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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Let’s say there’s no such thing as “money”. Instead, we still trade things for other things.
Now you sell pizzas, and I want one of your pizzas. Let’s say I want to trade you some of my gold for one of your pizzas. How much gold should I give to you?
Now let’s say I want one of your pizzas but the only thing I have is shit. And by shit I mean actual, factual shit. Again, how much of my own shit would you want for your pizza?
Ah, but now let’s say I still have shit, but a different kind of shit. Let’s say I have Guano. How much Guano would you like for one of your pizzas?
As you can see, while I can pay for a pizza with literal shit, some shit is more valuable than other shit. The same happens with money: the money of a country can be valued by others as “more valuable” that the money of other countries.
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