Global Business: Exchange and Value

Here you are, visiting the ever beautiful London, when you come across a shop with the most beautiful pair of shoes in the window. You notice they’re designer, vintage even, and in the perfect condition, and look, the price says £150. That’s reasonable you say, until you get to the counter to pay for the shoes, only for your mom to point out that £150, is actually $200 in U.S. dollars. This is called an “exchange rate”.

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G-20 Inflation Rate Decreases CLICK TO READ

A measure of inflation for the members of the Group of 20 was published for the first time today. According to a group of international institutions, the annual rate of inflation was 3.2% in July and fell to 3.0% in August.

Rates fell in many large developing economies such as China, India and Brazil in addition to the U.S. and the EU. Japan and Indonesia are the only countries whose inflation rate increased in August. The member with the lowest inflation rate was Japan at 0.9% and the highest was India at 10.7%.

If inflation rates continue on a downward trend, central banks will find reassurance in keeping their reactive monetary policies from the 2008 financial crisis intact. While the global economy has been recovering, it is feared that the future U.S. budget policy may set it aback.

What are your thoughts on the G-20 inflation rate? Post in the comment section below!

 

Source: WSJ

A Shadow of Mistrust Due to Argentina’s Falsified Inflation Statistics

Over the past fifty years, Argentina has often achieved the highest inflation rate in the world. Recently, there has evolved a severe disagreement between politicians and business executives regarding the publication of data and research of inflation levels.

Businesses (and researchers) want accurate reporting so that they can adjust their prices and forecasts accordingly. However, higher inflation numbers have severe economic repercussions for government, since there were commitments made to inflation adjust many government payments. In the budget, it makes a big difference whether the inflation rate is reported as 40 percent or as 8 percent.

In the country’s statistical office, starting in early 2007, the government replaced several statisticians, clerks, and field workers who collect consumer prices. Subsequently, starkly lower inflation figures began to be reported. Workers at the National Institute of Statistics protested Argentina’s miraculous declines in inflation and poverty rates. For example, the government numbers report an official poverty figure of 15.3 percent while the Catholic Church says it is near 40 percent.

Such discrepancies lead to controversy. Economists and political analysts say the allegations hurt the country’s credibility in terms of investments. In speeches, though, President De Kirchner and other officials have defended the country’s unorthodox economic policies, including high taxes on agricultural exports, heavy spending and energy subsidies .“Our different way of doing things has permitted growth and the creation of jobs,” Vice President Amado Boudou recently told reporters. “Argentines can be proud we did things our way.” Also, the government budget is less strained due to lower adjustment payments.

Who is right – the accuracy side, which is said to be particularly short term oriented, or the adjustment side, which claims there are other things than just numbers to worry about?

Sources:
http://www.washingtonpost.com/wp-dyn/content/article/2009/08/15/AR2009081502758.html, accessed March 4, 2012; Juan Forero, “Fight over Argentina’s inflation rate pits government against private economists,” The Washington Post, October 31, 2011.