{"id":10523,"date":"2015-07-29T18:02:12","date_gmt":"2015-07-29T23:02:12","guid":{"rendered":"http:\/\/olduvai.ca\/?p=10523"},"modified":"2015-07-29T18:02:12","modified_gmt":"2015-07-29T23:02:12","slug":"currency-devaluation-the-crushing-vice-of-price","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=10523","title":{"rendered":"Currency Devaluation: The Crushing Vice of Price"},"content":{"rendered":"

Currency Devaluation: The Crushing Vice of Price<\/a><\/h3>\n

Devaluation has a negative consequence few mention: the cost of imports skyrockets.<\/i><\/p>\n

When stagnation grabs exporting nations by the throat, the universal solution offered is\u00a0devalue your currency to boost exports<\/i>.<\/b>\u00a0As a currency loses purchasing power relative to the currencies of trading partners, exported goods and services become cheaper to those buying the products with competing currencies.<\/p>\n

For example, a few years ago, before Japanese authorities moved to devalue the yen, the U.S. dollar bought 78 yen. Now it buys 123 yen–an astonishing 57% increase.<\/p>\n

\"\"<\/p>\n

Devaluation is a bonanza for exporters’ bottom lines.<\/b>\u00a0Back in late 2012, when a Japanese corporation sold a product in the U.S. for $1, the company received 78 yen when the sale was reported in yen.<\/p>\n

Now the same sale of $1 reaps 123 yen. Same product, same price in dollars, but a 57% increase in revenues when stated in yen.<\/p>\n

No wonder depreciation is widely viewed as the magic panacea for stagnant revenues and profits.<\/b>\u00a0There’s just one tiny little problem with devaluation, which we’ll cover in a moment.<\/p>\n

One exporter’s depreciation becomes an immediate problem for other exporters:<\/b>\u00a0when Japan devalued its currency, the yen, its products became cheaper to those buying Japanese goods with U.S. dollars, Chinese yuan, euros, etc.<\/p>\n

That negatively impacts other exporters selling into the same markets–for example, South Korea.<\/p>\n

To remain competitive, South Korea would have to devalue its currency, the won. This is known as\u00a0competitive devaluation<\/i>, a.k.a. currency war. As a result of currency wars, the advantages of devaluation are often temporary.<\/p>\n

But as correspondent Mark G. recently observed, devaluation has a negative consequence few mention: the cost of imports skyrockets.<\/b>\u00a0When imports are essential, such as energy and food, the benefits of devaluation (boosting exports) may well be considerably less than the pain caused by rising import costs.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Currency Devaluation: The Crushing Vice of Price Devaluation has a negative consequence few mention: the cost of imports skyrockets. When stagnation grabs exporting nations by the throat, the universal solution offered is\u00a0devalue your currency to boost exports.\u00a0As a currency loses purchasing power relative to the currencies of trading partners, exported goods and services become cheaper […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[127,951,1099,2590,1784,2520,426,4924,2096],"class_list":["post-10523","post","type-post","status-publish","format-standard","hentry","category-economics","tag-charles-hugh-smith","tag-currency","tag-currency-devaluation","tag-devaluation","tag-exports","tag-imports","tag-inflation","tag-oftwominds","tag-stagnation"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10523","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10523"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10523\/revisions"}],"predecessor-version":[{"id":10524,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10523\/revisions\/10524"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10523"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10523"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10523"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}