4 ms·

Care to explain in what kind of bizzaro logic universe a country adopting a currency counts as debasement?

Fnoord 9y ago
I'm asking it as question, not stating it like a premise I agree with. I can explain what happened in my country: First, we had the guilder (NLG) since the 17th century [1], then we adopted the EUR. The conversion rate for us was approx 2.20 NLG for 1 EUR. When we adopted the EUR basically within a few months everything became as expensive in amount as it was before but then in EUR. That's not a normal recession or normal inflation. This inflation often gets directly attributed to adoption of the EUR. Whether that is factually correct or not, I don't know. If it would be factually correct (ie. let us assume it hypothetically is), would it be a correct example as a debasement? [1] https://en.wikipedia.org/wiki/Dutch_guilder https://en.wikipedia.org/wiki/Dutch_guilder
- fwdpropaganda 9y ago
  Now I understand the question, thank you. So, _inflation_ is a term normally used for increase of good's prices over time as measured in the currency of the country where you're buying the goods. So you can't use the term inflation to mean "the conversion rate was 2.20 NLG for 1 EUR and within a few months everything because as expensive in amount of EUR as it was before in NLG." This isn't a mere technicality. You can't measure increase in price across the moment when the EUR was introduced, because the EUR didn't exist before that and the NLG didn't exist after that. In my opinion the conversation onwards should be: if something happened, what interesting metrics should we be looking at to detect it and measure it? Let me suggest one: number of hours of median salary needed to buy the CPI basket of goods. Measure that before and after the introduction of the EUR. If that number increased, then you can say that consumers lost purchasing power. Loss of purchasing power does not necessarily follow as a consequence of inflation (although it can) but is usually the bad consequence of inflation that people worry the most about.
lagadu 9y ago
I believe he means all the outgoing currency getting destroyed.

I'm asking it as question, not stating it like a premise I agree with. I can explain what happened in my country: First, we had the guilder (NLG) since the 17th century [1], then we adopted the EUR. The conversion rate for us was approx 2.20 NLG for 1 EUR. When we adopted the EUR basically within a few months everything became as expensive in amount as it was before but then in EUR. That's not a normal recession or normal inflation. This inflation often gets directly attributed to adoption of the EUR. Whether that is factually correct or not, I don't know. If it would be factually correct (ie. let us assume it hypothetically is), would it be a correct example as a debasement? [1] https://en.wikipedia.org/wiki/Dutch_guilder https://en.wikipedia.org/wiki/Dutch_guilder

fwdpropaganda 9y ago
Now I understand the question, thank you. So, _inflation_ is a term normally used for increase of good's prices over time as measured in the currency of the country where you're buying the goods. So you can't use the term inflation to mean "the conversion rate was 2.20 NLG for 1 EUR and within a few months everything because as expensive in amount of EUR as it was before in NLG." This isn't a mere technicality. You can't measure increase in price across the moment when the EUR was introduced, because the EUR didn't exist before that and the NLG didn't exist after that. In my opinion the conversation onwards should be: if something happened, what interesting metrics should we be looking at to detect it and measure it? Let me suggest one: number of hours of median salary needed to buy the CPI basket of goods. Measure that before and after the introduction of the EUR. If that number increased, then you can say that consumers lost purchasing power. Loss of purchasing power does not necessarily follow as a consequence of inflation (although it can) but is usually the bad consequence of inflation that people worry the most about.

lagadu 9y ago

I believe he means all the outgoing currency getting destroyed.