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Can someone explain 'currency war'?
Posted on 2/25/13 at 10:49 am
Posted on 2/25/13 at 10:49 am
Supposedly, it's a looming threat globally. I know what trade wars are but am unfamiliar with currency war.
Posted on 2/25/13 at 11:02 am to Zach
It's a media creation to dramatize something that's been going on for decades with little notice.
It refers to countries trying to stimulate their manufacturing industry and economy by lowering the value of their currency. That makes goods manufactured in their country cheaper in other countries and therefore, more likely for people in other countries to buy their products.
It also makes products made in other countries more expensive within those countries with a devalued currency so citizens tend to buy less foreign made goods and more domestically manufactured goods which again stimulates the manufacturing industry in that country.
Japan is actively pursuing that process now and has been for several months. China is notorious for keeping its currency cheap versus the US dollar.
It refers to countries trying to stimulate their manufacturing industry and economy by lowering the value of their currency. That makes goods manufactured in their country cheaper in other countries and therefore, more likely for people in other countries to buy their products.
It also makes products made in other countries more expensive within those countries with a devalued currency so citizens tend to buy less foreign made goods and more domestically manufactured goods which again stimulates the manufacturing industry in that country.
Japan is actively pursuing that process now and has been for several months. China is notorious for keeping its currency cheap versus the US dollar.
Posted on 2/25/13 at 11:51 am to LSURussian
Thanks.
How does a country lower the value of their currency?
How does a country lower the value of their currency?
Posted on 2/25/13 at 12:08 pm to Zach
quote:
How does a country lower the value of their currency?
Increase the supply.
Posted on 2/25/13 at 1:01 pm to GumboPot
quote:
Increase the supply.
You mean print money? How does that affect inflation?
Posted on 2/25/13 at 1:36 pm to rickgrimes
quote:
You mean print money?
Not necessarily. The Fed or any central bank could sell their countries currency they have in reserve and purchase another countries currency. Thereby increasing the supply of country A's currency and decreasing country B's supply.
quote:
How does that affect inflation?
The way I think about inflation is too many dollars chasing too few goods. So if the money supply increases I would expect the prices of goods to increase as well. My two cents.
This post was edited on 2/25/13 at 1:41 pm
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