Viewing a single comment thread. View all comments

Derikoopa OP t1_j291ybw wrote

Reply to comment by Just_Jen_1 in eli5: Why couldn't a country in debt mint a coin of immense value and use it to pay off the debt? by Derikoopa

This makes sense in terms of a currency backed by the gold standard, but since that doesn't really exist anymore is it still relevant?

1

Just_Jen_1 t1_j29ft6m wrote

It is relevant because the effects inside the country and the effects in the global market are different. If Best Buy brings in a Panasonic TV from Japan, Best Buy has to give that country a certain amount of money that is relative in that country. So Best Buy has to pay the equivalent of $500 in Japan, then sells it me for $900. So sure, if my country prints more money and I get a raise, I can better afford the $900 TV locally. The problem is that after printing more currency, my dollar is worth less globally, due to my initial example. As a result, Best Buy will now need $700 to meet the same value for Japan in Japanese currency. In turn, the next time Best Buy sells me a TV, they need to charge $1200.

2

Just_Jen_1 t1_j29hemn wrote

Further to this, all exported goods cost more to bring in. This is how it effects the poor. If the poor don't get a proportional increase, then basic goods cost more. The poor get poorer.

1