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What determines how much a foreign currency is worth in a certain nation??
please no rude answers dont got time for it at all.
please no rude answers dont got time for it at all.
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demonhunter
New member
it depends on a few things. what kind of system are they on? are they on a gold standard? if they are it is pretty simple. that country can establish what the currency is worth based from gold. if its a fiat system like ours its really up the the government to say its worth x amount. that depends soley on the market and what other countries see that currencies value as. being the dollar is the dominant reserve countries base thier currency off of ours. if ours falls theirs will fall as well. its all supply and demand. you need to keep the demand high and the supply limited. if you take the U.S. as an example we have been flooding the system with paper money and its causing other countries to loose faith in our dollar. if that happens it will cause hyper inflation. the demand drops due to too much supply and it devalues the currency resulting in really high prices. with a gold standard this is almost impossible because gold never really changes in value technically. the reason gold is up so much compared to the dollar is because the dollar has lost value. gold stayed the same. there are other money systems but these 2 are the most known. fiat is based on nothing so you can print all you want and it is worth soley on what the market does. it will go up and down constantly. gold standard is the safest way cause you can only print as much paper as their is gold available and you cannot flood the system and you dont need to worry about the market for its worth like you would with just paper currency. we have used gold for thousands of years and its the safest inv4estment out there. it holds its value regardless of the markets. sure it vcan seem like its worth less at times the paper currency is holding strong but technically it never looses its value and we always have an end when it comes to a fiat system. then people always go back to gold. plus the ones who control the reserves cant control the currency of a country based on gold. they can however build or destroy a country based on a fiat system by manipulating the markets and forcing that country to deal only in their paper currency for trade.
really its supply and demand. you dont need to use gold you can do it with anything but you need a limit on how much there is. the less there is the more people want it and it will hold high value. if you have too much people loose the demand for it and it causes it to loose value. most countries are based off the dollar and you can see how that has turned out. those currencies have dropped in value because of it. now the middle east has not to worry about such things vause they deal in gold. not all but some still do.
really its supply and demand. you dont need to use gold you can do it with anything but you need a limit on how much there is. the less there is the more people want it and it will hold high value. if you have too much people loose the demand for it and it causes it to loose value. most countries are based off the dollar and you can see how that has turned out. those currencies have dropped in value because of it. now the middle east has not to worry about such things vause they deal in gold. not all but some still do.