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)11584 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)11584 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 States32083 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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theonemephisto
United States409 Posts
On September 23 2008 08:17 ahrara_ wrote: 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. One of the reasons that the American economy has been so historically strong and enticing for foreign investments is because there's a relatively low amount of government intervention and regulation. The bailouts change that. They represent part of a ongoing shift in the role of the government in the economy towards a much more centralized and powerful government role. Markets don't like that. IMO, government intervention will often be beneficial for minorities, but on the whole it almost always hurts the overall strength of the economy. The fact that the government is bailing out companies left and right means that not only is it using taxpayer money to do so (hurting the long-term growth of the economy), but it's also artificially propping up many institutions and firms that have lost efficiency and need to be purged from the market because they're no longer viable. In the long-term, a history of bailouts will also distort risk-management, especially for "too big to fail" institutions, further weakening the vitality of the market. Also, there's the really large threat of increased regulations by Congress (aka like every speech and article nowadays). So in my view, although the bailouts may help in the short-term, long-run investments are going to be looking a lot less positive when considering the growing role of of government. Then I think that you can also add in the extremely low interest rates and current expansionary monetary policy; these are cutting into the potential profits of investments and reducing their viability. Of course, this is more of a contribution to the long-term trend than a short-term change. And then I think that you can also always talk about "confidence" in the money; how much people believe that the money will keep it's value. The market is looking more and more unstable every day, and that has to degrade investors faith that the dollar will keep its value. On September 23 2008 08:18 ahrara_ wrote: So I guess what I'm looking for is: 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? I gave my thoughts on some of these up there, but I'll try my best again. I've mainly focused on demand for American investments. I think products is a lot easier to understand, if we make things that foreigners want, then they're going to want more, fairly simple. Investments are mainly determined by future outlook; do people think that the economy will continue growing enough in real (inflation-adjusted) terms faster than other alternatives. If people think the outlook is good, they'll invest more, and vice versa. Obviously money printing is part of it, but it also has to deal a lot with money multipliers you get from lending. Whenever you spend money, it eventually finds it's way back into a bank, which then lends it out again, in this way, existing money gets multiplied many times. The fed attempts to control how much money this is multiplied with a couple controls, of which the most used is the federal funds rate (rate at which banks charge each other for overnight loans). The lower this rate, the lower the punishment for lending too much and not having the federally mandated percentage in current holdings at the end of the day, so banks lend out more. Of course, you could have an entire discussion just on this rate and how the fed manipulates it/it's consequences, but that's the basics. I think that the crisis has mostly just diminished faith in the American economy. Obviously people aren't going to be buying many short-run investments, and long-run ones aren't looking too good with all the proposed changes and regulations going into play. Also, recently many analysts have come out denouncing the proposed bailout, saying that it will only prolong the difficulties. That can't help. | ||
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~OpZ~
United States3652 Posts
On September 23 2008 10:00 Balzy wrote: To all the above: Because Goodnight. Epic. | ||
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Too_MuchZerg
Finland2818 Posts
On September 23 2008 08:18 ahrara_ wrote: So I guess what I'm looking for is: 1. What causes demand for american products to go down? 2. What causes demand to go up? 3. What causes increases in the money supply (besides printing money ffs)? 4. What causes decreases in the money supply? 5. How has the wall street crisis affected currency values, and how? 6. Why has the announced bailout reduced dollar value? 1. Because Dollar is too high so it costs shitloads to, for example, european to buy USA products because they need more euros for that. 2. Now that Dollar is weak USA products are cheaper to sell to europe because euro is strong, so euro gets more dollar products. 3. Has many effects (1. is one option) , wages goes up --> product prizes go up (if we are talking about value not amount of money) 4. Germany had/has thing thats not good for economy, prizes goes down because people want to wait prizes go even lower, meaning that they dont spend money. Reverse inflation. 5 and 6, no clear answer from me. Guys who earn same amount of money monthly. Person A earns 3500 dollars a month and person B 3500 euros a month. Now its good time to buy American products because guy who earns 3500 euros has problems buying stuff cheap where he lives. Cycle starts because euro is too strong many factory owners don't want to keep workers @ eurozone, but rather move to USA (well China really but for this example) because expenses are cheaper. That time Finland joined EU we hoped weak euro to boost our sales to USA etc, but then dollar value went down because of China effect. | ||
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mahnini
United States6862 Posts
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