can somebody explain to me why sanction against a country causes its money’s value to drop. let’s assume this country is self-sustained (no import required) then does int’l exchange rate even matter? and if this country is a major exporter of oil, how does oil price drop affect its int’l exchange rate?
In: 1
So in order for anything to have value there has to be an agreement.
The simple barter version I have an apple orchard you have a chicken farm I trade you a bushel of apples you give me a chicken. We can both have fried chicken with applesauce for dinner.
The start of money has to do with one precious metals were used as a trading medium. So a goat was worth so much silver that same amount of silver was worth somebody loaves of bread so many bushels of rice so on and so forth.
So again you want my apples, but I don’t want chicken I want beef the guy who sells beef doesn’t apples he wants corn. To simplify this the equivalent trade for all the items we have can equal out to so many ounces of silver or gold. And is there a general agreement on this we can then make trades with these metals that have an intrinsic value.
Coitage was just a way to figure common values a silver coin of such size would automatically be worth so much.
Now we no longer have something of intrinsic value that we are trading we are trading pieces of paper, or ones and zeros if you look into electronic banking. How much something is worth is how hard those things are to get. If each of us has a million dollars they were less likely to trade for smaller amounts for luxury goods. So that’s where we’re at now. All this extra money has been printed which means that it’s not as rare which makes it not as valuable.
Latest Answers