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There more than one instance of this, including the 2008 financial crisis, but the first one is this: As the yen appreciated by 60% following the 1985 Plaza Ac
by MR4D 7y ago
There more than one instance of this, including the 2008 financial crisis, but the first one is this:
As the yen appreciated by 60% following the 1985 Plaza Accord, Japanese companies lost competitiveness in final electronics goods
In other words, if your currency appreciates, you’re doomed.
- nine_k 7y agoNot doomed, but your market narrows down. You better produce and sell something really special. Switzerland is an example of it: its currency, and thus work of its people, is expensive. Their exports are things like high-end mechanical watches, and other low-volume high-precision machines.
- K0SM0S 7y agoIn addition, I would think the relative safety and attractivity of finance in Switzerland is also key to making sure said currency doesn't become irrelevant. For a small country, they command impressive power in the financial space, however privately so.
- MR4D 7y agoSwitzerland is an example, but at less than 10 million people, it doesn’t compare well to many other economies like Japan, Korea, Germany, Russia, China, etc. Pivoting is much easier at small scale.
- hliyan 7y agoI constantly hear this argument about inflation being good for exports, but I cannot help but wonder that in the final analysis, it is just a mechanism by which wealth is shifted from those with savings, into the hands of exporters. Isn't this propping up exports that would otherwise have not been naturally competitive?