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Top Currency Exchange Rates from seopages444's blog

Since the abandonment of the gold standard by all the countries, currencies have been just fiat money, that is, a means of exchange, without any independent value of their particular but usually the one fixed by the issuing states or perceived by the people using them. Therefore, they could lose their relative value in two ways - by mention of other, stronger currencies, or even to the goods and services they could buy, the first being called devaluation and the latter inflation. They're not, however, cheap poe currency financial phenomena but are intertwined, and they're in no way restricted to just one country, given that nowadays we are trading on a worldwide market.


Devaluation is, as a rule, sanctified by the federal government, which, by way of the central bank, lowers the worth of the national currency against other currencies, fixing a new exchange rate. Why will it act in this manner? For counterbalancing the capital outflows or the trade deficit, obliging thus its citizens to limit their import purchases and buy more domestic goods, hoping thus to obtain eventually a trade surplus. But considering the fact that the value of money can be a challenge of perception, if currency traders feel that the currency is weakening, they could sell it for the foreign reserves of the relevant country and oblige the us government to lessen the currency value. Besides the trade deficit, a budget deficit can also lead to devaluation, if the us government resorts to printing more money to cover its debts. An exorbitant money supply causes inflation, whereby the purchasing power of the said currency will decrease, and so will its value against foreign currencies or gold, this means again devaluation.


What happens when currency losses its value? Well, it affects the entire financial system, which means wealth of a country. There are just three financial sectors by which money could be invested and profits made: the bond market, the FX and the precious metals. What happens with the bonds in such a scenario? The financial institution assets are valuable only to the extent the currencies by which they are expressed maintain their value, as the bonds'nominal value is assessed by conversion into currency. But with the sovereign debts of all of the Western states expressed in trillion dollars, bonds are only paper. So bond owners will either sell them for ones from better faring states or perhaps buy gold. The same could happen on the FX market: when currency traders are met with a weakening currency, each goes for stronger ones, or, if there are none, they will resort to the same hedge: gold.


The main problem may be the huge devaluation of the US dollar that is both global trading currency and the global reserve currency. Because of its devaluation, all the costs of commodities and services are increasing; this is exactly why, for example, oil has reached record highs lately. On the other hand, central banks, whose issued currencies are backed by the dollar, must sell dollars in exchange for stronger currencies or again gold. Both central banks and people will buy gold as a hedge against the further weakening of the dollar that the constantly increasing American debt will probably cause.


Therefore, there is no other selection for investors than buying gold. The issue is that nevertheless no-one can be hedged against what will occur to currencies because, no matter how much the gold bullion prices are going to increase, the bullion market cannot absorb significantly more than 5% of the assets from the FX and bond markets. So the global financial system is apparently doomed.



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