Just_Jen_1 t1_j28uppa wrote on December 30, 2022 at 2:14 PM

I recently came across this example: An object is worth $100. 100 coins are produced so each coin represent 1/100 value. If you subsequently print 100 more coins, each coin becomes less valuable at 1/200. The total value of the object remains the same, there are just more coins representing that value. So think of the "object" as a country's value globally. In the global market, the value of the country stays the same. Printing more coins results in each coin being worth less. Does that make sense? I'd like others to chime in if I missed the mark.

Derikoopa OP t1_j291ybw wrote on December 30, 2022 at 3:08 PM

This makes sense in terms of a currency backed by the gold standard, but since that doesn't really exist anymore is it still relevant?

Just_Jen_1 t1_j29ft6m wrote on December 30, 2022 at 4:42 PM

It is relevant because the effects inside the country and the effects in the global market are different. If Best Buy brings in a Panasonic TV from Japan, Best Buy has to give that country a certain amount of money that is relative in that country. So Best Buy has to pay the equivalent of $500 in Japan, then sells it me for $900. So sure, if my country prints more money and I get a raise, I can better afford the $900 TV locally. The problem is that after printing more currency, my dollar is worth less globally, due to my initial example. As a result, Best Buy will now need $700 to meet the same value for Japan in Japanese currency. In turn, the next time Best Buy sells me a TV, they need to charge $1200.

Just_Jen_1 t1_j29hemn wrote on December 30, 2022 at 4:52 PM

Further to this, all exported goods cost more to bring in. This is how it effects the poor. If the poor don't get a proportional increase, then basic goods cost more. The poor get poorer.