EPTi got linked on pony express and i just wanted to make the disclaimer:
just about every post in here is bunk with like 2 exceptions. don't believe everything you see on the internet.
/ungrateful bitch
why does currency lose value?
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ahrara_
Afghanistan1715 Posts
i got linked on pony express and i just wanted to make the disclaimer: just about every post in here is bunk with like 2 exceptions. don't believe everything you see on the internet. /ungrateful bitch | ||
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SolaR-
United States2685 Posts
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CaucasianAsian
Korea (South)11593 Posts
less money in circulation higher value | ||
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EmeraldSparks
United States1451 Posts
If the perceived value of American stuff seems to go down, then people will want dollars less, meaning the demand for dollars goes down, which means a foreign currency will buy more dollars or conversely a dollar will be less foreign currency. I think. I could be lying. | ||
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CaucasianAsian
Korea (South)11593 Posts
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Ra.Xor.2
United States1784 Posts
On September 23 2008 07:10 CultureMisfits wrote: cuz the government prints more of it. This is the main reason. During the 1930s, Germany printed a shitload of money to cover econ troubles and sank into a huge depression. Hitler ended up taking over because of that  . Also, the Confederate states during the civil war suffered a over 10000% inflation because they just kept printing bills which had no value.What I don't understand is, since gold or other "hard currency" isin't used to back money anymore, why does it still have value? | ||
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EmeraldSparks
United States1451 Posts
Suddenly all the rubles you thought you could buy things with you can't really buy things with. You try to exchange them, but nobody wants them, so you end up trading ten million rubles for a shiny penny to somebody who thinks he can sneak into Russia and buy the nuclear missiles. | ||
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QuanticHawk
United States32130 Posts
On September 23 2008 07:18 Ra.Xor.2 wrote: This is the main reason. During the 1930s, Germany printed a shitload of money to cover econ troubles and sank into a huge depression. Hitler ended up taking over because of that . Also, the Confederate states during the civil war suffered a over 10000% inflation because they just kept printing bills which had no value.What I don't understand is, since gold or other "hard currency" isin't used to back money anymore, why does it still have value? the strength of the economy and the ability of the nation to pay back the loans they have | ||
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theonemephisto
United States409 Posts
The previous statements affect the foreign market, but it adds a new element, the desire for American goods/services/investments. If you want anything sold in America or if you want to invest in American companies, you're going to need American dollars. It's another supply/demand question, how many Americans are selling dollars for foreign currency to buy foreign goods/invest in foreign markets and how many foreigners are buying dollars to buy American goods/invest in American markets. | ||
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Klockan3
Sweden2866 Posts
Now different countries have different inflation levels, and they make sure that no matter what happens in a sole monetary system everyone else will still keep their correct buying power. For example lets say that the USA raised their wages and prices by 100%, then for it to be fair the dollar would have to fall down to 50% of its old value or we would have an imbalance in currency levels. Anyway, the dollar getting weaker just means that you have a higher relative inflation than the currencies you are comparing it too. Also if you read some economics you would realize that inflation is a very important part of every economy, since it forces people to invest or see their fortune dwindle with time. Invested money contributes to the economy while people having money tucked away under their beds is what causes depressions. | ||
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LonelyMargarita
1845 Posts
http://en.wikipedia.org/wiki/Exchange_rates#Fluctuations_in_exchange_rates The rest of the article also mentions things like pegging that will affect it. | ||
Jibba
United States22883 Posts
On September 23 2008 07:10 CultureMisfits wrote: cuz the government prints more of it. This is a really poor explanation and has nothing to do with current inflation. I'm about to go eat and a real economist should really be replying (but not a Ron Paul-ist), but it is related to money supply and velocity, and because of America's perceived bond backing ability and pretty much every other factor you can think of. If Bush puts a trillion dollars into Wall Street like he's hoping to do, it gets relayed to tax payers which in turn is going to hurt companies forcing them to raise prices. Confidence has a lot to do with it. Enough with the gold standard bullshit. | ||
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theonemephisto
United States409 Posts
On September 23 2008 07:29 Klockan3 wrote: Currency value goes down since everyone raises the prises to earn more money, and with that more money they raise their wages. When everyone got raised wages and everything costs more, then we call that inflation. That's a lie. If the supply of money and the total output of the economy stays the same, then there will be no inflation. If the supply of money and the total output of the economy grow at the same rate, then again, there will be no inflation. Inflation isn't inherent. It is largely (almost all) dependent on the relation of money to size of economy. Everyone can't simply "raise prices to earn more money", as there's something called competition to make that impossible. It only works when people realize that there's more money than there used to be, and therefore, that each dollar is worth a smaller proportion of the total output than it used to be, that's when prices rise. Inflation only seems to be inevitable in the most current nations because there's constant political pressure for it (inflation puts the economy into overdrive until people realize what happens, that's when the economy corrects itself and slows down). Also, there's the psychological thing about people getting wage raises every year. | ||
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Caller
Poland8075 Posts
With the recent mass printing of money, the US has a fixed value. Each dollar, as a result, becomes worth less as it divides up the value. While it does technically pay off the debt (as printing money is technically giving x amount of money) it will result in a loss in confidence and heavy damage taken by lenders as they "lose" money. | ||
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tec27
United States3702 Posts
On September 23 2008 07:46 theonemephisto wrote: That's a lie. If the supply of money and the total output of the economy stays the same, then there will be no inflation. If the supply of money and the total output of the economy grow at the same rate, then again, there will be no inflation. Inflation isn't inherent. It is largely (almost all) dependent on the relation of money to size of economy. Everyone can't simply "raise prices to earn more money", as there's something called competition to make that impossible. It only works when people realize that there's more money than there used to be, and therefore, that each dollar is worth a smaller proportion of the total output than it used to be, that's when prices rise. Inflation only seems to be inevitable in the most current nations because there's constant political pressure for it (inflation puts the economy into overdrive until people realize what happens, that's when the economy corrects itself and slows down). Also, there's the psychological thing about people getting wage raises every year. Spot on. Klockan's ideas don't work because he assumes that raised prices directly implies raised wages, and somewhere in the middle money magically appears, which isn't the case. Inflation is largely driven by governmental pressure, especially in times of war. Finding a war where the government hasn't inflated the money supply in order to fund its military would be an incredibly hard thing to do. | ||
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freelander
Hungary4707 Posts
On September 23 2008 07:18 Ra.Xor.2 wrote: What I don't understand is, since gold or other "hard currency" isin't used to back money anymore, why does it still have value? only the USD isn't covered by "hard currency" I think, but I am not sure. | ||
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ahrara_
Afghanistan1715 Posts
On September 23 2008 07:23 theonemephisto wrote: Domestically, it's all about supply/demand. Ignoring the foreign exchange market, the ratio of amount of money to amount of services/products produced gives you the value of money. When the fed prints more money or creates more money through other practices (i.e., encouraging lending increases the multiplier on existing money), the value changes. The previous statements affect the foreign market, but it adds a new element, the desire for American goods/services/investments. If you want anything sold in America or if you want to invest in American companies, you're going to need American dollars. It's another supply/demand question, how many Americans are selling dollars for foreign currency to buy foreign goods/invest in foreign markets and how many foreigners are buying dollars to buy American goods/invest in American markets. So are you saying that the 700 bill bailout and the money market loans have eased up credit, and that's why the dollar is going down? This seems like the most credible explanation so far. So let me get this right. If demand for american goods go up, the demand for american dollars goes up, increasing its value. If aggregate demand for am. products falls, demand for american dollars goes down, hurting its value. So the reason the dollar is going down is because people are running away from american investments (demand goes down)? Shouldn't the opposite be happening after the bailout? Still hella confused. On September 23 2008 07:45 Jibba wrote: This is a really poor explanation and has nothing to do with current inflation. I'm about to go eat and a real economist should really be replying (but not a Ron Paul-ist), but it is related to money supply and velocity, and because of America's perceived bond backing ability and pretty much every other factor you can think of. If Bush puts a trillion dollars into Wall Street like he's hoping to do, it gets relayed to tax payers which in turn is going to hurt companies forcing them to raise prices. Confidence has a lot to do with it. Enough with the gold standard bullshit. i didn't want to seem like an ungrateful prick by telling the "print money" / "it's because of inflation durr" folks to shutup and die, so thanks for being my proxy jibba. | ||
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ahrara_
Afghanistan1715 Posts
What causes demand for american products to go down? What causes demand to go up? What causes increases in the money supply (besides printing money ffs)? What causes decreases in the money supply? How has the wall street crisis affected currency values, and how? Why has the announced bailout reduced dollar value? | ||
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Mastermind
Canada7096 Posts
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Balzy
United States113 Posts
Because ![[image loading]](http://img.photobucket.com/albums/v292/ekoms/Zicon_small.gif) Goodnight. | ||
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