Why does the country s currency depreciate?

The reason why the country's currency will depreciate is not only one reason, but also that there are many factors involved in the depreciation of a country's currency, including complex reasons and very transparent reasons.

If a country issues too much currency, it will inevitably cause inflation in the currency, and when inflation occurs, the country's currency will depreciate. In fact, to put it bluntly, the principle is the same as commodities. The law of demand tells us that when the supply is greater than the demand, the commodity will depreciate, but on the other hand, when the demand for a commodity is greater than the supply, the commodity will have the so-called ** rise, I think the same should be the case with money.

Currency depreciation is inextricably linked to a country's international economic situation. Take our country and the United States as an example, some of our country's foreign exchange reserves are US dollars, but the United States has a great advantage in this regard, because as we all know, the US dollar is directly linked to **, if the US dollar is printed in the United States, he is different from other countries, generally will not cause their own domestic currency depreciation, but will directly depreciate our country's foreign exchange reserves, this series of operations, in fact, has a great impact on the depreciation of the RMB.

In fact, inflation maintenance and depreciation have an impact on each other. In economics, the direct cause of currency depreciation is directly related to the amount of currency issued by a country, and we can come to this conclusion by calculating or formulating the depreciation rate.

There may be some places where it is not accurate, and professionals are welcome to point it out.

There are two main factors for the depreciation of the currency, one is the internal factor, and the other is the external factor, so I will introduce in detail how these two factors cause the depreciation of the currency.

First of all, in terms of internal factors, it is due to the fact that the institution that prints money, they are in sesame oil, articles, and in essence, they print more banknotes, so that there are only 100 trillion items in circulation on the market, but they have entered 150 trillion banknotes, which will make the price ** make the banknotes more and more worthless, and it will cause the depreciation of the national currency, which is from the perspective of internal factors, which is what we often call inflation. The specific effect of inflation is that it will make the rich richer and the poor poorer, why? Because, the poor have a lot of cash in their hands, and the rich people have no cash in your hands, they say that you only have a lot of assets, and the price of goods will only make the assets of these rich people more and more appreciated, but the cash in the hands of the poor is becoming more and more worthless, and the gap between the rich and the poor is gradually widening.

From the perspective of external factors, it depends on whether the country's currency is pegged to foreign currencies, for example, whether China's RMB is pegged to the US dollar, when the US dollar appreciates, then the US dollar will be more manageable than the RMB, then the RMB will depreciate compared with the US dollar, so in the international market, the depreciation of the RMB also means the appreciation of the US dollar, on the contrary, if the US dollar depreciates, it means the appreciation of the RMB. Now in a situation where the Fed does not raise interest rates, the dollar will gradually appreciate, and the yuan will gradually depreciate, so this will also cause the currency to depreciate, but this is based on the international currency market.

In the end, no matter which way the currency is devalued, then from an economic point of view, it is hoped that the currency can maintain its stable purchasing power, so as to bring a full vitality to the market economy, so that people dare to invest and dare to consume, which is a positive promotion effect.

China has been in a situation of inflation, and the renminbi has been depreciating, in fact, appropriate inflation has a beneficial effect on a country's economy, but currency depreciation too fast will have many adverse effects.

An important reason for currency depreciation is the excess of national currency issuance, the amount of currency issued by a country needs to be accurately calculated, I used to naively think that since the money is printed by our own country, why not print a little more, so that there is a lot of money, and there are no poor people, currency is just a tool for trading, and **** and so on do not have the value of the currency itself represents, in ancient China there was a serious phenomenon of currency overissuance, at that time people went to buy a piece of cloth, Even a bun has to carry a lot of money, and even a car pulls it, so the state must control the amount of currency issued and also pay attention to cracking down on counterfeit banknotes.

The decrease in the circulation of goods or services is also one of the reasons for the depreciation of the currency, that is, the supply in the market is less than the demand, resulting in the **** of goods and services, the reduction of goods and services that can be bought per unit of currency, and the currency has less purchasing power, that is, the money is worthless, and the **** of the laborer leads to a decrease in the cost of goods, so it also leads to the **** of goods. Just as an increase in money in circulation includes a decrease in storage, a decrease in the number of goods in circulation may be a means employed by merchants in response to a certain situation. When there is a problem in market regulation, the state should adopt macroeconomic regulation and control measures to avoid the deterioration of the situation.

Other reasons for currency depreciation include the international situation, the economic situation, just like the economic crisis in the United States that affected many surrounding countries. Of course, currency depreciation may also be an economic tool used by the state to adjust the exchange rate. People's psychological expectations can also cause a country's currency to depreciate.

The total amount of money issued by the state is greater than the total amount of money in demand, resulting in inflation, and the money becomes less available than before, (i.e., it costs 6 yuan to buy something that used to cost 5 yuan).

If there is too much money, it is worthless, and if there is too little money, it is even less valuable, because no one thinks it is money.

Because governing the country requires monetary policy to balance. Therefore, the currency has to be constantly aggressive against the market.

Depreciation is divided into international and domestic, right? The amount of gold in the currency, and the breadth of the transaction are determined.

It is to exploit the working people.

Currency depreciation refers to the reduction of the value of a country's currency, which has two aspects: internal depreciation and external depreciation. The amount of value of a country's currency is determined by the number of goods it can buy. When a country's domestic prices**, the same amount of currency buys less goods than before the price increase, which is the internal depreciation of the currency.

Sooner or later, the internal depreciation of the currency will inevitably be reflected in the exchange rate, that is, the relative decrease in the amount of currency exchanged for foreign currency of the same amount is manifested in the rise of the foreign exchange rate expressed in the national currency, which is the external depreciation of the currency. Of course, the external depreciation of a country's currency will sooner or later affect the domestic price **, resulting in the internal depreciation of the currency. However, the internal depreciation of a currency is not necessarily the same as the external depreciation.

The frequent depreciation of a country's currency indicates that the country's political and economic situation is not stable enough, and it will also affect the investment of foreign capital in the country.

Extended Information:1Money, by its very nature, is a contract between owners about the right of exchange, and the different forms of money are essentially unified.

In the past, due to people's unclear understanding of the nature of money, they mistakenly divided money into different types from different angles, such as: according to the commodity value of money, it is divided into two categories: debt money and non-debt money; According to whether the exchange ratio of *** is agreed, it is divided into convertible currency and non-convertible currency and so on.

2.In terms of form, money can be divided into physical money and formal money according to the commodity value of money, and physical money itself is a special commodity, including the amount of value, such as sheep, ***, etc.; Whereas, formal money itself has no quantity of value, its value is contractually agreed, only contractually valued. The two forms are different, but they are unified in nature, that is, they are both agreed to be used as a medium of exchange, and both have contractual value.

The purchasing power of money is determined by the contractual value of money, but the purchasing power of physical money is also affected by the value of its own goods, which is usually less than its contractual value as money.

A stronger currency causes imports** to fall and exports** to rise, although not to the detriment of exports.

But the balance of payments can be improved.

Currency depreciation can have the opposite effect. But in fact, the impact of currency depreciation on income mainly comes from two aspects: depreciation causes imports** to rise** and exports to fall**, which makes **conditions worse.