jupitersterrain four

Katyia4 November 2012 4:55AM

Response to wellrowmedown, 4 November 2012 3:50AM

so you recommend making SWFs instead of using IMF … so that means we’d be
not bailing out other countries wouldn’t it – - -

SWFs are typically created when governments have budgetary surpluses and have little or no international debt. This excess liquidity is not always possible or desirable to hold as money or to channel into immediate consumption. This is especially the case when a nation depends on raw material exports like oil, copper or diamonds. In such countries, the main reason for creating a SWF is because of the properties of resource revenue: high volatility of resource prices, unpredictability of extraction, and exhaustibility of resources
It is believed that SWFs in resource-rich countries can help avoid resource curse, but the literature on this question is controversial. Governments may be able to spend the money immediately, but risk causing the economy to overheat, e.g. in Hugo Ch�vez’s Venezuela or Shah-era Iran. In such circumstances, saving the money to spend during a period of low inflation is often desirable. Other reasons for creating SWFs may be economical, or strategic, such as war chests for uncertain times
There are two types of funds: saving funds and stabilization funds. Savings SWFs build up savings for future generations. One such fund is the Government Pension Fund of Norway. Stabilization SWFs are created to reduce the volatility of government revenues, to counter the boom-bust cycles’ adverse effect

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