Posts Tagged ‘money’
why devaluate ? because it could make your currency more competitive. in other word, devaluation could make your export cheaper than any other country. as a consequence, it could also cause trade imbalance. especially with other countries that the currency is not competitive.
according to recent slate coverage about the currency war issue, there are various ways to devaluate money. first, government could devaluate its currency by print more money. second, government could devaluate its currency by buying another countries debt. there are many more complex strategy to devaluate money. but those two are the most effective strategy.
i have read slate coverage about the latest currency war. slate wrote an inspiring coverage about the fundamental knowledge of the war. therefore, the article mainly talking about the definition, the basic knowledge that is needed to move to a more serious discussion about the currency war.
A “currency war” is just a headline writer’s term for what economists describe as “competitive devaluation.” It’s helpful, in this context, to think of a dollar or a euro—any currency, really—as just another product: Its value goes up and down according to market forces. At any given time, any given currency exists in a global market determined by supply (how much of a currency exists) and demand (how much investors want to buy goods and assets denominated in that currency).
currency manipulation is the government’s new weapon. as BBC said, it is government’s new weapon for the battle for economic recovery. many country have tried to undervalue their currency to raise the level of competitiveness of the currency. no wonder, some expert call it “competitive devaluation”
the issue now evoke intense debate among money expert. there are two main position on the debate. first, government said that currency manipulation will raise the competitiveness of certain domestic economy. second, some money expert said that such manipulation will be dangerous for the recovery battle itself. therefore, the issue will be a hot topic for the next G-20 meeting in Seoul, South Korea.