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Finance: What is Devaluation? 1 Views
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Description:
What is Devaluation? The process by which a nation deliberately lowers the value of its currency relative to other international currencies is called devaluation. In international trade, a devalued currency makes exports cheaper and imports more costly, which can help to stimulate more domestic manufacturing business in emerging market countries.
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Transcript
- 00:00
Finance allah shmoop What is devaluation steve Valuing a currency
- 00:08
i am making it less valuable can only happen when
- 00:12
the government which controls that currency decides to devalue it
- 00:17
So yeah it's a kind of their call when and
- 00:19
how much basically devaluation happens when a country decreases the
Full Transcript
- 00:24
value of its currency against other currencies A lot of
- 00:27
times by just running the printing press all night printing
- 00:30
a whole bunch of their currency there's a whole lot
- 00:32
of supply on the market Well why on earth would
- 00:35
a country ever intentionally do this like devalue their currency
- 00:39
Well usually because it wants its goods to be less
- 00:43
expensive abroad like to be ableto export them more cheaply
- 00:47
to places like the u s and china and russia
- 00:50
by a lot of whatever's Well when a currency is
- 00:53
devalued the homegoods iii the home country goods are cheaper
- 00:57
in other markets This will usually lead to an overall
- 01:01
increase in exports for that country when it comes to
- 01:04
exports and imports though there's a kind of a union
- 01:06
ng ng anyway there's a counterbalance at play here imports
- 01:10
become mohr expensive and consumers at home likely shift away
- 01:15
From foreign teo purchase in country goods right it's kind
- 01:18
of protecting the country's own domestic product there Currency changes
- 01:22
Yeah well the result Yeah strengthened domestic product sales in
- 01:26
all of this might sound hunky dorey But while there
- 01:29
are some potentially nasty side effects local companies are getting
- 01:33
a bit of a break here which might make them
- 01:35
inefficient Slash lazy slash sloppy slash lacking in competitive spirit
- 01:40
to go fight it out in the global markets No
- 01:43
plus one of currency is devalued Each unit is worth
- 01:45
bless and that can lead to inflation which causes all
- 01:48
kinds Other problems down the line So that's just the
- 01:51
nutshell of devaluation making money not worthless But you know 00:01:57.019 --> [endTime] worth less
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