Exchange Rates and Trade

We've talked about free trade, but one issue is that different countries utilize different currencies, and the values of those currencies are constantly fluctuating. The value of one currency with respect to another is called an exchange rate. How are these determined and how do they influence imports and exports? Let's get a closer look!
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Animation by Ignacio Triana: / unraveled
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[@tonyburton419]

Dave' s videos on economic, philosophy, etc so very helpful.

[@dorasama5804]

I just randomly got in this channel but it sure looks like I am not lost

[@oferransenberg5291]

Can you explain why a universal coin would fail?
I always thought about it and I have some questions:
1. Would there be inflation/deflation if the currency is fixed?
2. If every country has the same coin wouldn't it be better because there will be no exchanging fee?
3. Would economies thrive if they won't have their unique coin?

[@moreece1713]

Universal coin means the world has no borders and it will make it less peaceful because of beliefs, mainly Religious beliefs

[@beanrkar]

Look at el Salvador, they have Bitcoin as National Currency. and right now they are not doing good.

[@HTV-2_Hypersonic_Glide_Vehicle]

​@@Learn_A_TeachThat has less to do about currency, and more about laws and rules.

[@HTV-2_Hypersonic_Glide_Vehicle]

@@Learn_A_Teach One comment is talking about Bitcoin as a universal currency, implying that the country is not so healthy, another comment is talking about poverty and wealth gap increase, and tying that to the U.S. Dollar. Two different comments about different things. One comment is very broad and general, while the other is specific on a certain issue, wealth disparity.

[@seanofpeace]

Answers:
1. Yes, there can be inflation and deflation even when a currency is fixed against another commodity. Having a fixed currency does not stop the organization that controls the creation of it from “printing” more, causing its value in the market to fall - which is inflation. Conversely, it doesn’t stop people from hoarding the coin in times of economic uncertainty, causing its value in the market to rise - which is deflation. Having the currency fixed merely puts a limit on those activities, because people would simply start using the peg commodity.
2. Yes and no. Yes, having the same coin would reduce international transaction costs because there would no longer be a need to exchange currencies (which always involves risk - which is a cost). But also no, because at least with multiple currencies you have competing organizations with which you can place your trust. If the US begins printing too many dollars you can use British Pounds or Japanese Yen. (This is one reason why bitcoin became so popular - there IS NO single entity that can control how many exist.)
3. Economies can thrive or fail depending largely on what their governments are doing independently of what currency they use. It’s easy to find both good and bad economies between say, US states or EU nations, even though those geographies use the same local currency. If a government loads up on debt, and is then forced to raise taxes, that will hurt an economy because fewer resources are going into productive means, and more is going into interest payments. Governments can also create environments that can harm an economy by creating regulations that incentivize bad actors (such as limited liability laws or promises of bailouts).

[@glittercupkate]

This video was EXACTLY what I've been searching for - others that I watched are all way to complex for beginners

[@mikesparrow3807]

Thanks for another very educational video; them coming PD!

[@MrWouterKuipers]

The BRICS countries want to get an alternative to payments in American Dollars. Several economists predict it will be a mistake to do so. Why would that be a mistake? Why would it be better for all countries to pay in Dollars instead of creating a new currency as BRICS countries plan to do? Many thanks in advance for answering!

[@PappaTom-ub3ht]

Because if one one the countries in BRICS decides to start a long protracted war and need funding for this they can't print money if the other parties agree on it.

[@mozkitolife5437]

One thing we don’t need in light of AGW is thriving economies. Because we’re not basing those economies on sustainable models.

[@Canadian_Ry]

Thanks, Prof. Dave!

[@t.kudahjairus281]

Great video - thank you very much!!!

[@CrimWorld9]

I didn't understand the part about Trade Deficit and Depreciate the Value of its currency...
If you have a Deficit that means you're importing more, so you're buying more goods from other countries...
Wouldn't you want your currency to be value as high as possible if that's the situation? You need to buy as much goods as possible, so wouldn't it be better if your money was capable of buying 10 foreign goods instead of 5?

[@edward9012]

So suppose your country's currency appreciates a lot against other currencies in the world, yes people from your country could purchase goods from other countries more easily because they would become cheaper for you, but on the other hand, YOUR country's goods will also become more EXPENSIVE in the eyes of people from OTHER countries. Remember, people might hold jobs selling goods to foreign countries. When export becomes harder, loads of these people might earn less money, your country might become TOO dependent on imported goods, and the economy as a whole might be negatively affected. That's why usually you don't want your currency to appreciate TOO MUCH (and not depreciate too much either).

[@absolute___zero]

no forex broker advertisement? hmmm, weird!

[@annepandesal]

thank you

[@glennpearson9348]

Would love to see you revisit some version of exchange rates when you eventually take a deeper dive into crypto-currency (e.g., BitCoin, Dogecoin, Ethereum, etc.). It's difficult to tell whether these new-age currencies should really be treated like currency, or more like equities.

[@toby9999]

BitCoin seems to behave like a currency and a stock, albeit a stock with no intrinsic value, hence it's volatility. Yes, I would like a deep dive as I don't understand the attraction of crypto currencies, nor do I understand why people treat them like stocks when there are real stocks to invest in. Seems like a mugs game.

[@glennpearson9348]

@@toby9999 I agree. My view is that crypto-currency holds value like, say, art. In a free market system, we can talk about supply and demand and how these things affect prices, but at the end of the day, everything is worth what someone is willing to pay for it. Crypto-currency seems to follow that trend, too. There's no intrinsic value in crypto-currency, other than what the next sucker in line is willing to pay for it, as well as its value in being able to easily and untraceably launder actual money.

[@reeseexplains8935]

Could you do videos debunking Ben Shapiro?

[@KipCoffman]

Impossible

[@tanjunwei-zx1gl]

S$90 -> NTD1600

[@yajy4501]

This is unrelated to the video, I’m just putting it here in hopes that you might see it. Something you might consider covering (cause almost no one on TH-cam is) is the bad science the wildly popular Andrew Huberman promotes on his channel. He’s constantly taking single studies or insufficient evidence and extrapolating bold declarations from them as if they’re conclusive. Additionally, he hawks a lot of unproven supplements like the worst of the science bro community. While he does give a lot of good information as well, it bothers me that almost no one on TH-cam is calling him out for his excesses. Just something you might consider covering.

[@bhupendrakalme4897]

Thanks sir ❤

[@livingcodex9878]

おはようございます

[@MuhammadBilal-ld1ur]

Very nice dave

[@cc12yt]

very cool

[@Rxn836]

Lorenz is laughing from his grave at anyone trying to predict stocks.😂

[@me_at_ball]

hello dave

[@deivytrajan]

Would it be better if all countries had the same currency?

[@DiegoBoyager]

Yes

[@fxcurrencyconverter]

nice video

[@TriPham-j3b]

The unwanted import like over shipping of cars and building materials to america made unmanageable deficits that why americans are homeless because those things not selling but balance sheet send money oversea

[@dannybowden5296]

Is this for toddlers?! So many factors and facts left out.

[@ProfessorDaveExplains]

It's for high school economics students, written by a high school economics teacher.

[@dannybowden5296]

​@@ProfessorDaveExplains Fair dinkum!

[@simonsimon2888]

Revalue you gain,
Devalue you lose

[@SamShaw-iq1xr]

Dollar to rubil

[@abdulrashidmumuni8562]

Ghanadonia international money 💷 exchange 💱 rate 1 dollar 💵 10 ghc 20/5/2024

[@banderofficial]

bro knows everything

[@m.martin1928]

100 dreams = usd

[@Tomagotchiify]

I would love to gift Professor Dave some XRP! Thank you for your simple, easy, and visual lessons! You are a true hero in education

[@marchrome1214]

Earth is flat just open your mind

[@lovelybitofbugle219]

Its not even level!

[@sciencenerd7639]

thank you