how a lower currency value isn’t a sign of poor economy like in Japan?
In: Economics
“Lower” is ultimately arbitrary. Lower than what? Only one currency can be the most valuable so does that mean that any other currency weaker than the most valuable one means that the people in its country of origin are eating dirt and living in cardboard boxes? Most people compare a currency’s value against the dollar as the benchmark but it really isn’t the whole story. The US dollar is the 10th most valuable currency in the world, which means there are a lot of other currencies above it considered more valuable. The euro is more valuable but the entire EU economy is smaller and with a worse growth rate than the US economy. Europeans are generally making less money than Americans. The swiss franc is valuable but not for the same reasons why other currencies are valuable.
It’s a nuanced subject. You have to understand that what is called a “poor” economy by the media and financial institutions often just means it’s not skyrocketing all the time meaning people can’t make easy money off of it by investing. Japan has been more or less stagnant for 30 years and considered to be pretty much constantly going in and out of recession. That sounds bad on paper and you can be sure there are tons of gloomy headlines about it every year but ultimately what does it matter if their economy is stagnant and 1 dollar is 100 yen? Japan has a very high standard of living, great infrastructure, amazing industry, and even in their semi permanent state of recession and stagnancy they still manage to be at the top of the world’s economies by sheer size alone. That says a lot.
Basically there’s a lot more that goes into it.
Latest Answers