I’m never fully understood how currencies fluctuate beyond a layperson’s understanding of inflation/deflation, but still always assumed that $5 is $5 regardless of what currency it’s coming from or going into. But recent experiences have made me question that. M Not sure if this is the best way to ask my question because I think i actually have multiple closely related questions, so I’ll use examples instead:
My dad was recently in southeastern Europe and tried to pay for something at a store – they asked if he had dollars (or the local currency, i can’t remember) because it’s cheaper that way. If something costs $5, and I just exchanged the money into local currency, the merchant should be getting 5$ worth of currency regardless, no?
We went to Argentina in the spring, where it’s common for travelers to exchange dollars for pesos at non-government exchanges for a better rate. How does this happen? Are these exchanges getting dollars for less somehow, and thus able to offer better rates?
Again, I assume these questions are related, but what are the underlying concepts here? Thanks in advance!
EDIT: thanks everyone! I think between each of the responses I understand what I was missing!
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For the case of Argentina, first of all, and speaking as an Argentinian, don’t try to understand Argentina’s economy using any type of logic. In fact , for the sake of your sanity, don’t try to understand Argentina’s economy period.
That said, the government currently limits how many dollars a layperson can “buy” legally per month (ie, exchange pesos for dollars in the official market). So the “blue dollar” holds a value more or less based on demand for dollars in the black market, not by the official exchange rate (arguably, the “real” value of the dollar is closer to this “blue” value than the official one… But politics gets too complicated, of course)
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