Like why can’t some country say something like “our country’s currency value will be 200 times that of US dollars ” . And who determines this value or how it is determined. And why it constantly changes.
In: Economics
Value is determined by people. How much faith people have in said currency. People will lose faith when a country goes into debt and has to print billions/trillions to cover debt payments and other expenses, which is a reason why many are concerned about inflation (de-valuing) of the US dollar right now.
There are examples in history of inflation and hyperinflation that can be Googled quite easily.
It’s based on a number of factors, the largest of which is confidence/faith. If a country’s banking system looks like it’s having problems or might have problems, this will cause the relative value to fall.
The next ones are industrial output, how much “stuff” is that country making or providing as a whole. A country that is providing nothing has money that nobody is terribly interested in because, well, there’s nothing to buy in that country.
The value of money is determined by the demand for it, just like the value of goods and services. When the demand for Treasurys is high, the value of the U.S. dollar rises. The other way is through foreign exchange reserves. That is the amount of dollars held by foreign governments.
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