ECONOMICS

So I heard growing up that the most powerful man in the world was the chairman of our (American) central bank—the Fed Chairman. I didn’t understand it at the time, but I do now. I think it’s because the guy does not only control the amount of money in the US and can fight inflation or fuel it in the US, but he can do it around the world. We are everywhere and affect all. Even the Great Depression was not just a US phenomenon.

Writing about economics as a series of entries from each update, I’m naturally building on previous things. So if you’re joining me now, I’m definitely skipping things. But with exports and imports, foreign reserves (esp of dollars with other countries), foreign investment, demand for dollars for various things (like sending kids of Asian presidents to US schools), presence of American multinational companies everywhere, etc., you really do affect the economies around the world.

The strange thing is that today this truth is weakening. There will probably come a day when this is no longer true. But already, the rising powers of China and India, for example have a weakening effect on the ability of a boom or a recession to quicken or dampen the economies of countries around the world. And economists have already said the developing economies are balancing out our growing recession when calculating global inflation.

Did I talk about the process of inflation? I don’t remember. But anyway, central banks have been known as inflation busters because their policies can curb it or fuel it. The problem is the same thing you do to fight a recession (lower interest rates) and to put more effective money in the economy, is the same thing that causes or fuels inflation. So it’s a dilemma for these banks (EU bank, US bank, British Bank, etc.). Do you fight the recession and fuel inflation? Or do you eschew contributing to inflation and leave the executive and legislative branches to fight recession (which policies require money as well)?

Right now, the rand is weakening, and the ratio is the highest it has been since my arrival (or around the same amount about 7 rand to 1 dollar).