cent (20 rupee) loss on each can of coke. If you choose to do take that 20% loss, you're effectively taking a $40,000 loss every month, so where you had a revenue of $200,000, now it is $160,000. This leads to part 2.

2) Even though you chose to subsidize the cost of your products, leading to a 20% loss, you will not be able to subsidize transport and operation costs. Now, because cost of operations has also had a 20% increase (due to appreciation of the rupee), costs of operation are now worth $120,000.

So, $160,000 (revenue) - $120,000 (cost of operation) = $40,000 profit.

So, you went from $100,000 (10,000,000 rupees) profit, all the way to $40,000 (4,000,000 rupees) profit.

Basically, you just saw a loss of up to 60% of your company profit, and that's BEFORE CORPORATE AND EXPORT TAXES, so the likely number is even lower.

In such cases, you'd be facing bankruptcy.

PART B--->>>

If you choose to NOT subsidize, and let the market dictate prices, the cost per can will be $1.20,

200,000 cans x $1.20 (cost per can) = $240,000 revenue.

The problem here is that the country you're exporting this to, now has to pay $40,000 more for the same amount of the exact same product, and there is no guarantee that there they'll stick with you. With the global economy so integrated, likely the customer nation will look elsewhere for a cheaper price.

With operational costs being $120,000, your total profit should be

$240,000 - $120,000 = $120,000, a $20,000 increase in profit (20% increase), ASSUMING you can convince your customers to stick with you, and not look for cheaper rates. It is unlikely you'll be able to compete, and your customers WILL look elsewhere.

ALL of this can be applied to domestic markets as well.


English please, this is an english forum.

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I with purpose didnt write this in English..... My purpose was that only those who understand my text should read it, it isnt for those who cant understand it.