May 31st, 2012, 12:12 pm
QuoteOriginally posted by: yugmorf2For QE to really be a motor for generating inflation one also needs a fair dose of low central banking credibility. Non-independence of the central bank is probably a minimum condition, along with clear intent to fund government budget deficits with created money. Low monetary depth (in poorer countries, the ratio of broad to narrow money is much lower), might also aid the inflation process (relates to Anthis' point on velocity). QE hasn't delivered high inflation in the like of the UK and US because in such countries they have some 30 years of inflation fighting credibility up their sleeves that they justifiably don't want to throw away (unless things get considerably worse on the ground - such as a larger breakdown of financial system than we've seen to date).Any of this apply to Tunisia?Well, the thing is Tunisia can't finance its imports. There is a very serious trade deficit, and the abroad currency reserves ($6bn) are depleting fast. If the trade deficit (around $0.5bn/month) carry on, then we'll run out of cash in a year or so. Worse, there is debt that needs repayment and one can't know which bond will mature and what's its size; also some investors have the right to withdraw cash and their assets is around $2.5bn.So if a snowball effect began, everything could collapse faster than anyone could thing. S&P downgraded us recently to non-investment grade and also downgraded several Tunisian banks.Regarding your question, credit cards are barely used and accepted. Business trust and use cash a lot more. Checks are being rejected by many businesses due to fraud.