Topic: Why devaluation of currency a big step toward economic growth. (Read 225 times)

Devaluation simply means the inflation right or am I understand that in a wrong way?

Very low inflation rate is good for the country and its economic development that is why banks started to print money every year in the past now these banks are just printing money to tackle the economic crisis which is not the right way since it is going to affect the small business more as well as the people's spending power.

The key word I picked from your post is industrialization.
When a country is equipped with many industrial sectors and produce more than what she is consuming, it doesn't just boost the GDP but it increases the value of that nation and any where around the world, they are always respected.
African solely depend on importation and they also lack industrial plans to boost their economy there by devaluing their currency and increases the rate of inflation in their nations.

I think corporate profit margins are defined in terms of units sold. A car sold by general motors might have a $5,000 profit margin. This leads the private sector of major export nations to try to devalue their native fiat currency to sell a higher number of units, which looks better on paper in terms of revenue and profits.

Example if general motors has a $5,000 profit margin for every car sold. They can export 100 cars for $500,000 in profit margin. Or if they devalue their currency 20%, they might sell roughly 20% more units. Devaluing fiat currency looks better on paper for the corporate sector who sells more units. But also carries a negative effect of decreasing the purchasing power of consumers who reside in the country.

I think the reason for China's image management BS is because they don't want all the countries become truly their enemy, remember that they still have labor and concentration camps for their Muslim minority so I don't think that they aren't going to slow down with all their lies. Plus there's no possibility that the people of China will ever truly be free, CCP is an example of what happens if the cancer in society was left alone to grow big.

It's nice to see @amishmanish also realizes this kind of strange behavior, i.e., shilling Chinese government as if they are so good in governing people, etc. It's rampant on every social media and mainstream media so that more and more people notice this shady act.

Anyway, it should be clear as day that government monetary intervention only works in the short term before the supply demand dynamics catch up and other governments react with tariffs, etc. Remember the don impose heavy tariffs on China and brag about how they "pay." "They pay us million an millions" 

Good to know that someone else is also seeing this pattern of CCP shills and propagandists on the forum. The communists always have this agenda of "image management" rather than letting a free society and a free press come to the conclusion about the performance and shortcomings of a government.

I often see this same behavior on Twitter. The Chinese handlers try really hard to give off the honesty vibe in their interactions, (like this one that is posting about devaluation without any reference to Bitcoin, which this forum is about). Yet, anybody who is remotely aware of the actions of the CCP including jailing its businessmen, reporters, scientists, doctors for so much as trying to provide genuine criticism, will understand the evil behind this homogenous behemoth that wishes to lord over and bully more and more of the world.

As far as currency devaluation is concerned, it is something that has been done by countries to boost their trade balance in the past. This does not mean that it is somehow a way to enhanced prosperity and growth in a country's economy. The fundamentals of a free market matter. China has cheap labor, cheap capital, cheap land which made it a prime destination for capitalist corporations, leading to unprecedented growth. Apart from the availability of a pliant, billion plus population, what has contributed to the long term growth is the Chinese having zero qualms about stealing IP and copy-pasting,enabled by individual interests in the West.

So as @mu_enrico said, Go away CCP shill, we do not get fooled by the likes of you in the bitcoin world.

Devaluation is a fancy term for deflation and it's not a sign of an economic growth because that means that the price of products and services go down and at the same time cause aa chain reaction in the supply chain with the producers losing money because they paid much higher investment compared to the returns due to deflation. Another effect of this so called devaluation is that the salary for workers will go down especially those that are on the minimum wage.

So let me see if I get this right, you are basically approving the policies of the government that have to do with stealing the wealth of their citizens through inflation? Because that is what happens when governments devalue their currency, no offense but that is precisely why I have a great deal of my savings in bitcoin, I do not want to lose the purchasing power of the wealth that it has cost me a life to get just because a few politicians want to stimulate the economy.

Devaluation is not the right step for government that is unproductive to take because it will end up impoverishing the country the more. A country that can grow in devaluation is the type that is producing and it's GDP record is rising like China. If you devalue the currency, it will mean you have worthless currency but you need to fortify the exporting products, by that you gain foreign currency and have foreign reserve, while at the domestic front you have surplus of product which will make the worthless devalued currency able to buy goods and services.

There is a fairly simple and, importantly, logical explanation of why an acceptable currency devaluation is the engine of the economy and a "competitive" advantage. And now, in order:
1. Devaluation as the driving force of the domestic economy. Tu is simple enough. If the local currency is deprived of such a property as devaluation, i.e. a gradual reduction in price, or loss of value, the population, with a high probability, will simply accumulate and block significant amounts "in wallets". This means that these amounts (this can be a really significant amount for the local economy) will be "withdrawn" from circulation, which means that the money turnover within the country will decrease, and what is important - the investment attractiveness of money will disappear. This means that instead of investing (and buying goods, services, real estate, cars, etc. is, in a sense, investing in domestic producers), they will engage in ineffective "accumulation".
2. Devaluation as an exchange rate gain for the exporter. Very high cost, and growing (without devaluation) makes the export product less competitive. The same China is devaluing its currency for a reason. The consequence of the devaluation is the stimulation of exports, since the exporter, when exchanging the earned foreign currency for his depreciated currency, receives a devaluation income.

BUT ! There are many nuances that can give a purely negative result from inflation / devaluation (similar processes)

Actually, depreciation and devaluation of the currency are two different things but the end result of both of them is quite similar, it's just that depreciation shows results in a very slow manner as it's a gradual process and the country suffers in the meantime until there are enough foreign investors in the country or enough exports. While in the case of Devaluation, there is just one-time suffering for the importers but in the long run, things become smoother and generally better. But even a devaluation strategy should be very smartly curated with increased foreign investments and import substitution because it could lead to great economic degrowth if import substitution is not done on time. Also, hyperinflation can also happen in certain cases after devaluation. African countries are afraid of hyperinflationary scenarios after the Zimbabwe Tragedy so I think that is the reason they are not trying this.

china devaluing their money is by means of making the prices of products low. If you are going to do this in developed countries like what is going on in US today, it's going to cause inflation to which the buying power of the USD depreciates. what you can buy with $5 today may not be what it can in the next few days. if you still could buy a gallon of gas for $5 today, you may not be able to do so later. maybe half a gallon with $5. that's not growth.

china started low because they were devastated by war. it was like starting over from scratch but maintained their value low and continue to do so even today when they are already industrialized. manipulated as many believed it to be because they wanted to make it attractive to investors.

The most basic factor of the existence of a currency devaluation axis that drives a developing and developed country is the export action. It's as simple as this, if the demand for shipments of goods from country A to country B exceeds the maximum export limit of goods per year that has been determined by the company, the Dollar Exchange rate will increase and make the value of country A's currency will automatically decrease, thus having an impact on the value of inflation.

As the Chinese concept of producing goods, we should be an example, but that does not mean the Chinese in the general definition. For example, one of the Chinese tribes that is synonymous with a business concept that is almost successful in foreign countries and has entered its products to all corners of the region.
I once heard from my friend who is of Chinese descent and gave me a motivational word which he said was a principle for the Chinese, if I'm not mistaken it sounds like this
"Seeing once is better than hearing a hundred times, and practicing once is better than hearing a hundred times"
which means "No matter how high a person's education is, whatever pile of books that person reads, it will be useless if it is not applied in real life".

I don't see devaluation as a policy instrument that supports growth but chaos in the country because my country has a lot of history with devaluation policies and the results have worsened the economy.  How can it be called a devaluation as a sign of growth in the country.  I still haven't got a reasonable point for that.  Fyi, my country is not the most industrialized country but the biggest importing country and with this devaluation it is like a macroeconomic destroyer.  while the only umkm that could be saved were at that time.

A certain African nation has devalued its currency more than once in the past 5 years. Lol. Sadly they failed to follow sound theories of currency devaluation. They have no plans for massive industrialization, her citizens are more unemployed now than at anytime since it's independence. They depend on import and have solid strategy to do what it takes to resuscitate their dying economy other than borrowing and more borrowing from China. In this case, devaluation of her currency has become more of a curse for the economy than a blessing.

Ofcourse.
You can easily achieve similar result by making  local fiat currency somewhat scarce while getting people produces lots of local products in surplus. Some of the surplus can be sold to foreign markets a bit higher than the local prices and you won't need to artificially adjust the price of your currency.
I know quite a number of locally made products here that could be sold way cheaper (than what the Chinese market sell) because of  factors people normally miss when discussing why certain goods are cheap in one country but expensive in another.
I remember one of my relatives who lives in the US saying he preferred buying locally made shoes(I think canvas) whenever he is back home because they are way cheaper, but the local makers hardly export them to the foreign markets esp US probably because they can't.

Most countries increase the value of domestic currency either by buying it back/destroying some or by lending it out to investors.

The latter could be the reason the Chinese government sold off quite a large number of treasury bonds - as well as hurting the US's ability to borrow at a lower interest than they'd probably have wanted.

Exactly, increasing the value of a currency may increase debt and it will consume USD reserves.

There is a limitation to that "control" of currency value.

Here is how it works in Brazil:


If our currency (BRL) is losing value, the central bank makes a massive USD sell off, buying all BRL possible to increase BRL price.
However, our USD reserves are limited, the central bank cannot do that forever.

There are other way to indirectly increase BRL price. For example, increasing interest rates. However, in Brazil we already have one of the higher interest rates in the world (you can check it here)

By increasing interest rates, investors from around the world come to brazil and buy BRL and sell their currency (USD, EUR,etc) to invest in government bonds (which are paying higher than before). But this also increases debt.

International trade. Most economies require at least some level of export. If your local currency becomes too valuable, export declines which has a negative impact on your local economy. Also increasing the value of a currency will increase the value of debt in said currency. And pretty much all economies run on debt these days.

I am not sure if this theory is actually true one?

In my country since COVID situation the economical conditions are worsening and INR/USD is getting expensive (devaluation). This is obviously happening because there are huge expenses to the country in terms of Medical care, halted businesses, low GST/tax payout to the government due to lockdowns.

To over come this the Government has increased the prices of Petrol and Diesel which is high in demand all the time and unstoppable stuff. The prices have been increased everyday to gain more capital throughout country.

That's smartest move ever.

BUT, adjusting the value with increased export and expensive import seems little off the track. If Yuan is so expensive that imported material is unreachable then Yuan is not being regulated properly.

If currency is valued highly, then nothing should be costly to them. 

China sucks, go away CCP shill

China devaluates its currency simply because they want to keep their products' price low (cheap) thus remain competitive, yes they can do that since they have cheap sweatshops. But artificially changing anything will affect economic efficiency. They will need to import at some point, also pay its foreign debt. In the end, foreign countries will react, and everything will come back to the previous state (equilibrium). Any government intervention only useful in the short run.

Very simple! When a currency is steadily devalued by inflation, most people save less. That means they spend the money and the economic cycle gets going. That means more demand for goods and services, which creates more jobs and more tax revenue for the state. In addition, the state can also borrow more money, because the old debts have lost value and so the politicians can make themselves popular with the electorate by additional money through benefits for the people. Therefore, a government never has the interest to keep a currency stable in value.

Absolutely bollocks. A devaluation is not a "bold move" or a "good thing for the country", but rather the recognition that the economy is no longer competitive enough to maintain the level of imports that the citizens of the country are currently enjoying. The equivalent in a domestic environment would be the parents deciding that they need to spend less because they are not getting enough to keep with the expenses - it is as simple as that.

Devaluation is the last resort and is a defeat under any prism. Politicians tend to mask that reality since the beginning of times saying "this will help our economy", "we will sell more", etc... That is just to avoid saying you need to consume less imports because your products and services are not competitive.

You need to know the difference between products which exported from China and Africa, China mostly exporting electronic, machine, and other things that can be produced. While Africa mostly exporting precious metal, diamonds, raw material, and other things that scarce. If this scarce things keep been hunting, then one day it will run out.

Africa are lack of money and foods, so they always rely on foods imports. So it's useless if Africa devaluing their currency since they always rely on imports. Devaluing or depreciating currency isn't the main problems on Africa, but the corruption, politics and ecocystem.

Interesting. If a currency can be adjusted the way you describe, by a government, what stops other countries from increasing the value of their currencies?

Well, I guess every country have basic local things they can easily depend on without problems, even if they are completely cut off from the rest of the world.
I think some people are more careful going deeper into the Matrix/system than others... What's is more important is that we live more with nature than inventing/creating evil things.
 I hope we have couragous people in the continent refuse to abandon their good cultures while building and developing the societies with good/safe technology.

Devaluation of currency is a cautious move by the government of a country to decreasingly adjust the value of its currency.

China as a country is dominating the world market and economy because of that bold move.Because of the massive industrialization in china couple with the large productive population, capital intensive production and most importantly good maintenance of the nation resources.

Since china is one the most exporting countries in the world, china devalue the Chinese yuan which made imports expensive and export cheap.

Chinese taste for foreign good reduces, infant industries in china are protected, china has a surplus balance of payments which lead to economic growth and development.

But what is happening in most developing countries especially In Africa is not devaluation of currency but rather depreciation of currency.which is cause by low level of industrialization  Imports based economy.