Currency Collapse May Stimulate Economic Expansion, BIS Says. WTF?!?!?

Okay, I thought I had heard all the retarded, Idiotic, stupid, dumb-ass, lunacy verbal diarrhea. But this pretty much takes the bate, "Currency Collapse May Stimulate the Economy". And the Explanations for how such an impossible scenario would play out, almost makes the title of the article some what of a 'sane statement'. This is by far, one of the worst performances of gov-speak/double-speak in quite a long time, and a long line of continuous spin in the media and other places of society. On top of that, the article is making it seem like we've been through a currency collapse before, no, no we have not, never. The great depression was NOT a currency collapse, but an act of out of control hyper inflation, due to the creation of centralized reserve banking (Federal Reserve Bank), and the condition of the land back then (seeing as almost more than half the economy back then was based on land production, and agriculture). Yes, there are a few other reasons for the great depression besides those, but most are debatable, at best, or just random analysis. Anyways, this just goes to show how much the mainstream media is willing to test the average persons (and your) ability to think. A good way to see the reactionary bases on this delusional spew of idiocy by Bloomberg and the MSM, fallow your favorite trend forecaster index (twitter, facebook, etc.) and see who is reacting to this in what way, and from that, you will be able to see how many people are actually buying this nonsense garbage.

Now, does this guy really look like he's enjoying the post currency collapse 'stimulated economy'?

Currency collapses tend to spur a resumption of economic growth rather than fueling a decline in gross domestic product, according to the Bank for International Settlements.

Currency collapses are associated with permanent output losses of about 6 percent of GDP, on average, though the drop tends to appear beforehand, the Basel, Switzerland-based BIS said in its quarterly review yesterday.

“This suggests that it may not be the currency collapse that reduces output, but rather the factors that led to the depreciation,” Camilo E. Tovar wrote in the study. “To gain a full understanding of the implications of currency collapses on economic activity it is important to carefully examine the full circle of events surrounding the episode.”

The positive effects of a weaker currency on GDP, including making local products cheaper than imported goods, may outweigh the negative ones, such as rising inflation. Currency collapses occur when the annual exchange rate drops by about 22 percent, according to the BIS, which identified 79 such episodes, “more commonly in Africa than in Asia or Latin America,” since 1960, Tovar said.

“They also occurred under all types of currency regimes, except possible floating-exchange-rate regimes, where there are simply too few observations to obtain meaningful estimates,” the BIS said.

Economic Contraction

The euro tumbled about 20 percent against the dollar between Nov. 25, 2009, and last week as investor concern over record budget deficits in countries including Greece spurred speculation the 16-nation currency union may split. The European Union in May crafted a 750 billion-euro ($908 billion) rescue package to stem the crisis.

Greece’s economy will contract 3.9 percent this year and 1.2 percent in 2011, after shrinking 2 percent in 2009, according to the median of eight economist estimates compiled by Bloomberg. The euro-region will expand by 1.1 percent this year and 1.5 percent in 2011, after falling 4.1 percent last year, median forecasts show.

Hans-Werner Sinn, president of Germany’s Ifo economic institute, said on June 3 that it would be best for Greece to leave the euro instead of implementing an austerity program to reduce its deficit. Greek Prime Minister George Papandreou pledged budget cuts worth almost 14 percent of GDP to bring the deficit within the EU limit of 3 percent by the end of 2014.

“The real solution for Greece would be to leave the euro followed by a depreciation” of the new currency, Sinn said in an interview at a conference in Interlaken, Switzerland.

Growth May ‘Dominate’

European Central Bank Executive Board member Lorenzo Bini Smaghi said on May 28 that there are “no alternatives” for Greece beyond following the austerity program.

“Before drawing policy conclusions we should emphasise that these results are subject to a number of caveats,” the BIS said in the report. “Most importantly, the analysis does not address the reasons why currency collapses occur in the first place. Our analysis also has little to say about the mechanisms involved after the currency collapse takes place. While we cannot disentangle the various factors, our results do suggest that expansionary mechanisms tend to dominate.”

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