Forex reserves supply should be matched by domestic money supply to counter inflation.
If NFA grows, the monetary base will grow
If NFA falls, the monetary base will fall
That is how a currency board system should work.
The local monetary policy is tied to an anchor currency.
The monetary base has two components
NFA Net Foreign Assets
NDA Net Domestic Assets
NDA +NFA = Monetary Base
What #Turkey needs is to #peg its currency to an anchor currency.
#Currency Peg can be fixed or crawling.
They can follow many examples, with or w/o capital #controls.
It can choose from an expansive list that includes Malaysia, Nigeria, Argentina, Hong Kong or those in the GCC.
So does #Lebanon.
It needs a currency board system to control exchange rate volatility and inflation.
The multiple exchange rate regime has not helped that nation.
It has lead to misallocation and utilization of financial resources.…

Read this paper.
It presents a retrospective perspective of how currency boards performed with and without capital controls in different countries up to 1988.
#Malaysian Model of a #Peg and Capital Controls was decried by top global economists such as @paulkrugman & Late Robert Mundell (the God Father of the #EMU & the founder of #OCA Optimum Currency Area Theory)
#Mundell admonished @chedetofficial not to flirt with the real exch rate
Late both @paulkrugman and Mundell apologized if I remember correctly.
They admitted their mistake and lauded DR M for imposing capital controls and adopting the fixed exchange rate regime.
Malaysian Economy never stopped growing after that,or did it?
Positivist Economics slapped
I am all for Entrepreneurial Enterprises, Free Enterprise, Free Market Economics, and the Individual's ascendancy over the government, etc, blah blah...
Having said that, we can't accept all proof writings thrust down our throats by Right Leaning Mathematical Economics
The chap who understood Paul Samuelson was Paul Samuelson.
Not even Math Graduates were able to decipher the wasted logic behind his mathematical models, done often like running commentaries in a sporting contest.
Converting societal variables into maths is politics, not science
What about #Edgeworth #Box Matrix Politics?
How fascists such as Vilfredo Pareto (who was probably living in a cloud Cuoco land) came up with the model of free markets operating with agents, where everybody assumable got better off w/o making the other worse.
Crackpot economics
Actually, what we saw in the Western World after WW2 came to an end was a consensus that the Paretian Model of Welfare Economics, was correct.
Redistributive measures were akin to therapeutic treatments.
Here, the doctors of the welfare state capitalist model were economists.
The West fought the #Nazis but didn't disapprove of their economic intellectual traditions.
The Western intellectual tradition which has come to dominate the western economic and political thought processes is firmly embedded in Nazism.
Populism & Narrow Nationalisms are examples
The Great #Schism was caused due to differences in preferences over the use of language in religion.
In #economics, it is the same!
The language of #maths in economics is causing the new schism.

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More from @SAH16928046

23 Dec
"Americans increased the Defence Budget to the tune of USD 200 Billion per year between 1980 and 1987"
One must learn Crisis Management from Military leaders and Geostrategic Affairs Experts.
Leadership, management and entrepreneurship can all benefit from wargaming and decision-making did on the battlefield.
An interdisciplinary approach to problem-solving helps a lot!
#MacNamara is right about three things when he sums up a crisis situation
1. Misinformation exacerbates a crisis
2. Emotionalism can ruin strategic decision-making
3. First information received in the event of a crisis is always wrong leading to an error of judgement
Read 9 tweets
23 Dec
Positive Real Interest Rates are required to reduce inflation.
Negative Real IR's do not help rein prices.
This little much cannot be understood by the central bankers in high-inflation economies?
That works if the source of inflation is the money supply growth due to the deficit
However, if the source of #inflation is supply-side shocks, then raising policy interest rates might hurt more.
For e.g. the Exchange rate shock which brings in imported inflation into the economy needs forex supply to counter the import/outflow demand.
IR is the painful lever
yes, a higher CB Rate should technically curb aggregate demand and expenditures in the economy.
It can reduce the domestic money supply as bank borrowing declines and thereby reduces the monetary base.
Which should taper the imports & adjust the Current a/c.
Shock Therapy 101
Read 9 tweets
21 Dec
Two problems were identified with the education of #STEM based subjects.
Instructors at unis tend to pass on only #methodology, proof-writing & all the loaded #mathematical language of #symbols working in the backdrop.
But, ignore the #history & #philosophy of hard sciences.
Many A-level students study physics and get good grades, but they know little to nothing about Galileo, Maxwell, or Newton or the other greats!
Engineers do mathematics but have no clue about Euler, Laplace, Gauss, Fermat, Bernoulli and their personal rivalries and lives.
The same holds true for economists
No student can get a degree in economics without studying Keynes.
But, has anyone ever read about his personal life?
Keynes had a voracious appetite for stock trading, was sexually not straight, and was a non-economics degree holder.
Read 15 tweets
4 Dec
How much maths is needed in #private #equity (also when compared to hedge funds or investment #banking, for example)?
@GAIAnoburn @CAIA_Blog
Private Equity requires a good understanding of Finance and especially sector-specific finance such as Real Estate Finance and Investments and so on.
In my opinion, the techniques used to model PE transactions have a lot in common with those that are applied to Listed Equity.
It has some maths in it, but nothing out of the world!
Read 13 tweets
22 Nov
You are an entry-level risk analyst at a financial institution working in investments/portfolio management?
What you need to do to make yourself relevant.
This thread is about that....
Dos and Don'ts of a #Risk Profession =>

Do not =>
1. Don't brag about your degree/uni
2. Don't brag about your mathematical skills
3. Don't brag about your academic knowledge
4. Don't brag about your being proactive compared to Audit or Compliance or any other back-office unit
Dos =>
1. Do bring yourself down to the level of those engaged in the front offices/sales, etc.
2. Do try to understand the Enterprise IT Systems, Enterprise and Business Architecture
3. Do integrate your silo with the ERM Program
4. Do always compare theory with reality.
Read 15 tweets
21 Nov
Always do study at a university which has an influential alumnus.
Networking helps more than anything else when you are looking for a job or an opportunity to undertake a startup.
Please, be mindful of the fact that degree is just a decorative sketch framed for the walls.
Listening to a speech given by Late #Lee #Kuan Yew,
where he was advising undergrads about the paths they should pursue in 1994.
For Mr Lee, the #Oxbridge epoch was well over back in the 90s.
The #Yanks and their universities dominate the global corporate world and job networks.
The most interesting aspect of this speech made by then Minister Mentor Lee was that he encouraged Far-Eastern Asian Students such as the Singaporeans to do a first degree in Electrical Engineering and later back it up with an Ivy League #MBA.
What superb advice it was!
Read 6 tweets

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