Jake Nguyen runs a nervous hand through his once finely combed hair. He loosens his once perfectly knotted silk tie. And he rubs his sweaty hands across his once immaculately pressed trousers. Today has certainly not been a good day.
Over the past few months, Jake had heard whispers circulating from Wall Streetâwhispers from the lips of investment bankers and stockbrokers famous for their outspokenness. They had whispered about a coming Japanese economic collapseâ whispered because they had believed that publicly vocalizing their fears would hasten the collapse.
And, today, their very fears have come true. Jake and his colleagues gather around a small television dedicated exclusively to the Bloomberg channel. Jake stares in disbelief as he listens to the horrors taking place in the Japanese market. And the Japanese market is taking the financial markets in all other East Asian countries with it on its tailspin. He goes numb. As manager of Asian foreign investment for Grant Hill Associates, a small West Coast investment boutique specializing in currency trading, Jake bears personal responsibility for any negative impacts of the collapse. And Grant Hill Associates will experience negative impacts. Jake had not heeded the whispered warnings of a Japanese collapse. Instead, he had greatly increased the stake Grant Hill Associates held in the Japanese market. Because the Japanese market had performed better than expected over the past year, Jake had increased investments in Japan from $2.5 million to $15 million only one month ago. At that time, one dollar was worth 80 yen.
No longer. Jake realizes that todayâs devaluation of the yen means that one dollar is worth 125 yen. He will be able to liquidate these investments without any loss in yen, but now the dollar loss when converting back into U.S. currency would be huge. He takes a deep breath, closes his eyes, and mentally prepares himself for serious damage control.
Jakeâs meditation is interrupted by a booming voice calling for him from a large, corner office. Grant Hill, the president of Grant Hill Associates, yells, âNguyen, get the hell in here!â Jake jumps and looks reluctantly toward the corner office hiding the furious Grant Hill. He smooths his hair, tightens his tie, and walks briskly into the office.
Grant Hill meets Jakeâs eyes upon his entrance and continues yelling, âI donât want one word out of you, Nguyen! No excuses; just fix this debacle! Get all of our money out of Japan! My gut tells me this is only the beginning! Get the money into safe U.S. bonds! NOW! And donât forget to get our cash positions out of Indonesia and Malaysia ASAP with it!â
Jake has enough common sense to say nothing. He nods his head, turns on his heels, and practically runs out of the office.
Safely back at his desk, Jake begins formulating a plan to move the investments out of Japan, Indonesia, and Malaysia. His experiences investing in foreign markets have taught him that when playing with millions of dollars, how he gets money out of a foreign market is almost as important as when he gets money out of the market. The banking partners of Grant Hill Associates charge different transaction fees for converting one currency into another one and wiring large sums of money around the globe.
And now, to make matters worse, the governments in East Asia have imposed very tight limits on the amount of money an individual or a company can exchange from the domestic currency into a particular foreign currency and withdraw it from the country. The goal of this dramatic measure is to reduce the outflow of foreign investments out of those countries to prevent a complete collapse of the economies in the region. Because of Grant Hill Associatesâ cash holdings of 10.5 billion Indonesian rupiahs and 28 million Malaysian ringgits, along with the holdings in yen, it is not clear how these holdings should be converted back into dollars.
Jake wants to find the most cost-effective method to convert these holdings into dollars. On his companyâs website, he always can find on-the-minute exchange rates for most currencies in the world (see Table 1 ).
The table states that, for example, 1 Japanese yen equals 0.008 U.S. dollars. By making a few phone calls, he discovers the transaction costs his company must pay for large currency transactions during these critical times (see Table 2 ).
Jake notes that exchanging one currency for another one results in the same transaction cost as a reverse conversion. Finally, Jake finds out the maximum amounts of domestic currencies his company is allowed to convert into other currencies in Japan, Indonesia, and Malaysia (see Table 3 ).
a. Formulate Jakeâs problem as a minimum-cost flow problem, and draw the network for his problem. Identify the supply and demand nodes for the network.
b. Which currency transactions must Jake perform to convert the investments from yens, rupiahs, and ringgits into U.S. dollars to ensure that Grant Hill Associates has the maximum dollar amount after all transactions have occurred? How much money does Jake have to invest in U.S. bonds?
c. The World Trade Organization forbids transaction limits because they promote protectionism. If no transaction limits exist, what method should Jake use to convert the Asian holdings from the respective currencies into dollars?
d. In response to the World Trade Organizationâs mandate forbidding transaction limits, the Indonesian government introduces a new tax to protect its currency that leads to a 500 percent increase in transaction costs for transactions of rupiahs. Given these new transaction costs but no transaction limits, what currency transactions should Jake perform to convert the Asian holdings from the respective currencies into dollars?
e. Jake realizes that his analysis is incomplete because he has not included all aspects that might influence his planned currency exchanges. Describe other factors that Jake should examine before he makes his final decision.
Sample Solution
Another argument supporting the claim that preventing cultural heritage sites to fall into the hands of IS will help in the fight against them is that IS will lose a way to express their power and ideology on a global scale and recruit new members. Besides the fact that they do this because The emergence of social media brought a new way of terrorism into being. In âThe Islamic Stateâs symbolic war: Daâeshâs socially mediated terrorism as a threat to cultural heritageâ, this new way of terrorism is described as âsocially mediated terrorismâ (Smith et al. 2016, 164). The emergence of social media resulted in an opportunity for IS to use the destruction of cultural heritage as a way to âmanipulate and persuade audiencesâ (Smith et al. 2016, 181) and recruit new members on a global level (Smith et al. 2016, 174). Also, the emergence of social media caused that the âdestruction of cultural heritage serves the strategic purpose of cloaking the Islamic State with an aura of invincibility through highlighting the impotence of its opponents.â (Smith et al. 2016, 181). Furthermore, Paolo Foradori and Paolo Rosa, Professor and Associate Professor of Political Science at the University of Trento ((Foradori and Rosa 2017, 160), state that IS uses the distribution of images of them destructing cultural heritage sites as a new way of portraying their strength and âits radical, merciless, and unconditional ideologyâ which will recruit supporters from all over the world âby advertising its irresistible powerâ (Foradori and Rosa 2017, 150). So, due to the emergence of social media IS saw a chance to be able to propagate their ideas globally. The destruction of cultural heritage served to be a good tool for this. If Islamic State is prevented from access to cultural heritage to damage it, it loses a way to globally express their power and ideology and a way to recruit new members. This, in turn, might affect the powerful image the rest of world has of them and an ability to recruit new members, they will thus lose an ability to expand. On the other hand, Foradori and Rosa warn that IS could move on to other activities through which they can show their power on a global scale, shifting from cultural destruction to human killings. This will be much more undesired than the destruction of global heritage and will neither shrink the activities of IS. The human attacks might even become crueler than before, as they might go back to human killings with even more brutality or they might focus on specific groups like women and children (Foradori and Rosa 2017, 157). However, the message IS wants to spread with these shifted violent activities will not be received as globally as the messages spread from the destruction of cultural heritage. This is in contrast to Foradori and Rosa who stated that human killings will reach the same goal as the destruction of cultural heritage in terms of distributing the IS ideology on a global scale (Foradori and Rosa 2017, 157). This is because in contrast to videos of the destruction of cultural heritages, videos of murders can be very unpleasant to watch for most people and the videos that are being circulated by IS will only fulfill their goal if they are actually being watched by people around the world (Smith et al. 2016, 176). So, keeping cultural heritage out of the hands of IS might indeed cause IS to lose their powerful face on a global level global, and an ability to recruit new members, they will thus lose an ability to expand. Finally, as many cultural heritage sites have a good strategic military position, they can very valuable possessions for both IS and the Global Coalition fighting IS. The side who possesses the cultural her>
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Another argument supporting the claim that preventing cultural heritage sites to fall into the hands of IS will help in the fight against them is that IS will lose a way to express their power and ideology on a global scale and recruit new members. Besides the fact that they do this because The emergence of social media brought a new way of terrorism into being. In âThe Islamic Stateâs symbolic war: Daâeshâs socially mediated terrorism as a threat to cultural heritageâ, this new way of terrorism is described as âsocially mediated terrorismâ (Smith et al. 2016, 164). The emergence of social media resulted in an opportunity for IS to use the destruction of cultural heritage as a way to âmanipulate and persuade audiencesâ (Smith et al. 2016, 181) and recruit new members on a global level (Smith et al. 2016, 174). Also, the emergence of social media caused that the âdestruction of cultural heritage serves the strategic purpose of cloaking the Islamic State with an aura of invincibility through highlighting the impotence of its opponents.â (Smith et al. 2016, 181). Furthermore, Paolo Foradori and Paolo Rosa, Professor and Associate Professor of Political Science at the University of Trento ((Foradori and Rosa 2017, 160), state that IS uses the distribution of images of them destructing cultural heritage sites as a new way of portraying their strength and âits radical, merciless, and unconditional ideologyâ which will recruit supporters from all over the world âby advertising its irresistible powerâ (Foradori and Rosa 2017, 150). So, due to the emergence of social media IS saw a chance to be able to propagate their ideas globally. The destruction of cultural heritage served to be a good tool for this. If Islamic State is prevented from access to cultural heritage to damage it, it loses a way to globally express their power and ideology and a way to recruit new members. This, in turn, might affect the powerful image the rest of world has of them and an ability to recruit new members, they will thus lose an ability to expand. On the other hand, Foradori and Rosa warn that IS could move on to other activities through which they can show their power on a global scale, shifting from cultural destruction to human killings. This will be much more undesired than the destruction of global heritage and will neither shrink the activities of IS. The human attacks might even become crueler than before, as they might go back to human killings with even more brutality or they might focus on specific groups like women and children (Foradori and Rosa 2017, 157). However, the message IS wants to spread with these shifted violent activities will not be received as globally as the messages spread from the destruction of cultural heritage. This is in contrast to Foradori and Rosa who stated that human killings will reach the same goal as the destruction of cultural heritage in terms of distributing the IS ideology on a global scale (Foradori and Rosa 2017, 157). This is because in contrast to videos of the destruction of cultural heritages, videos of murders can be very unpleasant to watch for most people and the videos that are being circulated by IS will only fulfill their goal if they are actually being watched by people around the world (Smith et al. 2016, 176). So, keeping cultural heritage out of the hands of IS might indeed cause IS to lose their powerful face on a global level global, and an ability to recruit new members, they will thus lose an ability to expand. Finally, as many cultural heritage sites have a good strategic military position, they can very valuable possessions for both IS and the Global Coalition fighting IS. The side who possesses the cultural her>
