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Why some strong economies have weak currency?

Kamalov
Posts: 2
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6/12/2016 6:38:44 PM
Posted: 5 months ago
Strong economy with a persistently weaker currency: lessons from Japan"s economy. Need your opinions, thank you in advance!
ResponsiblyIrresponsible
Posts: 12,398
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6/12/2016 10:15:00 PM
Posted: 5 months ago
I don't think the Japanese economy is particularly "strong," so I'm not sure whether that's the best example--the yen's actually relatively strong, as well, last I checked because it's largely a safe-haven currency (and, of course, Japanese inflation is still fairly low).

But the simple answer is endogeneity: exchange rates reflect, which is to say that they are a function, of growth rates, but they also CAUSE fluctuations in growth.
~ResponsiblyIrresponsible

DDO's Economics Messiah
BillSPrestonEsq
Posts: 135
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6/12/2016 10:36:57 PM
Posted: 5 months ago
At 6/12/2016 6:38:44 PM, Kamalov wrote:
Strong economy with a persistently weaker currency: lessons from Japan"s economy. Need your opinions, thank you in advance!

Without a lot of research I would say it is because of their debt. There was a 10 trillion dollar stimulus in 2012 which brought their debt to GDP over 200%. They currently hold the highest percentage of debt to GDP In the world around 217%. Simply put they created lots of money raising the total supply, lowering the quantity demand creating a less valuable currency (all other variables being the same). The reason for this was mostly due to the 2008 recession and the tsunami. There is a lot more to this answer obviously but, my opinion is that it is mostly due to expansionary monetary policy and deficit spending.
Chang29
Posts: 732
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6/13/2016 12:35:50 AM
Posted: 5 months ago
Very few people want a currency that is weakening. The winners in a depreciating currencies are exporters, governments, and first users of newly created currency. The losers are every person holding a weakening currency by decreasing purchasing power. In effect, steeling value from each holder of currency. Very few people would voluntarily use a depreciating currency therefore, governments must use violence to force people to use a currency that is worth less everyday (legal tender laws).

Governments that impose weakening currencies upon residents are acting immorally.

The answer is separation of government from money and currency.
A free market anti-capitalist

If it can be de-centralized, it will be de-centralized.
harrytruman
Posts: 812
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7/25/2016 6:16:10 PM
Posted: 4 months ago
At 6/12/2016 6:38:44 PM, Kamalov wrote:
Strong economy with a persistently weaker currency: lessons from Japan"s economy. Need your opinions, thank you in advance!

Some do, but Switzerland has strongest currency in the world, and they have a great economy
DeuceKaboose
Posts: 11
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7/25/2016 9:15:45 PM
Posted: 4 months ago
Because weak currencies make importing goods from said economy cheaper, and creates an ideal environment for government spending. IE China
InterAnalysis
Posts: 3
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8/4/2016 9:47:05 AM
Posted: 4 months ago
At 7/25/2016 9:15:45 PM, DeuceKaboose wrote:
Because weak currencies make importing goods from said economy cheaper, and creates an ideal environment for government spending. IE China

Hello,

I am keen to learn whether you think there are any other countries that would fall under this same category?

Thank you
slo1
Posts: 4,351
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8/20/2016 7:16:16 AM
Posted: 3 months ago
At 6/12/2016 6:38:44 PM, Kamalov wrote:
Strong economy with a persistently weaker currency: lessons from Japan"s economy. Need your opinions, thank you in advance!

Net export economies benefit from weaker currency thus why some countries have pegs or manipulate currency to ensure it does not raise in value compared to other currency.

The bank of Japan has been known to sell yen on the open market to decrease the value of the yen.
Upiter
Posts: 24
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8/29/2016 3:32:24 AM
Posted: 3 months ago
Currency price does not directly equate to strength of economy. This is because a country can easily change the price of its currency by buying or selling its bonds or the federal bank changing the interest rates.

However, an economy that is competitive and strong and produces goods that the rest of the world wants would typically show a rising currency. But as I said, the country can just keep the currency low if it wants. This is what China, Japan, and other nations have been doing for a long time actually.