Reply to post: Re: Flow of money

NEVER MIND the B*LLOCKS Osbo peddles, deficits don't really matter

I ain't Spartacus Gold badge

Re: Flow of money

Remember though that currencies change their value. So if our economy isn't doing swimmingly, but we're paying off debt to foreigners, then Johnny-Foreigner might choose to sell those pounds to someone else at below the market rate.

Then our exchange rate falls. This makes our exports cheaper abroad, and so may help us to sell more of them. But it also makes our imports more expensive. This means we have become poorer as an economy, as we have to sell more exports in order to achieve the same level of imports we were getting before. If a large part of our economy is made up of international trade - then overall prices of goods will rise (again we are poorer). This is of course inflation - and workers may demand higher pay in order to counteract it. And so the merry dance of economic ripple-effects continues...

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