The relative increase in inflation of goods in economy tends to be higher than the depreciation of its currency , this increases imports , however if this situation continue for long periods , the currency depreciates due to trade deficit
I think Piketty what is referring to may be illustrated by the U.S. situation.
The U.S. has had large trade deficits for a long time.
A trade deficit means that the U.S. is selling assets to the rest of the world.
But the net foreign asset position (our assets minus our debts) has not deteriorated all that much over time. Why not?
The short answer is that ...
Piketty is correct, this is well known mechanism thats discussed in any international economics 101 textbook.
I think the best way how to see how this work is to forget about money for a second. Ultimately all economic transactions are not about money but about exchanges of real goods and services. Money are just facilitators of transactions, they solve ...