THE Zimbabwe economy

This report will address what Zimbabwe is currently experiencing of an inflation rate of over 7600% per annum. The crisis started in 2000 when the Zimbabwean government effectively bought farms and  displacing farmers from their lands then distributed the land to people who are close to Mogabe. Thus Leading Zimbabwe’s economy immediately into recession and inflation began to rise.
Just like everyone else the Zimbabwe people were suddenly faced with the crisis of having to pay much more for things, and they didn’t have enough because there was a decrease in output of the farms and agriculture products due to the polital corruption, so the Goverment started printing more money to cover it. Thus lead the Country to enter Hyperinflation based economy what happened worsen th esituation when Zimbabwe’s Reserve Bank  has been ordered by Mugabe  to print amounts of currency that grow the money supply at a rate well over Zimbabwe’s inflation rate. He also stated recently that Zimbabwe will continue this practice of printing more currency as and when required. printing more money cause hyperinflation which meant money supply is increased without taking an account of the overall economy of Zimbabwe and it eventually lead the currency to devalue. In plain economy if the supply of money increases above the inflation rate, it means the rate of inflation increases too. The Zimbabwe goverment has been printing trillions of local currency at a time when their economy is declining. In addition to that to worsen the situation Mugabe has imposed on traders to fix their prices had led the economy to contract and get worse because there was little demand on the supply and increase in cash flow circuling the country. If money supply growth is stopped and the goverment did stop printing money, people simply won’t have enough currency to buy anything anymore. if they are really to fight thi hyperinflation they should follow the footstep of Bolivia when they faced this situation

Globalization and Economy

Globalization is also referred to globalism. This term is used to explain the way the relationships of people, their culture and the business relations have increased globally. However, it is mostly used to refer to the economic relations. This includes the distribution of products and services around the globe and this is usually coupled with the reduction or removal of barriers that hinder international trade. The barriers include the tariffs, import quotas and fees imposed on exported goods. Apart from the economic view, globalization also refers to the exchange of ideas, cultures and languages across nations of the world (Wolf 12).

Free trade, on the other hand, is a type of policy held by certain countries. With such a policy, the country tends not to discriminate against goods brought in to the country and it does not interfere with goods being exported through the application of tariffs or subsidies respectively. The law of comparative advantage also applies for this policy. This is because it ensures that the member countries (trading partners) benefit equally from the trade of their services and products.

Several countries have continued to decrease the tariffs and currency barriers on international trade. Other countries have also made agreements in order to reduce some of the barriers that may hinder international trade. One of the agreements includes the Central America Free Trade Agreement. Another is the North American Free Trade Agreement. Free trade also ensures that there are no policies that distort trade by giving other companies or households advantage over others (fair trade). These include certain trade laws, regulations or taxes.

Islamic Finance and one of its tool

Islamic finance is based on the elimination of interest and speculation uncertainty from financial transactions. Islamic contracts are based on these criteria.

Murabaha

This contract involves the sale of goods on which should be delivered immediately with their payment being delayed until an agreed upon date. The price of goods has a profit margin agreed upon by the buyer and the seller attached to it . Normally, the market price of goods is shared between the buyer and seller in this contract. Murabaha is a form of sale based on trust, whereby, the buyer truly trusts that the seller has honestly disclosed all the necessary cost encored. After cost discussions, a profit margin is agreed upon preferably as a fixed cost. In the event that an international Murabaha transaction is bound by a foreign currency lets say the Dinar, the importer would demand authorization and confirmation letters from the buyer and seller stating the currency in which the transaction shall be carried out. The registration of the transaction can only take place after both parties have agreed on which currency the transaction should be carried.

If the buyers’ records are in a currency other than the Dinar, e.g. the Euro, it is his right to demand that the transaction be registered in his own currency. Murabaha does not prohibit the use of western currency and leave’s matters regarding exchange rates to the users’ discretion. It is permissible to transact using any type of currency and one is also allowed to convert the currency used on the transaction into their own currency at the exchange rates available on the date of purchase.

The amount of profit gained from a Murabaha transaction is not a reward for using the investor’s money. Simply put, in a Murabaha transaction, the investor cannot take money without performing any service other than use his money for the transaction. Money cannot increase without any labor input (Hosein, par, 10).  In Murabaha, an item is bought at its original cost and sold to someone else for a profit to be paid over time. The profit and the time period are factors agreed upon by the buyer and seller.

Interest (Riba) as offered in a conventional bank differs from Murabaha in that here money is lent to someone for a profit. Murabaha is trade that involves selling of goods at a profit which is paid according to the agreement of the buy and the seller.

It is not forbidden to transact with a person who in the interests of honest trade has traced the owner of goods he wants to buy provided that the terms are those agreed upon between him and the owner. If he is to enter into a new contract with you for the same goods, it is not permissible to transact with him for you will be taking twice the value of the goods from him which is Haram.

Murabaha is an interesting way of doing business where the buyer is asked how much profit he thinks is fair for the product he wants to buy. When considering today’s  conventional trade, whereby, some of the products on sale are grossly overpriced and profiteering is the order of the day, where little or no consideration is paid to the consumers. Murabaha's way of doing business would be good especially now when economies are battered by the global economic meltdown.

Ahmad, Aldouni. “Islamic modes of finance and the role of the sukuk”, Q finance,  n.d.. Web. 20 May. 2012.

Ahmed, Mohamed & Sattar. “Abdul. Sharia Opinions (Fatwa) on Murabaha”, Dallah Al-Baraka. N.d. Web. 20 May 2012.

Fareed, Faraz. "Islamic Finance Basics – What is Murabaha, Ijara, and musharakah /mudarabah?" Islamic finance affairs, May 25, 2007.  Web. 20 May 2012. <islamicfinanceaffairs.wordpress.com>.

Hosein, Nazar. "Islam, Murabaha and Fixed Deposits: Islamic scholar Imran Nazar Hosein." Imranhosein.org. Nov. 2011. Web. 20 May 2012.

Zaheer, Khalid. Is charging more on credit sales (Murabaha) permissible? n.d.

Web. 20 May 2012. <Khalid Zakeer.com>.

Comparing Jordan Economy with GCC country

1.1 Economic Growth

An examination of the economies of Qatar and Jordan shows a significant degree of disparity wherein Qatar far outpaces Jordan in terms of GDP (Qatar: 173 billion, Jordan: $36 billion), GDP per capita (Qatar: 92,501, Jordan: $5,899) and GDP percentile growth (Qatar: 18.8%, Jordan: 2.5%). The reason behind Qatar's economic success can be attributed to its export based economy that centers primarily on exporting oil, natural gas and petroleum based products to various international consumers. As a direct result of such actions, Qatar was able to become the richest country in the Arab world due to the power of its natural resource exports alone. On the other end of the spectrum Jordan is, unfortunately, is not rich in resources as compared to other countries within the Middle East . Lacking significant amounts of natural resources in the form of oil and gas resulted in the country relying on international exports in order to address its energy needs (Mishal, 20-34). It must be noted that due to its current location the country has had to deal with significant scarcities in its water supplies and, as such a large percentage of income that could have gone into industrial development, is instead spent on providing basic utilities to its local populace

1.2 Standard of Living

When comparing the standard of living of Jordan and Qatar it can be seen that the difference is actually quite low, primarily due to the significant amount of investments the Jordanian government has made into education resulting in the creation of a higher standard of living despite having fewer natural resources. Recent studies such as Sharp (2012) state that Jordan has a high standard of living with the current rank of 11th within the developing world. In fact, it can even be stated that Jordan has the second highest standard of living within the Middle East being second only to Qatar. The reason behind is a combination of government initiatives in affordable housing, financial management and education which have resulted in significant boons for the local population. Not only that, despite the relative instability within the Middle East, Jordan actually enjoys a relatively high level of political stability with few if any instances of social unrest. All of this has led to significant improvements in the overall perception of foreign investors in the country resulting in high levels of foreign direct investments which have boosted the country's industrial potential to a significant degree. It must also be noted that due to the demand for Jordanian labor within the Middle East this has also resulted in an increase in foreign currency remittances to Jordan which has enabled it to boost its foreign currency reserves.

1.3 Employment

Despite such obstacles, the Jordanian economy is actually quite robust in terms of the strength of its labor force as compared to Qatar. Based on the study of Khatoon (2010) it can be seen that the Jordan is actually one of the largest suppliers of skilled labor within the Middle East, easily surpassing Qatar in terms of the amount of its population that is involved within the local labor force . It must be noted though that reliance of Qatar on its oil and gas industry can actually be considered a negative aspect of its economy given that oil and natural gas resources are finite in nature. In the long term, it can be expected that when Qatar's natural resources run out, Jordan will be able to surpass them due to the robustness of its local industries and the strength of its skilled labor force. One particularly interesting aspect of Jordan's employment profile is that due to the relatively high demand for skilled Jordanian workers this has resulted in a large percentage of the labor population (approximately 1.1 million) actually being situated in various countries abroad. It is based on this that current statistics on the country's labor force are actually inaccurate given that most of these workers remit money back to their families from locations overseas and as such contribute significantly to the Jordanian economy without actually being employed within the country. Aside from its industrial parks that are fueled through significant foreign direct investments, Jordan also enjoys a rather healthy tourism and medical tourism sector that brings in approximately $4.4 billion in revenue per year. When combined with the country's IT and agricultural industry it can be seen that Jordan has a sufficiently diverse assortment of potential industries for its local labor force. This is in direct contrast to Qatar which is only now starting to develop its local tourism industries through a variety of ventures such as the FIFA World Cup.

1.4 Stable Prices

A look at Jordan's economy reveals a relatively stable local economy with inflation being kept in between the 4.5 to 5.5 range. While the country was affected by the 2008 financial crisis, as evidenced by the 14 point increase in inflation, overall Jordan has been able to practice sound macroeconomic policies and has been able to keep inflation within the country to a minimum. The same cannot be said for Qatar; between the periods of 2006 to 2007 the country experienced a massive inflation from 11.84% in 2006 to 15.05% in 2008. This may have been due to the significant global demand for oil at the time as evidenced by data after the 2008 financial crisis (resulting in a drop in the demand for oil) wherein inflation within the country actually fell to -4.86% in 2009 to 1.92% in 2011. Such a result is indicative of the inherent vulnerability of the local economy of Qatar to oil price shifts and, as such, should be a cause for concern given the volatility of oil prices.

Inflation in the UAE

in This entery i will discuss about the recent yeas inflation rates in the UAE, i can say the UAE is considered one of the most and unbeleivbly rowing economy in the world, even its considered an oil economy base however you can find the economy is fueled with other source of income such as FDI and services because we are a growing economy recent study shows that there will be an increse in wages in upcoming years which will help increase inflation, while recent wage increases are likely to support domestic demand further, putting rising pressure on prices. however economist say inflation is not a worry in the UAE since the sources of inflation are under control. After averaging 12. 3% in 2008, the UAE headline rate of consumer price inflation fell to 1. 6% in 2009 due to some central bank regulations, Having said that, it will be a sluggish process before housing costs start rising significantly, and it is anticipated that consumer price growth will remain at relatively low levels, reaching 2. 5% in 2011 and 2012, why I mentioned housing is because it is one of the most ifluential aspect in the UAE economy, the property sector played a huge role in terms the recent recession and inflation rates. in terms of UAE market the property market started to see some groth in it and new projects are established and thus injecting soe liquidity into the market which might increase the inflation rate in the near future

Printing money and hyper inflation

In this blog im going to discuss what does printing money means and why goverment resort to this solution and what are the outcome of doing such thing, Printing Money creates a sense of nervousness amongst both economists and the general public. If a government prints money faster than the growth of real output it reduces the value of money thus causing hyperinflation such as goverment of Germany and recent years the Goverment of Zimbabwi face and you can see the result so of hyperinflation will eventually hurt the economy and its public which means if one who is experiencing hyperinflation would buy a bottle of water it will cost you million of the locla currency and this is because the devalue of money and it will burden the public and the country will face deaper recession which will take decades to recover from. Governments often resort to printing money when they cannot finance their borrowing.
why do Goverments prints money, it might be becuase they fear of deflation, lets first describe what is deflation, deflation is a decrease in the general price level of goods and services, Deflation occurs when the inflation rate falls below 0% This means a person can buy more goods with the same amount of money over time, the effect of deflation is

1. Decreasing nominal prices for goods and services
2. Increasing buying power of cash money and all assets denominated in cash terms
3. May decrease investment and lending if cash holdings are seen as preferable (aka hoarding)
4. Benefits recipients of fixed incomes

•  (Wikipedia).

 

The Japanese Economy 2012

Im writing in this blog the summery of the japnese economy in recent years, not to mention the after WW2 because what happened after that had the world surprised and admired to what happened to the country who once bomarded to the ground by the Atomic Bomb, Usually self-sufficient in rice, Japan imports about 60% of its food on a caloric basis and it is considered to have one of the largest fishing fleets and accounts for nearly 15% of the global catch. For three decades, overall real economic growth had been noticed a 10% average in the 1960s followed by approxematly  5% average in the 1970s, and a 4% average in the 1980s. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, Japan in 2011 stood as the fourth-largest economy in the world after second-place China, which surpassed Japan in 2001, and third-place India, which edged out Japan in 2011 due to the challenges faced by the japanes economy and not to mention the political unrest between nations I mean japan most important economic partner, exports in late 2008 pushed Japan further into recession. Government stimulus spending helped the economy recover in late 2009 and 2010, but the economy contracted again in 2011 as the massive 9. 0 magnitude earthquake in March disrupted manufacturing and export was effected due to the strong yen which demmonished the export trend not to mention the bad influence of the results of the nuclear meltown in Fokishima. Electricity supplies remain tight because Japan has temporarily shut down almost all of its nuclear power plants after the Fukushima Daiichi nuclear reactors were crippled by the earthquake and resulting tsunami. mentioned below some of the economic data out of japan in 2011

GDP $4.389 trillion
GDP - real growth rate -0.5%
GDP - composition by sector
          agriculture: 1.2%
          industry: 27.3%
          services: 71.6% (2011 est.)

Inflation rate 0.4%
Exports $800.8 billion

I beleive a country like japan has the capability of recovering given the right sercumstances.
 

History brief:

 

The Zimbabwean dollar's predecessor, the Rhodesian dollar was essentially equal to half of a pound sterling when it was adopted during the decimalisation of 1970, the same practice which was used in other Commonwealth countries such as South Africa, Australia, and New Zealand. The selection of the name was motivated by the fact that the reduced value of the new unit correlated more closely to the value of the US dollar than it did to the pound sterling.

 

Reason for hyperinflation

 

The main cause of hyperinflation is a massive and rapid increase in the amount of money (estimated at 17,000%), which is not supported by growth in the output of goods and services.

This results in an imbalance between the supply and demand for the money (including currency and bank deposits), accompanied by a complete loss of confidence in the money, similar to a bank run.

 

Current situation :

 

 Today Zimbabwa it can boast strong growth and single-digit inflation rates. In 2008, Zimbabwe’s annual real GDP growth rate was a miserable -17.6 percent and its annual inflation rate was 89.7 sextillion percent—that’s roughly 9 followed by 22 zeros.

 

The spontaneous dollarization brought an end to the horrors of hyperinflation.

In late 2008, the people of Zimbabwe spontaneously dollarized the economy. Thiers’ Law prevailed: good money drove out bad, and the government’s hands were tied. Indeed, the government was forced to officially dollarize in 2009. Since then, Zimbabwe has enjoyed positive GDP growth rates, a feat not accomplished since 2001

Money

The world is full of people running various businesses, organizations and even governments that deal with money all through different structured levels. They all have different interpretations in the event that money is in their pockets; wealth, power and contentment in nature among others. Money is any substance that serves as a store of value, meaning that people can save it and use it later smoothing their purchases over time; a unit of account providing a common base for prices; or medium of exchange which people can use to purchase and vend from one another (Asmundson and Oner imf.org). Its value differs in different regions and parts of the world when compared. However, it is a common accepted and standard means of exchange by people within a boundary; that is why an individual from outside a nation will find himself with either few or more money after currency change in a foreign land that does not share similar currency.

According to Leyshon and Thrift, there exist several forms of money, “namely; pre-modern money; commodity money; money of account; state money and virtue money” (3).  Money exists as paper (certified currency notes), metallic coins, made of kinds of metals and credit money which is easily convertible and highly appreciated through cheques. In the past, a variety of commodities ranging from iron, gold, copper, silver, shells and animals served as a medium of exchange in various locations and times. The history of money can be traced back from the act of exchange; however, barter trade was not able to handle the complexity of life dealings and so had to be replaced with a common medium. Money must be easy to transport and identify, durable, difficult to duplicate, divisible and widely accepted (“the measure of money,” boj.org). 

Leyshon, A., and Nigel Thrift. Money/Space: Geographies of Monetary Transformation. London: Routledge Taylor and Francis Group, 1997. Print.

Asmundson, Irena, and Ceyda Oner. “What is money?” imf.org. September 2012. Web. 3 November, 2012. <http://www.imf.org/external/pubs/ft/fandd/2012/09/basics.htm>

Money supply in the economy

Money supply in the economy: This is simply the amount of money circulating in an economy. Several methods have been put across to measure money supply in an economy. However, the measures differ from nation to nation, in time and the intention. According to Dwivedi, “(i) money supply is a stock variable and measure of money supply refers to the stock of money at of point in time; (ii) by measure of money supply is meant the measure of stock of money available to the public as a means of payments and store of value and (iii) the term ‘public’ means all economic units including household, firms and institution” (212) excluding some areas like commercial and main central banks where money is in circulation. To quantify money, various policy makers and economists use M₀, M₁, M₂ and M₃ methods. “M₁includes money in circulation, checkable deposits and traveler’s checks while M₂ adds savings deposits, time deposits held in depository information and money market mutual funds share on top of M₁”( Gwartney, Stroup, Sobel, and Macpherson 266). M₀ is the monetary base from which other measures build on while M₃ is a broader measure including items that would be termed to be close substitutes for money.

 Money value is affected by its supply in the market; when its supply is limited comparing with its demand, its value is high at the time, but when unlimited in circulation, it looses its value; that is, one uses a lot of it to buy few items. Money supply is a very central issue in any nation; in most countries, it is handled by the government through central banks and treasury, other involved groups are credit unions and depository institutions among others with regard to a nation. Money supply in an economy will always affect interest rates; with increase in supply, the GDP increases too in the short run while price level in the long run, otherwise they both decrease in the same manner respectively. Money supply is important to GDP calculation and its increase bids bond prices up as it slows down the interest rate to affect investments which in turn influences total output in an economy. Suppose money supply generates faster than real output, inflation tends to occurs; hence, as much as developing economies need a growing money supply to pay for the increase in aggregate output, they need to be careful to avoid entering into such a situation. Referring to Beenhakker, money supply is expressed as MV=PQ; where M, V, P and Q means money supply, money velocity, price level and real output level respectively(103).

Beenhakker, Henri L. The Global Economy and International Financing. Westport: Greenwood Publishing Group, 2001. Print.

 Gwartney, J.D., Stroup, R. L., Sobel, R. S., and David A. Macpherson. Economics: Private and Public Choices. Mason: South-Western Cengage Learning, 2009. Print.