Flexible Exchange Rate

Finance a la shmoop what is an ex change rate? alright I give you two cleary's for

one cat eye you give me to come quat's for one banana with the peel on this [Person trades come quats for banana]

time thank you I give you forty two thousand three

hundred eighty two dollars for this new Ford Hemi truck with the awooga horn yep

these are all exchange rates marbles for marbles fruit for fruit and well dollars

for trucks with awooga horns in place just do what you know... people off well in

more common financee parlance exchange rates focus on the trading back and

forth of national currencies while each country or region generally has its own [Selection of currencies appear and man holding an Uzi]

currency printing more of that currency lets the government pay its bills more

easily if it's not collecting enough dough in taxes but if it prints too much

of that currency well then it falls in value relative to the currencies of

other countries think about that you print lots of dollars and you have lots

of debt well then it's easy to pay back your debt right but if you do that too [Money transfers into debt]

long people don't trust your currency and then it creates all kinds of havoc

when you want to trade with them well when all that happens and it's volatile

currencies back and forth the goods of the inflated country seem cheap to other

countries and in theory well then they buy more stuff from the country that's [Other countries trading from inflated country]

got cheap currency and it makes it much more expensive for the inflated currency

country to then buy more from the we don't print too much currency country

one euro cost about two US dollars when it first came out in the early 90s a

nice hotel that was 250 a night in Paris cost a US currency holder about 500

bucks right like it was 250 euros it was 500 US dollars pay for that same hotel

so you can imagine there were not a whole lot of US tourists anxious to rent

Hotel nights from Rue de la blah blah blah but when Europeans looked at buying [eBay website appears]

american-made speedo swimsuits oh yeah they were cheap and clearly too many

Europeans bought them but then the euro fell into closer parity with the US

dollar in part because faith in their economic union fell and because the US

appeared to be printing money at a slower pace than worthy Europeans and

the public kind of wanted US dollars instead of euros because they thought

the US a little bit more secure so what happened well the relative

inflation of the US was in better shape than that of Europe

so today the exchange rate after a long time decades is now about one to one [Man discussing exchange rates]

meaning one US dollar buys you about one euro and same vice versa yeah so

you'd say that the rate of euros to dollars is about even and coincidentally

a US dollar buys you about 100 new Japanese yen and a US dollar buys about

600,000 Zimbabwean dollars and let's see US dollar also buys fourteen thousand

galleons if you know you're vacationing at Hogwarts lovely time [Hogwarts castle appears]