Questions tagged [currency]

a generally accepted form of money, including coins and paper notes , which is issued by a government and circulated within an economy.

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37 views

Is the debt owed to resourceful producers by resourceless consumers practically irrepayable?

Here is my argument for the debt owned by resourceless consumers to resourceful producers (as currency, bonds, loans, or other means). Is it correct? If not, where am I going wrong? Economic value is ...
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3answers
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How can a currency be tied to a commodity like energy?

To make a stable (crypto)currency it basically needs to be tied to a thing of value that can not be just flooded onto the market with minimal effort. I think energy is the ideal thing to tie a ...
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37 views

Why don't Governments do away with the optics of taking on debt against new currency, and instead issue a limited currency every year (say 5% of GDP)?

Governments engage in the optical illusion of taking on debt against issued currency. The debt is effectively owed by the Government to itself. The value of the debt is completely controlled and ...
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24 views

Oliver Hart said that financing deficits by printing money can lead to hyperinflation “once the economy is close to full capacity”. What does he mean?

In response to a poll on Modern Monetary Theory, Nobel Laureate Oliver Hart said that Governments financing deficits by printing more money "can quickly lead to inflation or even hyperinflation ...
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For stability, is there a limit to the sovereign debt that a Government owes to itself against issued fiat currency?

Looking beyond the optical illusion of Governments owing debt to Central Banks, Governments effectively owe themselves the sovereign debt created against issued fiat currency. By definition, there ...
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Can banks 'create' money on their own or do they need help from other banks?

My current understanding of the banking money multiplication process goes as follows: Alice comes along and deposits 100 cash into Bank A. Bank A gains 100 in vault cash (reserves) as an asset and 100 ...
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2answers
60 views

Is it theoretically possible for a singular national currency to exist under a free banking system?

Free Banking is a proposed monetary system, usually by Austrian Economists, as an alternative to the prevalent Central Banking system. Under this arrangement, commercial banks would issue their own ...
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390 views

Is there any pressure to keep currency exchange rates around 1?

I notice that for any pair of currencies, the exchange rates seem to stay around 1 (as opposed to, say, 1,000,000). This is no longer the case if one country experiences an economic crisis that ...
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How digital currency (like Bitcoin) proponents solve the problem of its high volatility to make it a good candidate to replace fiat?

I have recently read an article about a family living with no fiat currency for several years. Indeed there are lots of advantages of using a digital currency. I am wondering if having an important ...
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32 views

Why does Bimetallism require international cooperation to have a chance at succeeding?

I was reading the Britannica encylopedia's article about Bimetallism and under the arguments put forth against it, they cite that bimetallism doesn't work without international cooperation. Could ...
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What happened to the Zimbabwe cash dollar after the introduction of Dollarization?

Let's say, before dollarization, I owned 1 million Zimbabwean dollars in cash and the next day dollarization went into effect. So in dollarization, the current Zimbabwean dollars will be invalid and ...
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Why does the United States have a fungible currency?

Given all the problems of money laundering and black market money entering the market why does the US have a fungible currency at all? If I put my totalitarian hat on it would make sense for every ...
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351 views

On what basis, is currency created?

This is more like a homework question. I am quite a beginner. I would appreciate any help, preferably with less technical terms, that guides me in the right direction. I went through the Wikipedia ...
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123 views

Demand Curve of Foreign Exchange

My high-school Macroeconomics textbook states that 'There is an inverse relationship between the price of foreign currency, or exchange rate, and demand for foreign exchange. When the exchange rate ...
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1answer
40 views

Why did the pound sterling lose its reserve status to USD?

Why did the pound sterling lose it reserve status to USD? Was this due to some agreement during the Bretton Woods negotiations?
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2answers
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Famous recent paper on monetary Unions

do you know any (theoretical or empirical) recent famous paper about monetary unions ? I heard that topics like "monetary unions at ZLB" or "fiscal coordination during crisis time" ...
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Log deviation from steady state - understanding a journal paper

I hope a question like this is fair game on this website! I'm doing some research for my thesis, and have come across what seems to be a pretty simple model - two countries, A (representing the USA) ...
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Could eliminating all taxes and only creating new money theoretically work?

Imagine you had the opportunity to found a new country from scratch (in 2020). Value exchange would be digital, where only the state can create new currency units. Instead of relying on income tax ...
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Can the U.S print infinite money? [duplicate]

I know that a country can't simply print money to pay debt, since it would only lower the value of the money, i. e. cause inflation. But what about the U.S? Since their new printed money is very ...
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If Lebanon has a shortage of dollars, are USD donations meaningless?

I was reading about the dollar crisis in Yemen the other day, which mentioned that even people who owned dollars couldn’t withdraw them. If the situation with Lebanon’s currency is similar, what ...
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1answer
52 views

Why does a current account deficit contribute to making a country a “sitting duck” for currency speculators?

George Soros had this to say about the factors surrounding his famous short of the British pound: The U.K. had a large current-account deficit…, modest FX reserves and no capital controls to rebuff ...
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1answer
22 views

What's a “relative pair trade” for currencies?

Is the U.S. Dollar About to Crash? – Pairagraph The way I see currencies is that they are a relative pair trade. Against gold, with its stability characteristics, I don't like the US dollar. But ...
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54 views

Is Currency Devaluation a cause or effect of interest rates?

I understand that Federal bank/Goverment can manipulate the currency market and devalue its currency by printing more money or buying foreign currencies/assets (essentially increasing the supply of ...
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In today's money, what was the value of a 1492 Spanish maravedí?

Satava (2007) estimates that the costs of Columbus's 1492 voyage was 1,765,734 maravedís. In today's money, what was the value of a 1492 Spanish maravedí?
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Why would China's FX reserves stay flat as the Fed ramps up its balance sheet?

As seen in the chart, China's FX reserves have remained flat lately despite the massive balance sheet expansion of the Fed. Though out of the temporal domain of this chart, if it were extended back to ...
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How does the imposition of import duties affect the nominal and real exchange rates in the long term?

Let's assume that a country imposes an import duty on goods imported from abroad. How will this change the long-term real exchange rate between domestic and foreign currencies? How will it affect the ...
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How exactly does QE affect the value of the USD?

A lot of people on the Internet refer to quantitative easing (QE) as a form of "legal money printing" when it is actually not. As such, many of these folks would thus erroneously say that QE leads to ...
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Depreciation of currency shall incentivise or disincentivise the foreign portfolio investors?

I am confused - if suppose currency depreciates then assets will become cheaper and foreign investors will find it enticing to buy these assets so in that case, foreign inflows shall increase In ...
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40 views

What is the effect on GDP when foreigners buy lots of domestic bonds?

I am trying to figure out the effect on GDP of foreigners buying lots of domestic bonds. From what I understand, when foreigners buy lots of domestic bonds: They need to convert their foreign ...
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1answer
30 views

How does the Monetary base, Narrow money and Broad money affect inflation?

In a lot of countries (e.g. Hungary) the M0, M1, M2 and M3 all doubled, tripled or even quadrupled in the past 10 years. How does this directly affect inflation? Since just because M2 doubles, it ...
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43 views

What are the benefits of reducing zeroes from currency (eg: Iran)?

Recently, Iran decided to replace its old currency to a new one. Quoted from Wikipedia A proposal has been agreed to by the Iranian parliament to drop four zeros, by replacing the rial with a new ...
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42 views

Does inflation/expected inflation in a given country devalue its currency or increase its value?

I've seen both arguments. From my understanding an increase in the rate of inflation should decrease the value of the currency since it's by definition a depreciation in its purchasing power. But I've ...
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79 views

How to interpret correctly the uncovered interest rate parity condition

So, according to my macroeconomics professor's notes, the UNCOVERED INTEREST RATE PARITY CONDITION is defined this way : Now, i don't quite grasp the concept of the 'expected appreciation rate of ...
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29 views

Why would oil suppliers choose a lower priced contract?

The West Texas Intermediate (WTI) futures contract has ranged from \$6 to \$20 in the last 48 hours. The May Shanghai International futures contract is 205 Yuan (CNY). At 7 CNY per USD, that comes ...
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57 views

If a fluctuating cryptocurrency becomes the new world coin, would it stop fluctuating?

An often mentioned criterium for money is that it should be a unit of account. It could be argued that cryptocurrencies don't satisfy this requirement. The argument is that businesses like bakers ...
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What did Jevons mean by this quote?

Jevons (1875): Currency is to the science of economy what the squaring of the circle is to geometry, or perpetual motion to mechanics. I can't make any sense of this quote. I know that the "...
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1answer
29 views

Why does a loose Fed policy reduce the downward pressure on the currencies of emerging markets?

To start off, my background is not in economics but in Computer Science. I recently read in the Economist that a looser Fed policy removes downward pressure on the currencies of emerging markets. Is ...
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1answer
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Math based proof for currency changes (microeconomics)

This isn't part of my homework but I am genuinely interested in the mathematical proof behind this question (this is my line of work currently). I tried to work through it but after 2 hours gave up. ...
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2answers
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Is fiat currency better than a backed-currency?

My question is would it be better if we went back to something like a gold standard but backed by a finite virtual material instead? It avoids the problem of fluctuations in gold supply. The money-...
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Who owns money?

Bishop Nicole Oresme (1320-1382), in the first monetary treatise, wrote: CHAPTER VI: Who owns the Money? (Cuius sit ipsa moneta?) Although it is the duty of the prince to put his stamp on the money ...
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US dollar the “Safe Haven”

Could anyone give me a detailed description on how the US dollar serves as the "safe haven" of assets when there are market stresses?
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Relationship between government expenditure and exchange rate?

I've read an increase in government expenditure can lead to increase the chances of currency crisis but shouldn't it lead to the opposite? Fiscal deficit ----> Govt will undertake borrowings --->...
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Whats the meaning of this parameter?

I was looking the currency exchange board, and I saw the value of "exotic" for the parameter Group, what is the meaning of this value? I dont know if this is a local figure or is used in ...
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With exchange rate parity, how do rates of return equalize?

Rate of return is equal to interest rate plus appreciation, is that right? If so, say you have a deposit in Canada and you find that the expected rate of return is greater in Australia. The demand for ...
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Equilibrium in currency devaluation?

In export oriented Economy, we often come across currency devaluation as means to boost exports. As per my understanding (please correct me if I am wrong), currency devaluation will immediately bring ...
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28 views

What are some currencies that are not pegged and fixed?

Are there any currencies that are not pegged to the dollar or euro and are purely fixed exchange rates?
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How does China control tax havens / finance flight differently?

It is said that china tries to prevent its money leaving overseas, for example yuan holding officials can't expatriate millions abroad or smuggle diamonds? How is that possible and efficient?
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Why did foreigners keep buying Swiss francs at -41% (not a typo) interest rate in the 1970s?

A Bloomberg (opinion) piece notes In January 1975, the Swiss government held an emergency meeting and then took the extraordinary step of slapping a 41% annual penalty on foreign deposits. But even ...
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What is the difference between microeconomics money and macroeconomics money?

In microeconomics, \$USD are a store of value. I can sell a candy bar for \$1, and I can hang onto that \$1 for a year and then buy the same candy bar for that same \$1. If I print \$1 (and get away ...
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why is the term fiat money or fiat currency and is it the same as legal tender or are there any differences?

I learnt some very basic economics learning about 2, 2.5 decades back. Recently, while reading some article on the web, I came to know about 'fiat money' and 'fiat currency' but have been unable to ...

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