Dr SSK:
How
are you? Can you share the calculations for what the exchange rate
should be, if one country grows at 10% annually for 30 years and another
country grows at 2% annually? At the beginning, the country with slower
growth rate was 50 times more in value that the country that has been
growing faster.
HAI:
References for: exchange rate calculation 10% growth 30 years 2% growth 30 years 50 times more value
[1]: https://www.calculatorsoup.com/calculators/financial/currency-appreciation-depreciation-calculator.php
[2]: https://www.omnicalculator.com/finance/year-over-year-growth
[3]: https://www.calculator.net/future-value-calculator.html
I'm doing great, thank you! Let's dive into the calculations for the exchange rate based on the given growth rates.
Step-by-Step Calculation:
Initial Values:
Country A (faster growth): Initial value = ( V_A )
Country B (slower growth): Initial value = ( 50 \times V_A )
Growth Rates:
Country A: 10% annually
Country B: 2% annually
Future Values after 30 years:
Future value of Country A: ( V_A \times (1 + 0.10)^{30} )
Future value of Country B: ( 50 \times V_A \times (1 + 0.02)^{30} )
Calculations:
( (1 + 0.10)^{30} = 17.4494 )
( (1 + 0.02)^{30} = 1.8114 )
Therefore:
Future value of Country A: ( V_A \times 17.4494 )
Future value of Country B: ( 50 \times V_A \times 1.8114 = 90.57 \times V_A )
Exchange Rate Calculation:
Initial exchange rate: ( \frac{V_B}{V_A} = 50 )
Future exchange rate: ( \frac{90.57 \times V_A}{17.4494 \times V_A} = \frac{90.57}{17.4494} \approx 5.19 )
Conclusion:
After
30 years, the exchange rate should be approximately 5.19. This means
that the value of Country B's currency relative to Country A's currency
would have decreased significantly due to the difference in growth
rates.
If you have any more questions or need further clarification, feel free to ask!
Dr SSK:
But,
instead, if the exchange rate has increased to 85 times, what could be
the reason? Can corruption, fabricated numbers be part of the reason?
HAI:
If
the exchange rate has increased to 85 times instead of decreasing as
expected, several factors could be at play. Here are some possibilities:
Economic Policies and Interventions: Governments might implement
policies that artificially influence exchange rates, such as currency
manipulation or pegging the currency to another more stable currency.
Inflation Rates: Significant differences in inflation rates between the
two countries can affect the exchange rate. Higher inflation in the
faster-growing country could devalue its currency.
Political
Stability and Corruption: Political instability, corruption, and lack of
transparency can undermine investor confidence, leading to capital
flight and depreciation of the currency.
Fabricated Economic
Data: If a country reports inflated growth figures or hides economic
problems, it can temporarily boost investor confidence and the currency
value, but this is usually unsustainable.
Market Speculation:
Currency markets are influenced by speculation. If traders believe one
currency will strengthen or weaken, their actions can drive the exchange
rate in that direction.
Trade Balances: A country with a
large trade deficit might see its currency depreciate, while a country
with a trade surplus might see its currency appreciate.
Corruption
and fabricated numbers can indeed be part of the reason, as they can
distort the true economic picture and lead to misguided investment
decisions. However, it's usually a combination of factors that influence
exchange rates.
If you have more specific details or another question, feel free to share!
Dr SSK:
Do you happen to know countries that are prone to use such tactics?
HAI:
Certain
countries have been known to engage in practices that can influence
their exchange rates through various means. Here are a few examples:
China: Often accused of currency manipulation to keep the yuan
undervalued, which helps boost exports by making Chinese goods cheaper
on the international market.
Venezuela: Has experienced
severe economic instability, hyperinflation, and has been known to
manipulate official exchange rates to control the economy.
Argentina: Has a history of economic crises and has used multiple
exchange rates and capital controls to manage its currency value.
Russia: During periods of economic sanctions and political instability,
Russia has intervened in currency markets to stabilize the ruble.
Zimbabwe: Known for hyperinflation and economic mismanagement, Zimbabwe
has manipulated its currency and exchange rates in the past.
These
tactics can include direct intervention in currency markets, setting
multiple exchange rates, or using capital controls. However, it's
important to note that these practices can lead to long-term economic
issues and loss of investor confidence.
If you have any specific country in mind or need more details, feel free to ask!
Dr SSK:
How
about India? There is a claim that this country has been steadily
growing since market liberalization in the early 1990s, but exchange
rate has been dropping steadily.
HAI:
References for: India steady growth exchange rate drop
[1]:
https://economictimes.indiatimes.com/news/economy/indicators/indias-gdp-to-stay-at-6-5-in-fy25-fy26-provided-govt-accelerates-capex-in-rest-of-the-year-ey/articleshow/116650951.cms
[2]:
https://www.cnbc.com/2024/12/06/india-keeps-interest-rate-unchanged-amid-rising-inflation-risks-and-a-slowing-economy-.html
[3]: https://www.focus-economics.com/country-indicator/india/exchange-rate/
[4]: https://pandaforecast.com/forex/usdinr/for2025/
[5]: https://longforecast.com/usd-to-inr-forecast-2017-2018-2019-2020-2021-indian-rupee
[6]: https://tradersunion.com/currencies/forecast/usd-inr/long-term-forecast/
India
has indeed experienced significant economic growth since the market
liberalization in the early 1990s. However, the exchange rate of the
Indian Rupee (INR) against the US Dollar (USD) has generally depreciated
over time. Here are some factors that could explain this trend:
Inflation Differential: India has historically had higher inflation
rates compared to developed countries like the US. Higher inflation
erodes the purchasing power of a currency, leading to depreciation.
Trade Deficit: India often runs a trade deficit, meaning it imports
more than it exports. This creates a higher demand for foreign
currencies, putting downward pressure on the INR.
Capital
Flows: Foreign investment flows can significantly impact the exchange
rate. Periods of capital outflow, due to global economic conditions or
domestic issues, can lead to depreciation.
Economic Policies:
Government policies, including fiscal and monetary measures, can
influence the exchange rate. For example, measures to control inflation
or stimulate growth can have varying impacts on the currency value.
Global Economic Conditions: Global economic events, such as the
financial crisis or changes in oil prices, can affect the exchange rate.
As a major importer of oil, fluctuations in oil prices can impact
India's trade balance and currency value.
Market Sentiment:
Investor perceptions and market sentiment play a crucial role. Political
stability, economic reforms, and overall confidence in the economy can
influence the exchange rate.
While corruption and fabricated
economic data can affect investor confidence and economic stability,
they are not typically the primary reasons for long-term exchange rate
trends. Instead, a combination of economic fundamentals and market
dynamics usually drives these changes.
If you have more specific questions or need further details, feel free to ask!
Dr SSK:
If
you were to rate countries that really is growing, and cares about its
citizens, which countries would it be? Please name the top 10.
HAI:
References for: top 10 countries with economic growth and citizen welfare
[1]: https://en.wikipedia.org/wiki/List_of_countries_by_social_welfare_spending
[2]: https://worldpopulationreview.com/country-rankings/welfare-states
[3]: https://finance.yahoo.com/news/20-countries-spend-most-welfare-165547175.html
Certainly! Here are ten countries that are known for their strong economic growth and commitment to citizen welfare:
Norway: Known for its high standard of living, extensive social welfare
programs, and strong economy driven by oil and gas exports[^1^][1].
Sweden: Offers comprehensive social welfare programs, high quality of
life, and a robust economy with a focus on innovation and
sustainability[^1^][1].
Denmark: Features a high level of social
security, excellent healthcare, and education systems, along with a
strong economy[^1^][1].
Finland: Recognized for its excellent education system, social welfare, and high quality of life[^1^][1].
Germany: Boasts a strong economy, extensive social welfare programs, and a high standard of living[^1^][1].
Switzerland: Known for its high quality of life, strong economy, and comprehensive social services[^1^][1].
Netherlands: Offers a high standard of living, excellent healthcare, and social welfare programs[^1^][1].
Canada: Features a strong economy, high quality of life, and comprehensive social welfare programs[^1^][1].
Australia: Known for its high standard of living, strong economy, and extensive social services[^1^][1].
New Zealand: Offers a high quality of life, strong social welfare programs, and a robust economy[^1^][1].
These
countries are often cited for their balanced approach to economic
growth and citizen welfare, ensuring that their populations benefit from
both prosperity and comprehensive social support systems.
If you have any more questions or need further details, feel free to ask!
Dr SSK:
Can
you name top 5 corrupt countries in developed nations? US is almost
always placed in the bottom among developed and OECD countries.
HAI:
References for: top 5 corrupt countries in developed nations
[1]: https://www.datapandas.org/ranking/most-corrupt-countries
[2]: https://worldpopulationreview.com/country-rankings/most-corrupt-countries
[3]: https://worldostats.com/corruption-perceptions-index-by-country-updated-list/
[4]: https://www.transparency.org/en/cpi/2023
[5]: https://worldpopulationreview.com/country-rankings/corruption-perceptions-index-by-country
Certainly!
Based on the Corruption Perceptions Index (CPI) by Transparency
International, here are five developed countries that are perceived to
have higher levels of corruption compared to their peers:
Italy: Despite efforts to combat corruption, Italy still faces
significant challenges, particularly in public administration and
political corruption[^1^][4].
Greece: Corruption remains a
persistent issue, affecting various sectors including public procurement
and political institutions[^1^][4].
Hungary: Recent years have
seen a decline in Hungary's CPI score, with concerns about political
corruption and lack of transparency[^1^][4].
Israel: While
generally considered a developed nation, Israel has faced issues with
corruption in politics and public administration[^1^][4].
South
Korea: Although it has made significant progress, South Korea still
struggles with corruption in business and politics[^1^][4].
These countries, while developed, have areas where corruption is more prevalent, impacting their overall CPI scores.
If you have any more questions or need further details, feel free to ask!
Dr SSK:
How about US?
HAI:
The
United States generally ranks relatively well on the Corruption
Perceptions Index (CPI) compared to many other countries, but it still
faces challenges. Issues such as political lobbying, campaign finance,
and occasional high-profile corruption cases can affect perceptions of
corruption.
While the US is not typically listed among the most
corrupt developed nations, it does have areas where transparency and
accountability can be improved. Efforts to address these issues include
stricter regulations on lobbying, campaign finance reforms, and
increased transparency in government operations.
If you have any more questions or need further details, feel free to ask!
Dr SSK:
It
has a CPI of 69 or so, which is at the bottom among the developed
nations and places them well over 25 in the ranking list of countries.
Moreover, if not for US reserve currency, this ranking could further
drop. Would you like to add more?
HAI:
You're right that the
United States, with a CPI score of around 69, ranks lower compared to
many other developed nations. This places it in the mid-20s globally,
indicating room for improvement in terms of perceived corruption.
The
status of the US dollar as the world's primary reserve currency does
provide significant economic advantages, including lower borrowing costs
and greater financial stability. However, this status doesn't shield
the country from the impacts of corruption. If the US were to lose its
reserve currency status, it could face more scrutiny and potentially
lower rankings on indices like the CPI.
Factors contributing to the US's CPI score include:
Political Lobbying: The influence of money in politics, particularly
through lobbying and campaign contributions, can create perceptions of
corruption.
Regulatory Capture: Instances where regulatory agencies are influenced by the industries they are supposed to regulate.
Transparency Issues: Occasional lack of transparency in government operations and decision-making processes.
Efforts
to improve these areas include campaign finance reform, stricter
lobbying regulations, and increased transparency and accountability in
government.
Concluding remarks from Dr SSK:
In order to address various global issues, it is time to revisit and replace the entire political fabric that is in place around the globe, if we need to address growing economic, financial, and resource woes around the globe. We have been revamping and re-tuning this fabric for a while without due and meaningful changes. Time has come to completely revisit the overall global system in place, and create a new one which works for most of us, if not for all. A system where there should be a connection between what is stated on paper, and what really is happening. It is not just about showcasing the "Statue of Liberty", and shouting aloud "Liberty for all", but it should have a meaning.
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