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USA can't just keep on printing dollars indefinitely. The more money they print, the more they offset the market and global demand for the dollar decreases.
Is not it happening ?
I heard that printing money is also related to your gold reserves, is it true?No, minor fluctuations are the norm in any economy, a full blown crash also happens once a couple of decades but a collapse of said magnitude has not taken place since the Great Depression where the Dollar was devalued to the point where it was used for lighting fires as buying matches was too expensive.
For your reference :I heard that printing money is also related to your gold reserves, is it true?
I heard that printing money is also related to your gold reserves, is it true?
New Recruit
I am not that good at understanding these economic matters, So just wanted to know from guys here who understand these things.
So my question is what effect will it have on Pakistan economy if all of its debt is written off(Which i think is round about $90 billion)?
I am not that good at understanding these economic matters, So just wanted to know from guys here who understand these things.
So my question is what effect will it have on Pakistan economy if all of its debt is written off(Which i think is round about $90 billion)?
So instead of building Foriegn reserves($20 billion), why dont we pay our debt with that?First & Foremost U need to Identify What is Debt & How Much Pakistan Actually Owes ... also VERY Important to Know is that Pakistan Owes More (Almost Double) of External Debt to Internal Debt.
Here U can Read All about our Existing Debt & How Much Deep we r entrenched in this Misery ..
The debt-to-gross domestic product (GDP) ratio stands at 66.4%, in which foreign debt is Rs6.4 trillion and domestic debt is Rs12 trillion.
Please Read this
Every Pakistani now owes over Rs101,338 in debt - The Express Tribune
Coming to your Question ... if by any chance (which is HIGHLY UNLIKELY) Pakistan Debt (Both External & Internal) is written off .... the First & Foremost Impact is that Pakistan Will Not have to SERVICE its Debt out of GDP, that means it won't have to keep a Chunk (in Pakistan Case a HUGE one) from its Revenues and Pay Back Matured Loan & Interest Payments on the Others.
now HOW Significant is this development .. u can Read Via Following Links (Also a little explained in the Above link)
The external debt servicing reached close to $7 billion in fiscal year 2014.
The country paid $6.820 billion in debt servicing in FY15, including $5.910 billion as principal amount and $915 million in interest payments. Worryingly, 47% of whatever the government generates in revenue is going to pay off debt.
$7bn debt servicing a challenge to economy - Pakistan - DAWN.COM
Debt servicing to eat up two-fifth of total budget - thenews.com.pk
Following is SBP Paid & Foretasted amount for 2014/2015
http://www.sbp.org.pk/ecodata/pakdebtsvr_summary.pdf
Ideally, this ratio should be less than 30% to allocate more resources to social and poverty-related expenditures.
Following is the Debt of All Countries (Internal & External) (No Apologies for Wiki the List is Referenced but Apologies for bit outdated Data) .. You can see Pakistan , India , US & any other by Amount & By Percentage ..
List of countries by public debt - Wikipedia, the free encyclopedia
List of countries by external debt - Wikipedia, the free encyclopedia
Now U May Ask that
1- Pakistan has LESS way Less Debt than Many Other COuntries (Mainly USA as is Mentioned here above by Many Fellow Members & also Incorrectly Countered by Others)
2- The Percentage of Debt of Pakistan although high but other Major Economies are Higher.
In this Response U need to take into account Multiple Items ... Like NET Creditor / Debtor .. & Composition of Debt etc. ...
USA may Have Trillions of Dollars in Debt (with a Significant Amount from China / Japan) but still;
1- She is NET Creditor .. - means they have GIVEN More Loan thn Borrowed Acroos the Globe ...
2- Regardless of Media Hype it is US itself (Social Security etc.) who holds MOST of US Debt ..
3- The Debt Servicing is CHEP from them as Lenders give her loan for 0.1% instead of coiuntries like Pakistan (1-10%) or Greece (Upto 30%)
Now that U (Hopefully) MAY BE understand that what is Debt, How Much we Owe & how much we spend in Servicing EVERY YEAR & you cannot compare One COutnry Debt Amount (Even Percentage) to another country ... I will try to respond to your Question .
1- As i said if our debt got written off (which it wouldn't be, see Greece for Example) ... we will be saving Billions of Dollars we will be Paying every year in Debt Servicing (Returning Loans & Paying Interest on Existing)
2- Pakistan has a Dilemma where due to Various economic constraints it has to BORROW Loan to PAY OFF Loan which is Not cheap & doesn't add a single value to our Economy .. We would not be required to do that either !
3- Pakistan will have MORE money to invest into development projects & we will be Surely Buying SU-35 too :p
4- although the above benefits will look awesome but the biggest of all we would (technically) get free from IMF & World Bank Claws .... thr loans although much needed come with significant Strings .. (increase Taxation, Removing Subsidies, Invest in Health & Education sector rather than Energy & Infrastructure) & u know ... in Our Country Heath & Education means Ghost Schools & Hospitals ... Hence technically we do not develop what IMF asks as to do & neither we are able to develop what we wanted. So we will be able to do as we like (Not a Fair Picture Either given the corruption) but atleast thr will be significant decline in Taxes & no reductions in Subsidies.
5- But contrary to above comment we may still would want to go Back to Those Lending Agencies , this time we will have the leverage that we don't owe tham anything, we will have Other options than IMF / World Bank .. (thr is Asia Bank, Chinese Lenders) .. and our Credit Rating would shoot Up to AAA, hence we will get super Cheap Loan ... So in addition to excess money every year .. we can do our own Mega Projects related to Infrastructure, Energy Generation etc. as running a Budget Deficit is Good Thing if it is well Planned, executed and within controllable limits.!
So All this is Very good to Talk about ... but again this isn't happening unless tommorrow Swiss Banks says they are giving back all the illegal Corrupt money they have from Pakistanis. OR USA & West Offer to Buy out our loan against Surrendering our Nuclear Capability.
I would Suggest U to Please be Simple with Your Thread Opening Titles ... I saw the thread and as i m no expert didn't even looked into the thread .. Might Want to Change it to something Like what would Happens to a Country if its Loan is Write off ?
So instead of building Foriegn reserves($20 billion), why dont we pay our debt with that?
2- The Foreign Reserves are All not held By State Bank a Significant amount is with the Commercial Banks, who Use it to Pay for thr Imports ... (Like Suzuki When it Needs Engine from Japan, it gives Rupees to Commercial Bank who Give them Dollar to Pay to Suzuki in Japan or convert Dollar it have to Yen ) ... Plus govt needs to keep a significant amount as a cushion in case of War or Tragedy to Pay for, also As Pakistan have a Negative Trade Balance the govt Needs to have amount to pay the Surplus (like Pakistan Bring 1 bIllion $ in Exports but Pay 2 Billion $ in Imports) so it is the Country who have to make sure we have that Extra Billion $ ready ((e.g Take Add into it the Fuel imports, Petrol, LNG etc) (Of course it is not as Simple, i m just explaining it) ...
In short Despite Foreign Reserve Touching 20 Billion $ .. it is not simply all with State Bank, Nor it is at the Disposal of the govt. to spend it all & it would Naive nay Stupid to Use it all at once to pay back the loans .. as We still need operational Amount (Cash flow) to cater for our routine transactions.