Kalistani Finance Minister aims at Convertibility
Republican Bank Recharter puts Kalistani Ruble on Solid Bedrock
Kaliburg, Ananto
April 8, 4695
Socialist Finance Minister Nedra Stuart discusses stabilization of Kalistani Economy
Last month, the Premier of the Republic, Sister Rebecca Bennots-Edwards moved a bill requested by Finance Minister Nedra Stuart for the recharter of the Republican Bank, which was founded in 4406. The previous charter was declared out of effect more than 100 years ago, and all assets were divested to profit making corporations, but the return of the Socialist Party of Kalistan has renewed efforts to bring the Nation's finances under control. The Republic's Franka Girrard caught up with Minister Stuart, who had one word on her mind: Convertibility.
[The Kalistani Republic's] F[ranka] G[irrard]: Comrade Minister, thank you for coming in to talk with my paper today.
N[edra] S[tuart]: It is my pleasure. Thank you for reaching out.
FG: We recently ran a story about a massive budgetary inflow due to ODEN's success. Following on the heels of this success, the Government has proposed a recharter of the Republican Bank. Can you tell our readers what this will mean?
NS: Sure. First, it will mean that we will regain control, for the first time in nearly 200 years, of the business cycle. Under liberal economic policies, Kalistan experiences boom and bust cycles like every other liberal economy. Speculation in one sector leads to a rush to investment, which leads invariably to over-production, surplus, and then bust, which means producers can't sell their surplus, let alone the new things they are trying to create. Even if employers wanted to keep workers on, a recession sets in, layoffs and unemployment increase, and a vicious cycle occurs. Whatever one thinks about that, it is a fact of liberal economics. Due to the features of supply and demand, and a market economy, boom-bust cycles are inevitable. The Republican Bank therefore exists to create, and this is an explicit feature of the Bank, it exists to create a floor and a ceiling, and to regulate the business cycle to the point where it is no longer a wild up and down, but closer to a flat line. We do this through monetary supply, interest rate setting across the Republic for loans, especially to those people who seek to buy things like homes, and to businesses who wish to expand, and through various regulatory policies that ensure that there is faith in our currency, even in times which would otherwise cause people to lose faith in the bank.
FG: The Bank charter that the Government supports promotes zero percent economic growth.
NS: That is correct. Zero percent growth provides...
FG: Excuse me, Comrade Minister, but surely your critics will answer that at zero percent economic growth, you have stagnated the economy, have foreclosed the opportunity and even the incentive for investment, and have missed out on many lucrative opportunities that are associated with boom times. Your critics will argue that surely the bad times are outweighed by the good. How do you answer them?
NS: With zero percent growth, we also eliminate inflation. We also are able, as a political body, to deal easy with the very real burdens that people face when the economy changes. We get rid of unemployment, and can maintain our priority toward a negative unemployment landscape. We may not make a ton of money, and investment may be sluggish, but at the same time, we do not specifically prevent economic growth in any specific sector, nor do we eliminate the potential for profit in the private sector. We merely counter it through monetary and fiscal policy, so that economic expansion in one sector is met with contraction in another. This allows us to meet our political responsibilities under the dual system, and ensure that mania cannot possibly sweep the entire society and otherwise rational individuals stampede at the slightest hint of trouble. The SP would much rather navigate smooth flat waters than waters which are filled with twenty foot tall triangular waves and covered in shoals. The Bank charter allows us to ensure that our waters are tranquil, if nothing else.
FG: But are you concerned that foreign investment will dry up?
NS: Look, Comrade. There is a ton of money to be made in Kalistan. We have a massive, highly educated, motivated, exceptionally well trained workforce in Kalistan. We have advanced infrastructure. We remain awash in natural resources that other nations want. We abound in tourist opportunities. Under normal circumstances, we would not be able to keep up with the inflow of FDI into Kalistan. And though the Bank Charter, and Kalistani National Law prevents that tsunami, even under these conditions, foreign investors can still make money hand over fist in our private sector. And we welcome that impulse. It leads us to a strategic goal of the rechartering of the Bank, that being convertibility.
FG: Are you suggesting that the Kalistani Ruble could be a more universally-convertible currency? It is pretty common understanding that a tightly controlled currency decreases convertibility, so does the Government actually believe that this will increase Convertibility?
NS: Absolutely. Most countries can not make their currency truly convertible because their economies are weak. They are plagued with hyperinflation and their own people do not have confidence in their currency. Our Bank Charter locks in the value of our Ruble, against foreign currencies. When even stable currencies fluctuate, the Kalistani Ruble only jiggles a little. When other currencies collapse, the Kalistani Ruble is held to where it is.
FG: But this doesn't answer the question, with respect. Bank controls decrease convertibility, they decrease the free flow of currency across state lines.
NS: The Kalistani Ruble is a fiat currency and only its value, not its trade, is regulated. It doesn't matter where the currency is, or in whose hands it sits. Our aim is to control the interaction between the money supply and the business cycle. We have controls in the charter which guarantee that the vast majority of the Rubles available are in reserve, to such a degree that we could weather any international shock, and if currency levels in Kalistan proper are getting too low, we will release more of the reserve to pick up the slack. Meanwhile, if we see too much of our money flowing out, we will play with our interest rates, to encourage that money to come back home in the form of foreign investment. Ultimately, we want people to use our money. The more they use our money, the less we have to use theirs.
FG: Will too large a reserve cause the Republic to miss out on investment opportunities of its own?
NS: We have built in provisions that allow Kalistan to make very conservative investments abroad. That fund does not touch the reserve. But in terms of "missing out", we are not missing out when our goal is 0% GDP growth. Under these circumstances, we will always have entirely more than we need to meet any request, and to cover all emergencies.
FG: Do you foresee a robust currency leading to a trade imbalance as imports become cheaper in Kalistan and exports become much more expensive for others?
NS: In theory, yes. We will certainly import more, because we will be able to buy more things with the Ruble. This should encourage other countries to accept our currency, because we will tend to make large orders. But the imbalance should be offset by the value of our exports.
FG: Suppose other nations find Kalistani exports to be too expensive?
NS: Then we will keep them ourselves and pay in cash. A strong currency means a weak competitor, so, if they do not want to acquire Rubles for whatever reason, we can also acquire a mountain of their cash on a one for one exchange, and use it to purchase their goods in their own denomination. Either way, we won't incur a deficit if we buy the goods in cash, even if it isn't the Ruble. But I have a feeling that Kalistani exports will draw some interest abroad eventually, and meanwhile, our currency will become rock solid, guaranteed to hold its value over a long period of time, and should serve as a nice harbor for nations who do not wish to invest in stormier seas elsewhere. Convertibility is the goal here. A very conservative approach to monetary policy will yield benefits for Kalistan over the long run.
FG: Do you have any plans to renationalize the oil and steel industries?
NS: We will be sponsoring bills to that end, once the funding mechanism is in place via the Bank. We also have passed legislation recently which will rebuild the Kalsie, and we will encourage domestic and foreign investments in the Exchange, and now we just need to put in place the Charter. Coming on the heels of the passage of the Ananto Strait Accord, we will be uncapping those wells out in the Strait, and we can expect to see Kalistani oil returning to Kalistani gas stations sooner rather than later. Energy Independence is a very real possibility once more.
FG: We are nearing the end here. Have you had any input from either the National Conservatives or the Syndicalists on the plans to renationalize?
NS: We have not heard from either Party. We had an assist from the Syndicalists on the Omnibus, and the Nationalists supported withdrawal from the extradition treaty. But we have the votes to carry all bills over the line, so perhaps they simply feel that they aren't particularly needed. It is the Government's wish that they would participate, but at the end of the day, the SP still needs to move its agenda. So we will keep working, and perhaps we will have some help sometime.
FG: Well, Comrade Minister, we thank you for the time you spent with us.
NS: Thank you Comrade Journalist. I look forward to our next meeting.
FG: Thank you. Me too.