Kalistani Major History

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Kalsie's wild ride ends with Net Loss
Conservative policies "bad for Kalistan" says Finance Minister
Kaliburg Ananto
January 7, 5405


Kalsie's International Cambio Market returns to life following disastrous conservative interlude

Kalistan has once more weathered the storm of a so-called "Conservative Party" who existed in this iteration only to marry liberal economic policies to extremely repressive curtailment of civil liberty and expansion of the Police State in the Republic. The Conservative Party has gone defunct and now a new governemnt, composed entirely of the Socialist Party has restored order and sanity to the Nation's economic and monetary systems. The effect has been calming to both the Kalsie and the Currency Exchange system known as the International Cambio.

"We saw wide fluctuations in the market," said market analyst Glen Baker, of Sulari Financial Ltd. "These fluctuations in the markets were associated with the more hands off approach of the liberal policy makers in the Conservative Party. Once changes were made that strengthened management's hand in labor relations, private capital flooded into the Kalistani market, as capitalists who have been invested in more volitile and lucrative markets in other nations rushed home to collect a windfall that they expected. But five short years is not nearly enough to shake Kalistan out of its habits, and most of that investment failed to pan out in the hyper inflated speculative bubbles that began forming in most private sector areas. Those bubbles burst leaving perhaps tens of thousands of capitalists holding the bag, and as a result, due to short selling and margin calls, they soon found themselves in trouble. The net result of ill advised deregulation in the Private Sector was negative for most institutional investors, and led to a reaction by the Kalistani Government, who swiftly moved to restore labor rights in the Private Sector."

Other fluctuations were felt in the Kalistani Ruble itself. "We saw a dramatic increase in the value of the Ruble," said Baker. "By dramatic, of course I mean outside of two standard deviations from its historic average. While it did not lead to widescale deflation, the demand for a more unregulated currency led the Kalistani Ruble to be revalued against the TMU in the Kalsie to about .788 KRB to one TMU. This revaluation has thrown the Ruble off the mark, making imports much more cheaper than before but local products a bit more expensive. And since most demand is supplied by Kalistani production, it is going to take a little time for prices to find a new equilibrium, and it will be a bit painful for both local consumers and foreign importers into the medium term."

Getting the stock market and the Cambio back under control has been just one of the policies of the new Government. Another is standing the Militia back up and recovering whatever is left of the decommissioned naval equipment abandoned in Lourenne at the start of the recent crisis. "We are just in the earliest phases of discussing the matter with our Lourennais Counterparts," said Francesca Dias, spokesperson for the Ministry of Foreign Affairs. "Obviously we want the ships back, and obviously we will want to proceed in a way that will preserve and strengthen our relationship with Lourenne. Details will be forthcoming, but the Minister will be flying to Eroncourt this Spring to begin formal talks for the return of the decommissioned 2nd and 3rd Fleets."

As the Cambio goes back into swing in Kalistan, the Republican Government has expressed its interest in returning to the quest of making Kalistan's currency internationally convertible. "Our Currency rarely loses or gains in value," said Baker. "This often makes the Ruble very attractive for institutional investors who want to hold foreign currency as part of their portfolio. It is a safe place to park assets. The effective 0 percent growth policies of the Kalistani Government under Socialist control always mean that the economy targets growth to population increase. This means that there is a nice steady 2-3% growth rate over time for investors, with almost no threat of devaluation. And the strengthening of the currency against the TMU means that the Rubles held by individuals are now worth far more than the 2-3% per annum growth they usually experience. In the short 5 years of Conservative Rule, the TMU lost an additional 6-10% on the Ruble, in addition to the normal growth rate. The Ruble's primarily institutional investors in Lourenne, Lodamun, Hutori, and Dolgava gained a windfall from the deregulation, that effectively doubled the value of growth in their investment portfolio each year. While we expect the growth rate to return to ZPG levels, that was still a fantastic return on investment, and as a result we saw new large scale buys by sovereign wealth funds and institutional buyers in other friendly nations across Northern Seleya and Dovani."

Convertibility is sought out by the Kalistani Government primarily because it smooths the road for trade. A convertible currency means that Kalistani Rubles don't have to change into a third currency for Kalistan and another country to do business. "There are two necessary conditions for convertibility," said Baker. "One is that governments will accept our currency because they know it will be easy for them to convert the money into their own currency. We make that possible through rock solid valuation and up to the moment exchange rates, as well as no transaction fees for Governments to buy Rubles. The second is that large players also hold large amounts of our currency and they use that currency to make purchases. If our money spends like their money, they will not see any downside to acquiring our money, especially if our money regularly appreciates against their own currency, and a ruble today can buy as much as .98 Rubles can next year. A careful control over both the money supply in society and the valuation on the International Cambio can assure that second condition."

Baker expects the Ruble to experience slower than usual growth over the next 5 years to allow it to slowly settle back down at around 1.00 TMU, where ZPG principles will kick in once more.