If every country’s’ money was suddenly not worth as much, wouldn’t there be no effect? Like if the whole word decided collectively to make everything 50% cheaper, but make peoples pay also lower as well. Wouldn’t the buying power be the same?
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A recession or depression isn’t caused by money losing value, it’s caused by less overall value being produced. Money is a way to measure that value, and to store that value, but the economy is basically made up of a nebulous concept called “value” that we create via work. Value is, basically, what lets us live and enjoy our lives.
Every time someone does work, they add value to the overall economy. In a simple farming community this is clear – farmers do work, that lets the community have food, everybody eats. If farmers get really good at farming, the community can have a few people do the farming and have other people do other jobs, like making clothing or housing. Now everybody eats *and* has clothing *and* has housing! Rinse and repeat this process for a few thousand years and we get the internet and factories and super specialized jobs that let us eat and be fed and have entertainment and pretty great lives!
But when that amount of value per person starts to drop – maybe because of bad crop yields, or wars, or over-investment in things that don’t end up producing enough value – then we start to regress. Suddenly we might not have enough food – or we have enough food, but not enough other things people want. Because of normal wear and tear, things break but we don’t have the ability to replace them with new ones.
That’s what a depression (or a recession, which is the “more correct” term) is – it’s when there’s suddenly less value to go around, so people’s lives in general get a little worse, and the only way out of it is to find ways to produce more value again.
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