Could the intellectual debate break the diplomatic silence?

The Conference on the Sustainable Development in Rio de Janeiro held by the United Nations from 20 to 22 June 2012 was accomplished with a common vision of the future. The outcome document, entitled “The future we want” reaffirmed commitment to accelerate the efforts in achieving internationally agreed development goals, including the Millennium Development Goals by 2015. The commitments involve working together and supporting sustained economic growth, social development and environmental protection as well as freedom, peace, security, respect for all human rights, adequate standard of living, justice and democratic societies.

The outcome document states that since 1992 there have been areas of insufficient progress and setbacks in the integration of the three dimensions of sustainable development those followed by multiple financial, economic, food, energy crises and natural disasters. Thus, the continued strengthening of international cooperation, particularly in the areas of finance, debt, trade and technology transfer, innovation, entrepreneurship, capacity-building, transparency and accountability were affirmed by participated countries. Moreover, urgent and ambitious actions those engage stakeholders in sustainable decision making were highly encouraged.

The concept of green economy in the context of sustainable development and poverty eradication is based on the sustainable patterns of production and consumption those enable to manage natural resources with low negative environmental impacts, increase resource efficiency and reduce waste. The common vision of “The future we want” also recognizes that incorporated green economy policies into national sustainable development plans, strategies and priorities are fundamental for countries those seek the transition towards sustainable development. Additionally, it was acknowledged that opportunities to support green economy and job creation may be facilitated through public and private investments in science and technological innovations, regeneration and conservation of natural resources and ecosystems.

According to the vision, governments were advised to develop, manage and regulate industries with principles of sustainable development. Moreover, countries reaffirmed the commitments to reduce subsidies for environmentally harmful production and wasteful consumption and were invited to consider restructuring taxation system with the aim of minimizing trade distortions and the possible adverse environmental impacts.

Consequently, during the conference on sustainable development the agreement to establish an inclusive and transparent intergovernmental process was reached which involves all relevant stakeholders, including governments, international, regional and subregional organizations, the private sector and civil society to take effective measures for achieving sustainable development goals. The countries recognized the importance of goals those are based on Agenda 21 and the Johannesburg Plan of Implementation with full respect of all the Rio Principles and agreed to develop sustainable development goals taking into account different national circumstances, capacities, priorities, international law and commitments made during previous summits in the economic, social and environmental fields.

Following the above commitment The Open Working Group was established on 22nd of January 2013 by decision 67/555 (see A/67/L.48/rev.1) of the General Assembly. The Member States have decided to use an innovative, constituency-based system of representation that is new to limited membership bodies of the General Assembly. This means that most of the seats in the OWG are shared by several countries.

The call for high-level policy making group was launched again to foster sustainable development. Despite the fact that each country has primary responsibility for its own economic and social development, there is a hope that intellectual discussions may break the diplomatic silence and sustainable development goals will be supported by different stakeholders with effective measures.

Is a review of inflation targets in demand?

Inflation rate is one of the indicators that central banks observe and make decisions regarding monetary policy changes. However, why economic growth is associated with the increased industrial output due to higher prices and devaluation of currency instead of increased productivity? Moreover, what is the relationship between the inflation rate and nominal currency rate and the importance of the conventional target of healthy inflation of 2 percentages?

The considerations will be made by taking changes of the monetary policy of the ECB made on 2 May 2013 as an example. According to the introductory statement to the press conference of the Governing Council of the ECB released on 2 May 2013, the real GDP contracted by 0.6% in the fourth quarter of 2012, following a decline of 0.1% in the third quarter. The statement also revealed the decline of output for five consecutive quarters and the decline of annual HICP inflation of euro area to 1.2% in April 2013 compared to the 1.7% in March. According to the monetary analysis section, the annual growth in broad money was 2.6% in March compared to the increase of 3.1% in February and the annual growth rate of the narrow monetary aggregate, M1, increased slightly further to 7.1% in March, reflecting the continued preference for the most liquid instruments in M3. Moreover, while deposits with the domestic money-holding sector continued to grow further in most stressed countries in March, the annual growth rates of loans (adjusted for loan sales and securitisation) to non-financial corporations and households have remained broadly unchanged since the turn of the year, standing in March at -1.3% and 0.4% respectively. So, the decision of the Governing Council of ECB to lower the interest rate on the main refinancing operations of the Eurosystem by 25 basis points to 0.50% and the rate on the marginal lending facility by 50 basis points to 1.00% was related to the attempts to encourage development in the euro area. However, do the expectations of keeping inflation rate close to 2 percentages define a healthy investment environment?

The ECB measures the stability of domestic currency as the nominal effective exchange rate of euro which is calculated as weighted averages of bilateral euro exchange rates against 20 trading partners of the euro area. According to the statistical data of the ECB, the daily nominal effective exchange rate of the euro in May 2013 lost its strength by 10% during the last five years and is close to the average of 10 years (euro value is up by 1.5%). However, considering the relationship between the inflation rate and nominal currency rate during the last five years it appears that correlation was -0.398. Moreover, healthy investment environment may be considered the one in which the nominal interest rate is higher than inflation, id. est. in order the investment generated returns inflation should be lower than the remuneration of debt securities. The estimated annual inflation rate of euro area was 1.2% in April while data of the euro area yield curve revealed market remuneration rates on government debt securities with the maturity of one year in range of 0.020% to -0.006%.

So, declined inflation rate might be treated as market’s self-regulation mechanism in the context of economic constrains.  Slowing demand is a signal to producers and suppliers of services to review the demand of production and services as well as pricing policies those may end to the intensified consumption after the cut of costs and prices.

Consequently, could the inflation target of 2 percentages be released instead of cuts of interest rates?

 

 

What do economists want and finance managers need?

Even though economists and finance managers have similar objectives to pursue actions those result business growth and economic prosperity, tensions regarding suggested development solutions may arise due to different approaches those economists and finance managers apply in estimation of progress and sustainable development. The minutes of the Federal Open Market Committee held on March 19–20 2013 set the continuation of the low interest rates policy till 2015 and purchases of the Federal Reserve’s assets till 2014. Moreover, according to the Bloomberg records, an investor and philanthropist George Soros who delivered speech about the financial crisis management in the conference at King’s College of Universiity of Cambridge suggested to the leaders of European Union to accept Eurobonds. He expressed believes that low interest rates are essential to assist undermined European countries. However, why low borrowing costs those economists suggest are not always the most important factor that finance managers concern about in decision making?

Minutes of the Federal Open Market Committee held on March 19–20 2013 revealed that the Committee decided to keep the target range for the federal funds rate at 0 to ¼ percentage and continue purchasing longer-term Treasury securities at a pace of about $45 billion per month and purchasing agency mortgage-backed securities at a pace of about $40 billion per month. The committee anticipated that such low rates and assets purchase programme is appropriate as long as the unemployment rate remains above 6½ percentage and projected inflation is not more than a half percentage point above the Committee’s 2 percentage longer-run goal. The potential increase of the target federal funds rate was set in 2015 and the end of the Federal Reserve’s asset purchases was foreseen in 2014.

Additionally, George Soros acknowledged that during the distortions in the financial markets borrowing costs may be inadequate high. So, countries those implement strict austerity measures in order to reduce budget deficits suffer with the pace of recovery. However, the reason of tensions regarding suggested solutions may depend on different approaches to the same problem.

The general economic indicators such as the GDP growth, created jobs and inflation target could be improved by additional injection of financial resources into the system. Id est. economists may see the solution in the additional amount of assets required to stimulate development, while finance managers estimate the demand of products or services, required professional skills, optimisation of business processes and management of business development costs.

Thus, facilitation of lending to private sector with low borrowing costs is not the prime concern of finance managers. More sophisticated decisions are made regarding the scope and efficiency of business. From finance management point of view, the strength of business emerges from sustained demand of products or services and capacity to manage business costs. So, the first decision is made regarding what to produce and how to sell which follows with the decisions of how to fund activities?   

Low borrowing costs are only a fraction of weighted average costs of capital which is estimated by finance managers in financial decision making.  The other costs those finance managers assess are the costs of equity related to the shareholders’ assets allocation, as well as estimation of costs of bankruptcy and financial distress due to possible business losses.

Can financial institutions protect themselves from the financial shocks?

The Policy Board of the Bank of Japan announced today quantitative and qualitative monetary easing measures approved at the Monetary Meeting on 4 April, 2013. The main decisions involve doubled the monetary base and the amounts outstanding of Japanese government bonds (JGBs) to 270 trillion yen as well as exchange-traded funds (ETFs) to 3.5 trillion yen within two years, and more than doubled the average remaining maturity of JGB purchases to about seven years. The aim of the introduced measures is to achieve the price stability target of 2% in the consumer price index (CIP) at the earliest possible time within two years through reduced risk premia of purchased assets and increased lending to businesses.

Each financial shock undermines economy even financial stability of the financial institutions is sustained. Thus, the challenge to boost economic growth through increased liquidity and lending capacity of financial institutions may require enhanced credit supervision as additional money injected into the financial system could lead to the increased scope of credit crunch and magnitude of financial shocks. Taking into account the high connectivity between different markets and contingency effect of success and fail, is it possible to reduce central banks’ intervention by strengthened risk management of financial institutions?

The capital requirements to sustain financial shocks still remain the main tool of financial stability. So, the quality of capital of financial institution which enables to preserve value of equity during temporary financial shocks could be the main focus.

Is €10 billion a sufficient amount to support financial sector of Cyprus?

The Central Bank of Cyprus announced that the Eurogroup Agreement on Cyprus was reached on 25 March 2013. According to the press release of the Central Bank of Cyprus, the Bank of Cyprus will be restructured and fully capitalised by acquiring performing loans, other assets and the insured deposits of the disorderly defaulted Laiki Bank. The Laiki Bank Group pursued restructuring plan which has been approved by the Central Bank of Cyprus; however, reported interim consolidated financial statements of the Laiki Bank Group for the nine months ended 30 September 2012 revealed loss of €1,67 billion, decline in total assets to €30,37 billion and deterioration of customer deposits to €17,86 billion. So, is financial assistance of €10 billion negotiated with the Eurogroup a huge or a small amount for Cyprus?

The Eurogroup Statement on Cyprus released on 25 March 2013 states that Laiki will be resolved with a full contribution of equity shareholders, bond holders and uninsured deposits’ conversion to equity in such a way that a capital ratio of 9 % was secured by the end of the programme. The bailout amount of €10 billion will be used to safeguard all deposits below €100000; however, money of agreed financial assistance will not be used for the recapitalisation of Laiki Bank and Bank of Cyprus. Thus, is €10 billion a sufficient amount to strengthen financial sector?

Most likely, the majority would respond that the sufficient amount of the bailout depends on the scope of possible damages to the economy, the degree of dissatisfaction of the depositors and investors, and undermined confidence in the financial markets. However, uninsured deposits’ conversion to equity, according to the agreed programme, should not be treated as depositors’ loss. It is an exchange of assets to ensure financial stability by sufficient capital requirements. Consequently, strong financial sector is not defined by the amount of money. It is rather a result of the successfully allocated financial assets.

So, the answer whether €10 billion is a huge or a small amount of money could be measured by the time and efforts required to make it.

 

The first step to succeed or the last chance to survive – an invitation to sustainable development PLEASE SHARE!

Abstract

Inflated assets’ bubbles remain the key to financial risks. The other risk is ignorance of markets’ inertia. It seems that financial stability encourages the economic growth, and vice versa, economic growth is required to keep financial stability. But if consumption does not generate enough incomes to cover capital expenditures, is it a sign of bad luck or unconsidered actions those fail to match customers’ preferences? The main criterion of efficient markets is equal opportunities to gather information so that market participants were able to estimate and compare the value of assets. However, with markets’ distortions investors take inadequate higher risks than expected returns. Thus, are there sustainable development strategies those allow companies to generate incomes during economic contractions and enable investors to withstand financial shocks in the financial markets?

A brief review of European policies

Recession in Europe undermined local businesses and consumption. According to the  Eurostat  data the real GDP growth rate in  European  Union’s  27  countries  was -4.6% in 2009 which followed by a positive increase of 2.1% in 2010, 1.5% in 2011 and decline of -0.3% in 2012. The rate was  projected  to  increase by 0.1% in 2013 and  1.6%  in  2014.  The  biggest  rates   of economic  contraction in  2012 were  registered  in Greece,  Portugal,  Cyprus,  Slovenia  and Italy.  The recorded real   GDP  growth  rates  amounted -6.4%,  -3.2%, -2.3%, -2.3% and -2.2% respectively. According to the data recorded in January 2013, the unemployment rate in 27 European countries comprised 10.8% with the highest rates in Spain, Croatia, Portugal those amounted 26.2%, 18%, 17.6% respectively and the unemployment rate of 26.4% in Greece which was registered in December of 2012. The analysis of EU-27 household final consumption expenditure published in February 2013 at the Eurostat’s Statistics in focus revealed that actual individual consumption in 2011 was close to the EU-27 average of 70% of GDP for most countries; however, the range of the actual individual consumption per capita in euros varied from €35000 in Luxembourg and €29600 in Denmark to €6400 in Hungary in 2011 (respectively €3400 in Bulgaria and €4200 in Romania based on last available data for 2010). According to the survey the Baltic economies and Greece were the most severely affected, with loss of actual individual consumption (in volume terms) of 12% to 15% between 2008 and 2011.

 

European region is also the case of multiple decisions regarding bailouts, fiscal discipline policies, strategies for economic recovery and financial stability measures. According to the European Financial Stability and Integration Report prepared in 2011, during 2008 and October 2011, the Commission approved total state aid measures of €4.5trillion (36.7% of EU GDP), the majority of which in the form of guarantees on bank liabilities. The actions taken to insure stability involved enhanced financial supervision in Europe with established new European Supervisory Authorities for the banking, securities markets and insurance and occupational pensions sectors those started operating in January 2011, the Commission’s contribution to the new Basel agreement on bank regulation (Basel III) in 2010, the European Financial Stabilisation Mechanism (EFSM) and the European Financial Stability Facility (EFSF) those were created in 2010 to provide up to €500 bn to Member State governments for reduction of tensions in euro area sovereign debt markets as well as established the permanent European Stability Mechanism (ESM). The other policies include measures for increased transparency such as temporary restrictions on short sales, prohibition to use credit default swaps in emergency situations, standardised OTC derivative transactions’ clearing via central counterparties as well as the maximum guarantee cover for held deposits to €100000 and investors’ compensation scheme to cover investments to €50000. 

Moreover, financially fragile countries required financial assistance to implement structural reforms in order the borrowing costs were kept at sustainable level in the markets. According to the European Financial Stability and Integration Report prepared in 2011, the joint European and IMF’s financial assistance to Greece amounted €110 billion in 2010, financial stability support to Ireland reached up to €85 billion. Portugal received an approved €78 billion bail-out in May 2011. Additionally, the financial assistance programmes have continued in Latvia, Romania and a precautionary programme was also requested by Hungary. One of the exceptional cases could be mentioned private investors’ voluntary acceptance of a 50% Greek bond haircut which enabled both a €100 billion cut in Greece's sovereign debts and allowed a new Greek programme of aid of €100 billion at the end of 2011.

European financial sector also required governments’ interventions and bailouts of banks due to mismanaged aggressive business strategies. According to the European Financial Stability and Integration Report 2011, the total amount of state aid actually used by the financial sector in EU 27 during October 2008 and December 2010 comprised €1.6 trillion (13.1% of EU27 GDP) of which: €1.2 trillion and other liquidity measures; €288 billion for recapitalisations; €121 billion for asset relief interventions. Restructuring of banks in Ireland, Denmark, Germany, Spain, United Kingdom involved mergers, recapitalization, deleveraging and operational optimizations.

 

In addition, the European Central Bank’s (ECB) role was also significant. According to the European Central Bank’s Annual Report 2009, following the consequences of financial crisis the Governing Council of the ECB lowered interest rate on the main refinancing operations at 1.00%, the rate on the deposit facility at 0.25% and the rate on the marginal lending facility at 1.75% in 2009. The rates were slightly increased in 2011 as a result of the improved economic outlook; however, due to new demand of liquidity and intentions to support economic recovery with facilitated lending to businesses, the interest rates were lowered even more in 2012. The effective rates from 11 July 2012 are the following: rate on the main refinancing operations is 0.75%, the rate on the deposit facility is 0.00% and the rate on the marginal lending facility is 1.55%. According to the ECB’s annual report prepared in 2009, the enhanced credit support to economy comprised the following five measures:

– the provision to euro area banks of unlimited liquidity at a fixed rate in all refinancing operations against adequate collateral;

– the lengthening of the maximum maturity of refinancing operations from three months prior to the crisis to one year;

– the extension of the list of assets accepted as collateral;

– the provision of liquidity in foreign currencies (notably US dollars); and

– outright purchases in the covered bond market.

The first 12-month LTRO, conducted on 24 June 2009, resulted in a record €442 billion being allotted to the euro area banking system at a fixed rate of 1%, bringing the total volume of outstanding refinancing operations to nearly €900 billion, and thereby contributed to lower money market rates also at longer maturities. The stabilisation in euro area and the recovery in asset prices from the record lows after the collapse of Lehman Brothers were indicated first time at the end of the first quarter of 2009. However, due to dysfunctional markets the ECB continued interventions in 2010, 2011 and 2012. According to the European Financial Stability and Integration Report 2011, between May 2010 and the end of December 2011 the ECB bought securities those amounted €218 billion, and at the end of 2011 its holdings contained about €211 billion. Furthermore, due to the ECB’s launched two 3-year long-term refinancing operations (LTROs), the ECB allotted €489 billion in December of 2011 and during the second round of LTROs in February 2012 the ECB lent a total of €529 billion.

 

Moreover, investigations of supervisory authorities disclosed other systemic weaknesses of the European financial sector such as mis-sales of insurance, illegally fixed Libor rates and money laundering cases. Taxes on transactions and caps on bonuses are the further policies beside increased capital and liquidity requirements those are intended to shift banks’ business models towards stability and credibility.

The basis of stronger European Union was set in the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union on 2 March 2012. One of the main elements of the Treaty was the so-called fiscal compact which proposes steps forward towards greater budgetary discipline and better coordinated fiscal policies in the EU. The other major agreement was reached regarding the European banking union in December 2012. Member States agreed to give to the ECB a supervisory responsibility. Тhe Single Supervisory Mechanism will enable the ECB to detect risks in banking sector, request necessary actions, ensure compliance with capital requirements,  grant and revoke licences for credit institutions.

Observations about recent events

Considering the economic contraction, raised unemployment and diminished consumption due to austerity measures the European countries went through in order to balance their sovereign budgets, stabilise financial sector and reduce borrowing costs, similar economic consequences may affect the US as it also attempts to reduce sovereign deficit. According to the Congressional Budget Act of 1974, an agreement for the budget for the United States Government for fiscal year 2014 and appropriate budgetary levels for fiscal years 2015 through 2023 should be achieved by April 15. The findings of the House of Representatives reported by the Committee on the Budget at the legislative text stated that measures those were used to boost economic activities during the recession and early stages of recovery added over $1 trillion to the debt though economy continues to perform at a subpar trend. Moreover, a view that large debt levels impose higher tax burden, creates uncertainties for businesses, stagnates the US economic growth and job creation was expressed. Consequently, the Budget Committee proposed to spend $4.6 trillion less in the next decade compared to the current path of spending. Private sector which is highly dependent on the government stimulus policies may suffer the most due to the government’s budget discipline policies.

 

Other potential threats for the financial stability were reported in February and March. While money laundering investigations and €17 billion bailout which was negotiating for Cyprus seemed to be insignificant in terms of the scope of influence on financial markets, the downgraded UK’s AAA credit rating to AA1 by rating agency Moody’s and the Bank of England’s estimates on the capital shortfall of £35 billion for Britain’s banks if risk-weighted assets were standardised are important risk factors considering investment. Moreover, it seems that the US Federal Reserve’s report on the stress test of banks was also ignored. According to the Federal Reserve’s released results on 7 March 2013, the nation's largest banks have continued to improve their ability to withstand severe economic conditions with stronger capital positions. However, due to the stress scenario which includes a peak unemployment rate of 12.1%, a drop in equity prices of more than 50%, a decline in housing prices of more than 20%, and a sharp market shock for the largest trading firms, projected losses at the 18 bank holding companies would total $462 billion during the nine quarters of the hypothetical stress scenario.  Additionally, the aggregate tier 1 common capital ratio, which compares high-quality capital to risk-weighted assets, would fall from an actual 11.1% in the third quarter of 2012 to 7.7% in the fourth quarter of 2014 in the hypothetical stress scenario.

Despite the on-going fiscal discipline measures, economic contraction threats and estimated potential losses due to financial shocks the S&P 500 Index exceeded pre financial crisis level and reached 1556 on the 11^th of March 2013. The FTSE 100 Index similarly reached a new high of 6510 on the 12^th of March 2013. 

Even though the international standards and supervision on financial institutions were enhanced, deterioration of assets’ value remains a major pressure on stability. Consequently, investors may face waves of gradual downtrends if performance of companies misses estimated earnings due to diminished consumption and weak economic growth. The other possible scenario is higher volatility - if resilience of declined equities’ value is stimulated with continuing monetary easing policies.

 

And if it is not true, then how much such development cost and how long such recovery last?

 

 An invitation

Certainly, various regions are exposed to different economic development and financial stability challenges; however, is it possible to balance economy and financial stability by successful expansion of sustainable businesses and reduced financial risks?

Taking into account threats of current economic growth and financial stability issues, we would like to invite policy makers, financial institutions, entrepreneurs and innovators, academics and other interest groups to share their observations and experience those may help to identify factors required to attract investors and remove barriers for sustainable development. So, that launched financial facility programmes supported development necessary to strengthen resilience during financial shocks and contractions of economy.

Proposed topics are the following.

1.   The concept and benefits of sustainable development. Threats and barriers attracting investors. Consumer’s preferences. Estimation of the long term value instead of initial costs of the investment projects. Business resilience during financial shocks and contraction of economy.

 

2.   Challenges introducing specific sustainable development projects/investment opportunities in different regions.  The attractiveness of business environment, issues related to the market uptakes of innovations, transfer of knowledge and skills. Preparation of investment projects and managing risks of project implementation.

 

3.   Business development, competitive advantage of investment in environmentally friendly innovations those let to achieve greater resource efficiency. International investment opportunities, benefits and challenges of business development, international cooperation, cross continental partnerships, required legal reforms, preparation of business development plans and risk management.

 

4.   Market uptake of innovations, issues related to standardisation and investment in innovations. Protection of intellectual property rights, practices and strategies for launched innovations.

 

5.   Attractive investment opportunities, expectations of investors, assessment of investment opportunities, risk management practices. What makes proposed investment project attractive?

 

6.   Fund raising practices. Available alternative funds and financial facilities for implementation of sustainable development projects. Preparation of investment proposal, feasibility of investment opportunity, assessment of alternative strategies and project risk management.

 

7.   Balanced interests in public and private partnerships. Balanced rights and obligations of public and private partnerships, challenges managing conflicts of interests.

 

8.   Financial stability issues. Management of counterparty, credit and market risks. Practices and challenges in estimation of risks, returns and costs of capital, assessment of leverage in financial decisions.

 

9.    Sovereign wealth funds interest in sustainable development solutions. Investment priorities of sovereign wealth funds, assessment of attractive investment opportunities.

 

10.   Managing conflicts of interests, international disputes. Demand of legal advice, services and reforms.

If you are interested in topics mentioned above and investment in sustainable development please let us know.   

Thank you for your time in considering cooperation.

We look forward to hearing from you.

Yours sincerely,

Ms Asta Pravilonytė

Website: www.asta.me.uk

Email: asta@asta.me.uk

Tel: +44 (0) 2083166205

Mob: +44 (0) 7531222596

22 Hastings Street

London SE18 6SY

United Kingdom

How much the purchase power of currency affects prosperity?

It seems that there is no end to the monetary policy easing.  According to the Wall Street Journal’s article published on 5 February, 2013, French President F Hollande is calling the euro-zone governments to consider the monetary zone’s policy on foreign exchange. The massive quantitative-easing programmes launched by the US Federal Reserve and the Bank of England as well as policies of the Bank of Japan to keep yen at law rates encourage European leaders to respond with similar decisions. However, how effective is monetary policy easing?

The threat of undermined stability of the global financial system was the main reason for central banks to start purchasing toxic assets and injecting additional cash into the system. Initiated cooperation was seen as essential to calm the markets; however, quantitative easing programs have grown into the permanent policies. Moreover, the necessity of such prolonged actions is backed with the economic recovery policies. The financial stability was sustained in exchange of currency devaluation policies those were also understood as favourable circumstances for exporters. The race for better export conditions sparked currency wars between the major advanced economies; however, does reduced purchase power of currency increase the prosperity?  

Money is a short term asset and the value of the securities denominated in particular currency also fluctuates according to the exchange rate. Thus, how much wealth is generated through the policies those reduce value of currencies?

Maybe it depends on goals and measures those are placed in action. Could it be that the devaluation of the currency is a goal and the monetary easing programmes are the measures to support the devaluation? Could it be that increased export is a goal and the devaluated currency is a measure to achieve it? Perhaps all of those measures are used as undoubted believes of strong recovery. But how much reduced purchase power of currency increases consumption and strengthens consumers’ ability to choose products and services?

So, if the goal is prosperity, could the devaluation of the currency be the right measure to pursue?