Quote:
Originally Posted by jamesqf
Got to admit I don't really understand most of that. (Guess I should've stuck to quantum mechanics :-)) Devaluing as a way of escaping debt seems just a sneaky way to declare bankruptcy without actually calling it that: "Yeah, we're just going to pay ten cents on the dollar of what we owe you, but you're going to get just as many of our shiny new devalued pesos, so it's ok."
As for devaluation letting them compete on price, wouldn't any sensible person just raise the price as measured in new, devalued money so as to receive the same value?
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We had this discussion in another thread. Price inflation is the direct result of devaluation of any currency. It brings to mind the anecdote about the devaluation of the German mark in the 1930's. The story goes that someone needed a wheelbarrow full of paper mark currency to go shopping, leaving the wheelbarrow outside the shop. While inside, someone dumped the currency on the ground and took the wheelbarrow, as it was worth more than the devalued paper money.
But when it comes to exchange rates of currency that is factored into transactions. If the currency is worth less (or worthless) you will need to spend a lot more of it to compensate for its lack of value.
When all else fails, the government will crank up the printing presses and print more money. Devaluation is the cruelest tax of all.