Group Leader
- Joined
- Oct 2, 2018
- Messages
- 680
@tonie, err I’m the one trying to say that it’s the purchasing power that changes while the exchange rate can stay stable.
I apologise if you think i’m trying to troll. As you may have noticed by now, I kind of suck at trying to explain things. Orz.
If you don’t mind one last attempt...
Also I’m also caught up to the webnovel translation so I’m cheating a bit with foreknowledge
Taking your supermarket analogy , say the two stores accepted euro, dollars, and gbp. It would take the equivalent amount of each currency to buy the water at the first store €0.83, $1, ¥104, and £0.69 and at the small shop €1.24, $1.50, ¥156 and £1.12. If we take, $ and ¥ to be Enel and ¥ the same principal would apply which goes back to the post questioning “ A million enel is a hundred million yen right?” And I say “Yup checks out!”
Even though there is a supply and demand fluctuation at the small shop causing an increase in the cost of the goods the basic ratio between currency pairs remains steady. . If he arrived at the small shop first and said hey! $ 1.50 = ¥ 100 and set that pricing as the initial valuation, if he then travels to the supermarket he’d find water to be at 1$ = ¥66
To my understanding, This is similar to how all the currencies transitioned from the gold standard ( 1 money = 1 gold ) to fiat currency. First you start with something you have, 1 money = 1 gold (or in MC’s case food and drink), and then you exchange the gold value to a fiat value ( where value is not dependent on its weight in gold but rather the understanding of how much that unit of money should be worth[ in relation to the average cost of everything] by the nation or the MC -a-nation-of-1)
in a way paper money functions in the same way.
We consider a bank note of £10 to be worth that amount because the MC/Gov says “it shall be so” (-fiat), despite having no further physical proof on that scrap of paper/polymer besides the £10 printed on it.
I apologise if you think i’m trying to troll. As you may have noticed by now, I kind of suck at trying to explain things. Orz.
If you don’t mind one last attempt...
Also I’m also caught up to the webnovel translation so I’m cheating a bit with foreknowledge
Taking your supermarket analogy , say the two stores accepted euro, dollars, and gbp. It would take the equivalent amount of each currency to buy the water at the first store €0.83, $1, ¥104, and £0.69 and at the small shop €1.24, $1.50, ¥156 and £1.12. If we take, $ and ¥ to be Enel and ¥ the same principal would apply which goes back to the post questioning “ A million enel is a hundred million yen right?” And I say “Yup checks out!”
Even though there is a supply and demand fluctuation at the small shop causing an increase in the cost of the goods the basic ratio between currency pairs remains steady. . If he arrived at the small shop first and said hey! $ 1.50 = ¥ 100 and set that pricing as the initial valuation, if he then travels to the supermarket he’d find water to be at 1$ = ¥66
To my understanding, This is similar to how all the currencies transitioned from the gold standard ( 1 money = 1 gold ) to fiat currency. First you start with something you have, 1 money = 1 gold (or in MC’s case food and drink), and then you exchange the gold value to a fiat value ( where value is not dependent on its weight in gold but rather the understanding of how much that unit of money should be worth[ in relation to the average cost of everything] by the nation or the MC -a-nation-of-1)
in a way paper money functions in the same way.
We consider a bank note of £10 to be worth that amount because the MC/Gov says “it shall be so” (-fiat), despite having no further physical proof on that scrap of paper/polymer besides the £10 printed on it.