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Let me get this straight. If I'm getting paid less per hour, this is good for me because it means I'm selling the stuff I produce at a more competitive price?

by lottin 5y ago

3np 5y ago
Less in global terms, more in local terms. > A weak domestic currency makes a nation's exports more competitive in global markets, and simultaneously makes imports more expensive. Higher export volumes spur economic growth, while pricey imports also have a similar effect because consumers opt for local alternatives to imported products. This improvement in the terms of trade generally translates into a lower current account deficit (or a greater current account surplus), higher employment, and faster GDP growth. The stimulative monetary policies that usually result in a weak currency also have a positive impact on the nation's capital and housing markets, which in turn boosts domestic consumption through the wealth effect. https://www.investopedia.com/articles/investing/090215/3-reasons-why-countries-devalue-their-currency.asp https://www.investopedia.com/articles/investing/090215/3-rea... https://home.treasury.gov/news/press-releases/sm751 https://home.treasury.gov/news/press-releases/sm751
- lottin 5y ago
  > Less in global terms, more in local terms. What does that mean? The fact that a currency depreciation can result in higher GDP, doesn't mean it has to. The Turkish lira has been steadily depreciating against every major currency since 2007 and yet Turkey's real GDP is now below its 2007 level. Its current account balance has not only not improved but it's got worse. Nothing suggests that, as a general rule, countries have "strong incentives" to weaken their currencies.
  - 3np 5y ago
    General rule, no. But for certain nations, yes. Those nations just happen to include the global heavyweights.
    - lottin 5y ago
      Can you put a concrete example of a global heavyweight (e.g. a developed nation) that has a strong incentive to weaken its currency?
      - 3np 5y ago
        Did you read the links I provided? Also https://www.investopedia.com/articles/forex/042015/what-currency-war-how-does-it-work.asp https://www.investopedia.com/articles/forex/042015/what-curr...
        lottin 5y ago
        I read this article, and I fail to see how it supports your claim. Again, can you provide a specific example?
        3np 5y ago
        Specific examples are mentioned and references provided. EU, US, BoE, Mainland China
        lottin 5y ago
        It just says that "according to a report in CNBC" in 2019 the BoE, the Fed and ECB were engaged in currency war. It provides zero evidence to back this assertion. At that time, the inflation rate in each and every of these regions, was below 2%, and fell further in 2020 [1]. This is not an example of a country weakening its currency. [1] https://data.oecd.org/price/inflation-cpi.htm https://data.oecd.org/price/inflation-cpi.htm

Let me get this straight. If I'm getting paid less per hour, this is good for me because it means I'm selling the stuff I produce at a more competitive price?

by lottin 5y ago

Let me get this straight. If I'm getting paid less per hour, this is good for me because it means I'm selling the stuff I produce at a more competitive price?

3np 5y ago

Less in global terms, more in local terms. > A weak domestic currency makes a nation's exports more competitive in global markets, and simultaneously makes imports more expensive. Higher export volumes spur economic growth, while pricey imports also have a similar effect because consumers opt for local alternatives to imported products. This improvement in the terms of trade generally translates into a lower current account deficit (or a greater current account surplus), higher employment, and faster GDP growth. The stimulative monetary policies that usually result in a weak currency also have a positive impact on the nation's capital and housing markets, which in turn boosts domestic consumption through the wealth effect. https://www.investopedia.com/articles/investing/090215/3-reasons-why-countries-devalue-their-currency.asp https://www.investopedia.com/articles/investing/090215/3-rea... https://home.treasury.gov/news/press-releases/sm751 https://home.treasury.gov/news/press-releases/sm751

lottin 5y ago
> Less in global terms, more in local terms. What does that mean? The fact that a currency depreciation can result in higher GDP, doesn't mean it has to. The Turkish lira has been steadily depreciating against every major currency since 2007 and yet Turkey's real GDP is now below its 2007 level. Its current account balance has not only not improved but it's got worse. Nothing suggests that, as a general rule, countries have "strong incentives" to weaken their currencies.
- 3np 5y ago
  General rule, no. But for certain nations, yes. Those nations just happen to include the global heavyweights.
  - lottin 5y ago
    Can you put a concrete example of a global heavyweight (e.g. a developed nation) that has a strong incentive to weaken its currency?
    - 3np 5y ago
      Did you read the links I provided? Also https://www.investopedia.com/articles/forex/042015/what-currency-war-how-does-it-work.asp https://www.investopedia.com/articles/forex/042015/what-curr...
      - lottin 5y ago
        I read this article, and I fail to see how it supports your claim. Again, can you provide a specific example?
        3np 5y ago
        Specific examples are mentioned and references provided. EU, US, BoE, Mainland China
        lottin 5y ago
        It just says that "according to a report in CNBC" in 2019 the BoE, the Fed and ECB were engaged in currency war. It provides zero evidence to back this assertion. At that time, the inflation rate in each and every of these regions, was below 2%, and fell further in 2020 [1]. This is not an example of a country weakening its currency. [1] https://data.oecd.org/price/inflation-cpi.htm https://data.oecd.org/price/inflation-cpi.htm