The Devaluation of fiat money is powered by Inflation

[MarissaLopez]

Fiat money is a money or currency that is unable to change its function or pattern,which is signed and decreed as a legal tender.having this money is like owning an asset because you cant change it,but it can be use as an exchange for something.

This fiat money is a meduim of exchange in the form of coins,paper and all of that.since its existence it has been an easy way of exchange for demands and wants and has helped in reaching to the goals of oneself.which have made the approach and desires for this fiat money to be over emphasised.
But the insurgency of inflation have empowered the devaluation of this money.

Inflation is the general increase or rise in the prices of goods and services,when inflation is encountered it cause a total increase and alters the prices of goods and thus amount to the devaluation of fiat money.

What Causes inflation: For example when the demand for a particular products is higher than the supply,that way inflation has taken place.
                                          Another one is when prices goes up and affect everything including supply. And dont meet  up to a persons or country needs and wants.that way inflation has ocurred.
                                          Then Devaluation: The main power engine for inflation of this fiat money.This happens when a particular country is trying to adjust to the tendency of balancing the fiat money to balance with trade(Good and services).when this is done money or currencies value is reduced and make importation of goods to be downgraded and exportation of goods and services to be reduced.
The devaluation of this money has made exports to increase and importation to decrease,because since the money is devalued as inflation arised,the neccessity of meeting to that demand is reduced,and so therefore encouraging exportation of this goods would help in keeping It at a balance.

So i think this should be thrown into the house for better enlightenment and better discussion.

[1714245869]

1714245869

[1714245869]

1714245869

[MegameSama]

waste fiat money instead of gold, gold has been proven to maintain asset values for hundreds of years, its value has remained even increased.

[yudi09]

Fiat money is a money or currency that is unable to change its function or pattern,which is signed and decreed as a legal tender.having this money is like owning an asset because you cant change it,but it can be use as an exchange for something.

This fiat money is a meduim of exchange in the form of coins,paper and all of that.since its existence it has been an easy way of exchange for demands and wants and has helped in reaching to the goals of oneself.which have made the approach and desires for this fiat money to be over emphasised.
But the insurgency of inflation have empowered the devaluation of this money.

Everything about the money you mentioned is determined or controlled by the government or a party that has the authority to issue regulations regarding how much money must be printed or made each year.

Acceptance of fiat money as a transaction tool that makes it easier for people as a medium of exchange to get something because fiat money is a legal tender that is recognized by all countries.
But from the way fiat currency works, its value depends on the government or central bank, so it is not surprising that its value can change or fall over a long period of time due to inflation and several other things.

There is something even greater than fiat currency but the government or interested parties are not willing to admit it or make it a good financial system, namely bitcoin.
This type of currency needs to be discussed in the house specifically in order to get the answer who is better.

[hugeblack]

Inflation is one of the economic terms that is often misunderstood. In a good economic system, controlled inflation is necessary to create value on the commodity and to force consumers to spend instead of displacing. As an example of the importance of inflation (in its simple sense, which means an increase in product prices), we can ask why prices do not increase in Japan^[1] and how It was bad for the economy^[2].

In general, inflation of 2% is good for most economies, and sometimes as long as the government can control inflation, the wheel of the economy will turn.
The problem comes from excessive and explosive inflation, where the government is unable to control inflation, prices increase daily, and the currency rate decreases, and this is what many believe is the concept of inflation.

Excessive inflation has internal causes related to state policies, external causes, and causes related to the structure of the economy. It is a symptom of a disease, and without identifying the cause of hyperinflation, the solutions will fail.

I think that talking about such a subject requires more, but this story in brief.

[1] https://www.asahi.com/ajw/articles/14462174
[2] https://www.eastasiaforum.org/2022/08/12/japans-low-inflation-conundrum/

[Faisal2202]

The topic was quite hard for me to understand actually I did not knew that devaluation can cause inflation instead you tried to emphasize that inflation will makes yours currency lose value! Correct me if I take it wrong. Well, the point is in the hope to making the value of one country's currency equal to another things, many factors plays important role, like monetary policy, interest rates, etc. etc.

So after huge discussion things came back to the fact that higher demand of goods means more inflation, lower supply of money in the circulation means lesser inflation as there will be less money to buy things.

PS: Well, if the ratio between consumption and production will be managed then inflation can be controlled.

[Alpha Marine]

I think that talking about such a subject requires more, but this story in brief.

[1] https://www.asahi.com/ajw/articles/144621

From the article, I have a few questions. 
If the cost of a product is $20 for example, there is no way that product can be sold for $15 just because that's the price that the people will buy. No company would operate like that. A company would food eventually if they followed this business model. The goal is to make a profit, so if they're not making a profit then there's no point in the business.
Or, they're making a profit but not much. For example, they make just $2 out of a $20 product. Isn't that a good thing that a company can't exploit people and make excessive profits off of them?

Could it also be that the people in Japan buy more less quality products?
If the cost of producing the product is $20 and the company knows that people will not buy at that price, they'll find ways to reduce the cost of production to about $10 to $15 and then sell for about $22. This would help the company make more profit but they would sell less quality products, to their Japanese market at least.

Another question,
Does it mean that the forces of demand and supply don't play a role in the determination of prices in Japan? From the article, I can conclude that it is the people who determine the price, so no matter how the market is, the buyers still determine the price.

Finally,
Does this also affect imported products from foreign companies or do the citizens only do this to local products?
Because there is no way foreign companies would export their products and services to Japan if the people would just buy them at a price they want even if the company is not making the kind of profit they desire.

[348Judah]

Devaluation of fiat currency is not only caused by inflation, there are many more factors that must be considered which have contributed in many ways to how we are being affected by inflation in holding a fiat currency in an economy, have we considered some of the policies that surround the monetary system in fiat, how the government officials control the process, how it's been manipulated or maybe we ever think of the kaw behind the repeatition in continuous printing of fiat currency without limit, i see this as a broad discussion with how to tackle the overall causes of fiat devaluation over time while inflation is just the most emphatic cause we all mentioned often leaving others causes or factors behind.

[ShinyStarPrincess]

Fiat money is a money or currency that is unable to change its function or pattern,which is signed and decreed as a legal tender.having this money is like owning an asset because you cant change it,but it can be use as an exchange for something.

This fiat money is a meduim of exchange in the form of coins,paper and all of that.since its existence it has been an easy way of exchange for demands and wants and has helped in reaching to the goals of oneself.which have made the approach and desires for this fiat money to be over emphasised.
But the insurgency of inflation have empowered the devaluation of this money.

Inflation is the general increase or rise in the prices of goods and services,when inflation is encountered it cause a total increase and alters the prices of goods and thus amount to the devaluation of fiat money.

What Causes inflation: For example when the demand for a particular products is higher than the supply,that way inflation has taken place.
                                          Another one is when prices goes up and affect everything including supply. And dont meet  up to a persons or country needs and wants.that way inflation has ocurred.
                                          Then Devaluation: The main power engine for inflation of this fiat money.This happens when a particular country is trying to adjust to the tendency of balancing the fiat money with trade(Goods and services).when this is done money or currencies value is reduced and make importation of goods to be downgraded and the exportation of goods and services to be reduced.
The devaluation of this money has made exports to increase and importations to decrease, because since the money is devalued as inflation arised,the neccessity of meeting to that demand is reduced,and so encouraging the exportation of these goods would help in keeping It at a balance.

So i think this should be thrown into the house for better enlightenment and better discussion.

Living in Argentina with 150% INflation rate. I can tell how this can crash an economy

[STT]

Inflation will destroy an economy from the losses and impediment it introduces to the order flow.  If a price is not stable then each party producing, buying and distributing cannot be sure of their costs vs margins during a sale.   150% inflation is a failure, people will do anything to get away from that problem of constant losses.  Most likely only those connected to government or crime will be able to operate properly in the end.

gold has been proven to maintain asset values for hundreds of years, its value has remained even increased.

Gold doesnt go up in value, it has no yield either so it should not be kept for profit especially.  The biggest point is stability in that its inert and able to exist outside of these FIAT paper problems, also most of the world will accept gold so its a link to international trade.  People like to compare crypto with gold, they are different but its understandable due to similar advantages.

[Abu-Naim]

Devaluation of fiat currency is not only caused by inflation, there are many more factors that must be considered which have contributed in many ways to how we are being affected by inflation in holding a fiat currency in an economy, have we considered some of the policies that surround the monetary system in fiat, how the government officials control the process, how it's been manipulated or maybe we ever think of the kaw behind the repeatition in continuous printing of fiat currency without limit, i see this as a broad discussion with how to tackle the overall causes of fiat devaluation over time while inflation is just the most emphatic cause we all mentioned often leaving others causes or factors behind.

I agree that government policies have an impact on the value of our fiat currencies, however inflation is one of the primary causes of fiat currency depreciation around the world. When fiat loses value, the country's economy suffers as a result of higher prices for products and services, and people who save fiat will no longer value what they saved.

I no longer trust keeping fiat cash because my country's currency consistently loses value to the dollar, and the little money you have on hand can no longer satisfy your wants as a result of the high cost of things. With my savings, I intend to purchase some BTC.

[safar1980]

so anyone understands that with rising inflation comes devaluation. but if you look at the example of agriculture, when the country has a poor potato harvest but a good rice harvest, should inflation occur?
Won't the poor stop buying expensive potatoes? It is logical that they will buy cheaper rice and there will be no inflation.

[goaldigger]

so anyone understands that with rising inflation comes devaluation. but if you look at the example of agriculture, when the country has a poor potato harvest but a good rice harvest, should inflation occur?
Won't the poor stop buying expensive potatoes? It is logical that they will buy cheaper rice and there will be no inflation.

Inflation does not around only about the prices of the commodities, its actually based in a whole market sentiment of one country, the monetary policies also a big contributor for the inflation. Yes there’s an alternative but considering the generations now, we are still buying the things that we want even if its too expensive or even if there’s a cheaper alternative, and that’s how many deal with the inflation.

[sunsilk]

When a lot of new supply of money has been printed in the circulation, this also causes inflation. Everything about law of supply and demand, that's applicable to our economies.

On the other hand, Bitcoin is deflationary and that is because of having a limited supply. Its scarcity makes it a deflationary and if there are people keeping foreign currencies as their asset and reserve, it's better to have Bitcoin based on my experience.

With money printing and inflation are coming together, there could be lesser growth with these factors to none.

[Gyfts]

Another question,
Does it mean that the forces of demand and supply don't play a role in the determination of prices in Japan? From the article, I can conclude that it is the people who determine the price, so no matter how the market is, the buyers still determine the price.

Looks like the article was removed, but to answer your questions despite what it may have said: Supply and demand always dictate what prices consumers pay for products. If there's ever deviation from supply and demand, it's because the government has manipulated the market on their own accord, usually by money printing, to control price.

[Fiatless]

The devaluation of currency can be caused by inflation. When the price of goods keeps increasing money will also lose its purchasing power. An example is the case of Zimbabwe in 2006 where a loaf of bread cost about Z$550,000 which was just 1 dollar. But devaluation can also be an economic strategy to promote local consumption of goods and exports. Locally produced goods will be cheaper which means people will prefer it to expensive imported goods. Currency devaluation will make the country's goods cheaper in the international market which will attract more trade partnerships.

But there are also dangers of devaluation especially if the country relies on other countries for importation of raw materials. This will make raw materials more expensive and locally produced goods may no longer be cheaper. Devaluation is a good economic policy that has worked for countries like China but it can cause harm to other countries, especially to countries that depend on others for raw materials and human resources.

[Don Pedro Dinero]

So i think this should be thrown into the house for better enlightenment and better discussion.

Dear Marissa, I am sorry to say that you have not caused enlightenment with your post, and I think it is your way of writing that does not help. Your nickname sounds Spanish, I suggest you to go to the local Spanish forum to debate there as well.

To try to clarify what you are saying and to do my bit, we have two parts, inflation and economic growth, which are linked. And within inflation we have inflation that is only caused by monetary policies, or inflation that is not caused by monetary policies, generally by economic growth, but also by other factors, such as the increase in energy prices.

So, when inflation is caused by monetary causes, because central banks issue a lot of money this causes currency devaluation, and in that sense the title of your thread is correct. However, when inflation is not strictly monetary it does not cause devaluation. Therefore, what you say is only partially correct.

[mvdheuvel1983]

Inflation is good if it is moderated. Governments create inflation. What is bad is the extreme of it which is hyperinflation. The uncontrolled inflation that the government creates through the printing of money is only beneficial in the short term especially during a recession. In the long-term people can't keep with the rising price especially if those on fixed incomes.

Let me summarise by saying that in the short-term inflation helps because there will be more money in circulation and people would have more to spend but then when it is left uncontrolled, the money becomes useless no matter how much you have and demand will no longer increase but remain either stagnant or decrease.

[Sim_card]

Hyperinflation is what is not good with a country economy because it will cripple the economy when the government of that country cannot control it. Another thing that can cause a general world inflation is a pandemic. We saw the damage that Covid-19 pandemic caused to the world economy because there was lock down everywhere and no production,some counties hasn't still recovered from the damage that the pandemic did to their economy. War can cause inflation too,all these that I mentioned are fuel to inflation. A country that doesn't produce but rather depend on exported goods will be a slave to inflation just like some Africa countries.

[Gozie51]

Your post looks uncoordinated but something can be made out of it anyway. Apart from fall in supply which could lead to scarcity and the rise of the price of goods or services which is what is called inflation, you also have to know that the government can deliberately cause a level of inflation maybe moderately to control the amount of money in circulation. To this effect if government want to have the policy to circulate money, they could reduce the rate of interest on loan and that can cause money to be in the reach of many and that means more money chasing fewer goods. That will lead to inflation but it is artificial and can be controlled.

[MFahad]

Gold doesnt go up in value, it has no yield either so it should not be kept for profit especially.  The biggest point is stability in that its inert and able to exist outside of these FIAT paper problems, also most of the world will accept gold so its a link to international trade.  People like to compare crypto with gold, they are different but its understandable due to similar advantages.

Gold always shows higher price although it requires some months to increase in value but the lower price does not exists as longer as that of crypto coin. These days gold rate is increasing and that of crypto is going down, I don't say that crypto is not a good way to make investment but as compared to crypto gold is a wise choice for profitable growth.

According to my experience gold never disappointed its holders and its true that for sometime it downs but when we compare its price on annual basis so we can conclude that gold is always better in price than previous year.