How do we compute currency value?
It is quite simple:
Value ＝ Commercial Balance - Investment Balance
Commercial balance ＝ import - export
Investment balance ＝ foreign investments in - investments in foreign countries
Basically, if you (your country) export more then you import and/or you attract less investments then you invert outside your country, the value of your currency will decline.
If your currency value decrease, the cost of depth will increase because your money worth less.
If your currency value decrease, get ready for the beginning of the inflation spiral.
If you have the choice, you rather be in inflation created by growth the inflation created by value depreciation.
If you do an estimation of US dollars value depreciation since 1992 based on commercial balance only, you will get 17%. (see code balancy.py)
Rule: Understand currency value. If its depreciating, you are in trouble. If it is depreciating and diluted from money supply printing, you are in big troubles.
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notes:
If you try to estimate value depreciation of the US dollars in 2012, you get this:
currency value ~ commercial balance - investment balance
2012 (US): -1% ＝ (190 B - 225B) + (?* 40B - ) *weird that we can get estimation of investment out of US
Export 2012: 190 billions
Import 2012: 225 billions
investments in 2012: 40 billions
investments out: ? (should be bigger the investment in)
bailout: 700 billions -> dilution 17% of US value
deficit 2013: dillution 1% value
deficit cumulate since 1992 (no bailout): -16% (see code balancy.py)
deficit cumulate since 1922 (with bailout): ~30%
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