Weak Currency
Categories: Banking, International, Forex
A currency is only weak when compared to its fellow currencies. A weak currency is a currency that has gone down in value compared to other currencies. Depending on which way you’re converting your money, a weak currency can be good (allowing you to buy more value) or bad (decreasing your buying power).
In general though, weak currencies are bad for the residing nation. Weak currencies often come from inflation issues, deficits, high imports compared to exports, and slow economic growth. The better a country’s economy is doing, the less likely they are to have a weak currency.
While weak currencies are usually the result of normal economic ups and downs, they can also be the result of larger events (Brexit, anyone?) and may even be purposefully implemented after a long period of currency strengthening (looking at you, China circa 2015).
Related or Semi-related Video
Finance: What is a strong dollar?3 Views
Finance allah shmoop what is a strong dollar everything's relative
Like if you waved dollar bill at a hotel owner
in russia in the early nineteen nineties just after gorbachev
tore down that wall Well that dollar would have bought
you a whole night in the fanciest hotel in moscow
hugely strong dollar relative to the russian ruble Back then
a dollar that took an average worker in the u
s like five minutes to earn Fought an entire night
at a swanky hotel in russia Why Well at the
time russia's entire political system was a shaky unstable Its
population didn't trust its own very soft currency Would it
be devalued like more less made worthless the next morning
by the government as it's issued a new currency Or
said that that when old ruble is now worth a
one thousand of a new russian ruble or with government
print a whole forest worth of just newpaper diluting the
value of any one unit of its own rubles could
happen has happened with other countries in the past by
brazil We're looking at you Could that happen in the
u s Well pretty much know least not in the
modern era people trust you ask currency which is like
saying that they trust the u s to not screw
over people who rely on its banking system in its
currency and that reliance and trust is worth a fortune
to this country because we attract the assets of foreigners
who feel safe giving our banks their money All right
well what does that trust actually do or mean to
us It makes for ah highly prized or strong u
s dollar meaning that people will pay a lot of
their own country's mistrusted currency in order to buy the
certainty or reliability of our own awesome currency And a
big part of this has to do with relative inflation
rates and relative interest in printing mohr paper by the
government like they're making bets that the inflation rate in
the u s will actually be responsibly controlled with various
monetary and fiscal policy Things that work versus the situation
in l say venezuela where the country is going bankrupt
under massive amounts of dead on their oil and they
have to print currency night and day just to pay
the bills people from starving yeah so people don't trust
venezuela like they do the us anyway This dynamic makes
u s goods relatively mohr expensive and foreign goods cheaper
in the u s Think about it like us goods
to be bought with russian rubles takes a whole lot
of rubles to buy us made chair where as us
dollars go very far in russia and a really nice
chair here with the massage thing all that three bucks
leased It wasn't nineties anyway And yes it also makes
it inexpensive for those holding highly prized u s dollars
to pay for hotel rooms in france when the euro
is weak against the dollar and of course somalia because
we always beat up on you somalia Sorry so yeah
at least for now the u s dollars pretty strong
Keep going with the russian metaphor It's rocky versus ivan 00:02:58.11 --> [endTime] drago strong