Difference between revisions of "Devaluation"
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When the [[Federal Reserve]] deliberately [[prints money]] (often a cause of [[hyperinflation]]) to cover a persistent [[budget deficit]] without borrowing, this may be considered a devaluation. A steady insidious process of [[inflation]] is not considered a devaluation, although if a [[fiat currency]] has a high level of inflation, its value will naturally fall against [[gold]], [[silver]] or foreign currencies. | When the [[Federal Reserve]] deliberately [[prints money]] (often a cause of [[hyperinflation]]) to cover a persistent [[budget deficit]] without borrowing, this may be considered a devaluation. A steady insidious process of [[inflation]] is not considered a devaluation, although if a [[fiat currency]] has a high level of inflation, its value will naturally fall against [[gold]], [[silver]] or foreign currencies. | ||
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| − | [[Category:Economics]] | + | [[Category : Economic Preparedness]] |
| + | [[Category : Economics]] | ||
Revision as of 10:29, February 21, 2015
Devaluation is a government monetary policy to dilute the value of its currency, typically by printing more of it. The reasons for this can include helping voters (like farmers) who are in debt by reducing the real value of their obligations, or helping the government itself pay back loans (see United States Treasury securities and the National debt). Sometimes devaluation is done to increase exports and decrease imports, thereby reducing a balance-of-payments trade deficit.
When the Federal Reserve deliberately prints money (often a cause of hyperinflation) to cover a persistent budget deficit without borrowing, this may be considered a devaluation. A steady insidious process of inflation is not considered a devaluation, although if a fiat currency has a high level of inflation, its value will naturally fall against gold, silver or foreign currencies.
