For instance the Japanese 100 yen converts to just 1 Australian dollar.
In: Economics
The point of a currency is to make commerce practical at any scale beyond a very small group because bartering only works if there is equivalent need. If you make boots and someone else raises chickens, you might swap if one person needs boots and the other person needs chickens. If that’s not true, now you are stuck with chickens or boots you don’t need and have to do another trade to get something you do need. For this reason, every culture, society, even video games (look up “stone of Jordan” in Diablo) ends up deciding on a thing to use as a form of currency.
For a currency to function, it has to be stable (it can’t be something that will rot or the supply will dramatically change at times), dividable (so you can do small and big transactions), limited in supply, impossible/very difficult to replicate, and universally accepted as valuable. For this reason, gold has been the defacto currency of the world for a long time.
Fiat currencies like the dollar and the yen are modestly new. I suppose you could say Romans thousands of years ago, but this was more or less the start of it. With a currency that is controlled by a government, they know they need to be careful not to increase the supply of it too quickly or people will move onto other currencies or to limit supply too much as it leads to deflation and hoarding of the currency itself.
Basically, you want a currency that slowly loses value (inflation is actually good… in moderation). You should view it as a stable thing you can use to conduct commerce, but you should see it as a bad idea to just have a vault full of it not being used as it is losing value. Money is just a tool we use to allocate goods and services in a society. It doesn’t create goods or services. Every country has been devaluing their own currencies at their own speeds for whatever reason for a long time. In periods of economic hardship, it can help goose the economy to increase supply more than normal as it encourages people to spend their money instead of hoarding it, and the money created can be used to hire people to create more goods and services. Getting an unemployed workforce working means everyone has more stuff which is really what wealth is. However this erodes the savings of people who have fixed income, pensions, and undermines the confidence in the currency itself. So, it’s a tight rope to walk.
TLDR: Every country has been running inflation independently of each other for a long time. So, that’s why the valuations are all over the map.
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