The Federal Reserve was established in 1913 to function as of the central bank of the United States and the key arbiter of its monetary policy systems. The Fed’s vital role is to regulate the supply of money and credit in an effort to maintain price stability and promote sustainable economic growth throughout the country. … Continue reading Global Economics: The Expansive Effects of a Strong U.S. Dollar
Bitcoin: Have Cryptocurrencies Become Legitimate Market Assets? In the last few years, one of the biggest stories to hit the financial markets is the rise of Bitcoin, which is a blockchain-based digital currency that can be used to exchange in global transactions. For many, these cryptocurrency is an asset that is both mysterious and uncertain. … Continue reading Bitcoin: Have Cryptocurrencies Become Legitimate Market Assets?
In all of the recent news dealing with US President Donald Trump and the world economy, the term “trade war” is being used a lot more than would normally be the case. But what does this term actually mean? Who are the winners and who are the losers? Does a “trade” war resemble a military … Continue reading Global Economics: What is a Trade War?
Not that they can’t, but why would it be bad policy to raise government revenues by issuing bonds that are then sold to the monetary authority? Here are some thoughts in relation to a fixed exchange system and a floating exchange rate system.
FOREX is short for “foreign exchange”. When we discuss the FOREX market we are usually referring to the purchase or sale of a currency against sale or purchase of another currency. The largest and most active market in the world is in fact the foreign exchange market. Since the market remains open for 24hrs (never … Continue reading Economists View: FOREX Explained – ‘What is Forex?’
The Loonie hit on 11 year low closing the day at 1.3785 / 1USD. Last time the dollar was this low was May 2004. Apart from immediate consumer impact felt in the purchase of consumer goods and vacations, the depreciating currency is indicative of deeper problems for the Canadian economy. Canada is predominantly a commodity … Continue reading Canadian dollar hits 11 year low with no end in sight
As of this post the Canadian dollar is depreciating versus the American dollar. The major contributing factor to this downward pressure is due to the interest rate announcement expected by the Bank of Canada. Why does the Canadian dollar go down when interest rates are reported to be staying the same or declining? To put … Continue reading Why does the Canadian dollar go down if interest rates stay the same or go down?
The reason domestic currencies drop may baffle some newbie FOREX investors since many movements are rooted in what are called ‘expectations’. You see, currency movements move up or down (depreciate or appreciate) based on expectations and/or real announcements. Here is an article to help you track currency movements because predicting currency movements is a skill … Continue reading How to Predict Foreign Exchange Movements
Q. Why/How may a drastic fall in the current account lead to a devaluation of a currency under a fixed exchange rate system? A. A drastic fall in the CA may lead domestic policy makers to move for expansion of domestic output in an attempt to increase exports or have positive affects on the CA.
Q. What kind of policies would policy makers Central Bank (CB) consider with: an exchange rate system with a “fixed E system”, high export growth, a rise in inflow of capital in the past few years, a problem emerging with growth of exports are slowing down and most profitable opportunities are getting exhausted. Oh yea, … Continue reading Capital Flight and Slowing Exports – Revaluation