#LEBBASES 14 AND 15 Ratio between currencies and relative devaluation

18 August 20204 years ago babelfish

We continue with Claudio Borghi's #lebbasi basic economics course. today the themes are those of money, or rather of the relative relationship between currencies, that is the exchange rate, its devaluation and its revaluation.

Exchange: First of all, exchange rates are always relative. There is talk of devaluation or revaluation against the dollar, the yen, the euro, etc. The position is therefore always relative and if you want to give a picture of the trend of a currency in general, you cannot limit yourself to comparing it with a single other currency, but you must do it relative to all, or at least to a package of the most important. in this case the devaluation of one currency with respect to another can simply be the "revaluation" of the counterparty with respect to all currencies, in general. this is important because the real question should be, in case of exit from the euro, not IF it devalues, but WITH RESPECT TO WHAT OR WHO devalues.

then we move on to the analysis of the effects of the devaluation with a very simplified example, with two countries with different currencies floating free, “Cracozia” and “Ruritania”. If C devalues with respect to R immediately the inhabitants of R will feel an effect linked to their theoretical greater wealth, but the products of C will immediately be cheaper, more purchased and the industry of C will displace that of R. At this point R will have an explosion of unemployment and, over time, and a lot of social pain, will be forced to devalue its currency against C, or rather the market (Due to trade balance imbalances) will force R to devalue.

We invite you to listen to the example, which is really interesting and funny, and thank Inreverente for the technical support.

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The article #LEBBASI 14 AND 15 Relationship between coins and relative DEVALUATION comes from ScenariEconomici.it .

This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/lebbasi-14-e-15-rapporto-fra-le-monete-e-svalutazzzione-relativa/ on Tue, 18 Aug 2020 06:56:35 +0000.