Monetary Devaluation Essay, Research Paper
MONETARY DEVALUATION
Like every other product the coin of a country has a price, which is the exchange type; this represents the quantity of Mexican pesos that are needed to buy an American dollar, and like every other price this one is determined because:
a) Because of the offer and demand of dollars, or
b) Because of the monetary authorities of the country.
The origin of the exchange types comes from the necessity that residents of one country have to buy another country’s money in order to cover their international debts. In Mexico’s case, residents demand dollars to buy goods and services from the exterior (imports); the offer of dollars comes from the selling of goods and services to the exterior (exports) as well as the income of capital such as foreign savings or direct investment. When imports and exports are not balanced the offer and demand of dollars is altered, which can also be affected in a short time for speculative reasons or simply as a precaution.
MEXICO’S CASE:
The changes in the economical situation of our country or in the ones with whom we realize mostly the exchange of goods and services, affect the behavior of demand and offer of dollars and as a consequence its price. If in Mexico the exchange type maintains fixed and the tendency of high prices is bigger than that one of the countries with whom we handle business normally, we will have a relative expensiveness of our goods and services with respect to the foreign ones. At the same time, foreign products will be cheaper to us. This situation provokes an increment in imports, carrying the demand of dollars, while the offer reduces as exports weaken. To stop this unbalance between offer and demand and not devaluating the coin, the government goes to external credit, establishes control over imports, subsides exports, etc A situation of this type cannot maintain undefined. A way to correct this unbalance is to devaluate the coin (modification of the exchange type in the one the price of dollars in terms of our coin is increased).
MONETARY DEVALUATION
EXPERIENCE IN DEVALUATIONS:
While the devaluation in 1938 was associated with the petroleum expropriation, the one in 1948 was considered as part of the worlds adjust after the Second World War. Until July 1948, the exchange type was at $ 4.65 for dollar and from that date on the peso maintained itself floating until in July 1949 it fixed itself at a new price of $ 8.65 for dollar. This price was modified again in April 1954, where it settled at $ 12.50 for dollar without there ever being a point of previous fluctuation. Its adjustment was precipitated by the public expense realized to stop temporarily the economical activity due to the recession that the United States suffered after the Korean War, not leaving out the breakdown on the prices of raw materials that Mexico exported.
DEVALUATION PROCESS IN MEXICO:
MONETARY DEVALUATION
When the government expends more than it receives as income (such as taxes and others) a deficit (lack of money) is produced in its register, the one that covers making new money without funds; this provokes more circulation of money. While more money is circulating than goods and services, prices rise provoking inflation. These prices sometimes go above the prices of imported goods and services; the government is forced to devaluate the coin to put it in the same level it was before, of course, in dollar’s prices.
EXAMPLE:
We export products to the United States. Suppose we export a TV; our TV costs $ 2,000.00 and the peso has an exchange type of $ 7.90 for dollar.
TV PESOS EXCHANGE TYPE DOLLARS
2,000.00 $ 7.90 253.16
But in six months our exported product has risen its price by $ 500.00 and the peso still has the same exchange type. As a consequence, our product will be more expensive to other countries they will not buy it.
TV PESOS EXCHANGE TYPE DOLLARS
2,500.00 $ 7.90 316.45
But what happens if we increase our exchange type proportionally to the rise of prices? In order to do that, we will have to know how many percent it increased in the six months. Well, our product increased 25% in six months, so we would have to increase the exchange type by 25%. This way, our TV will cost the same for foreigners in dollar’s terms
TV PESOS EXCHANGE TYPE DOLLARS
2,500.00 $ 9.87 253.29
Другие работы по теме:
Nixon Essay Research Paper In June 1970
Nixon Essay, Research Paper In June 1970 Nixon signed into law a bill lowering the voting age in federal elections from 21 years of age to 18. In mid 1971, the 26th Amendment to the Constitution, extending the franchise to citizens 18 years of age in all elections, was ratified. In his January 1971 State of the Union message to Congress, Nixon outlined six sweeping proposals.
Mueller V Allen Essay Research Paper MUELLER
Mueller V. Allen Essay, Research Paper MUELLER V. ALLEN Issue: Did the government violate the Establishment Clause because they provided monetary support to the parents of all school-goers?
Recession Essay Research Paper RecessionOf all the
Recession Essay, Research Paper Recession Of all the economies in the world the last one most people would think are in danger of recession is Japan. Their technology advances are mesmerizing and yet the economy is in danger. They have had their interest rates lower than any economy in the world since the 1930 s.
My Trip Essay Research Paper The role
My Trip Essay, Research Paper The role of the visit to Pemberley by Elizabeth and the Gardiners would most closely resemble a modern visit to a museum or a tourist attraction.
GDP As A Measure Of The Economy
Essay, Research Paper GDP As a Measure of the Economy The GDP is not a sufficient gauge of how the nation’s economy is doing. The GDP is a sum of the monetary value of what has been produced in the nation in the past year. The formula for calculating the GDP ignores a large percentage of the activities that transpire in the nation’s economy.
Mexican Economy Essay Research Paper For the
Mexican Economy Essay, Research Paper For the fourth time in the past 20 years, the Mexican economy is in financial distress, largely because of bad monetary policies pursued by Mexican officials. The United States has responded in all four instances by lending money to the Mexican government as a short-term palliative.
Greenspan Essay Research Paper Federal Reserve Board
Greenspan Essay, Research Paper Federal Reserve Board Chairman Alan Greenspan vows to promote ?low and stable inflation.? The main goal of the U.S. economy is to maintain price stability. This reduces the likelihood that imbalances could develop that would ultimately undermine the record economic expansion that the U.S. is currently having.
Fed Essay Research Paper Rukeyser 114 A
Fed Essay, Research Paper (Rukeyser 114). A final tool of monetary policy are foreign currency operations. Purchases and sales of foreign currency by the Fed are directed by the FOMC, acting in cooperation with the Treasury, which has overall responsibility for these operations. The Fed does not have targets, or desired levels, for the exchange rate.
Standards In Taiwan Were Three Times Those
In Malaysia. Essay, Research Paper In 1992 the GDP per head of Malaysia was $2200 and that of Taiwan was $6600. Discuss the basis and confidence with which an economist might conclude that living standards in Taiwan were three times those in Malaysia.
Euro In America Essay Research Paper On
Euro In America Essay, Research Paper On January 1,1999, the world witnessed a change never seen before: eleven nations of the European Union fixed their currencies to each other and established the world?s first common currency, the Euro. The creation of a single European currency will be the most important development in the international monetary system since the adoption of flexible exchange rates in the early 1970.
Grant Scandals Essay Research Paper Black friday
Grant Scandals Essay, Research Paper Black friday Scandal 1869 Early in Grant’s first term, two gold speculators Jay Gould and James Fisk hoped to buy gold at $130 per ounce and sell it at $160 per ounce. They tried o corner the gold market. They went to Grant, who had no understanding of monetary issues, and convinced him to tell Treasury Secretary George Boutwell to stop selling gold.
The Federal Reserve Essay Research Paper The
The Federal Reserve Essay, Research Paper The Federal Reserve System ?The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system.?
Monetary Policy Essay Research Paper I IntroductionIn
Monetary Policy Essay, Research Paper I. Introduction In order to promote national economic goals, a central bank acts to influence the availability and cost of money and credit, this is known as monetary policy. The Fed has three main tools with which to carry out policy. These instruments of monetary policy are open market operations, discount policy and reserve requirements.
Alan Greenspan Chairman Of The Federal Reserve
Board: Essay, Research Paper Alan Greenspan, chairman of the Federal Reserve Board: President Clinton appointed Alan Greenspan, a well-known chairman of the Federal Reserve Board, to his fourth term as the chairman of the nation’s central bank. Alan Greenspan accepted the chance to lead the Federal Reserve Board for another four-year term beginning June of 2000.
Social Change Essay Research Paper In the
Social Change Essay, Research Paper In the article, “The Rhetorician as an Agent of Social Change”, written by Ellen Cushman, I believe that the way I feel about ACCESS is shown. “A gift that is not returned can become a debt, a lasting obligation. Depending on the terms of the exchange, this obligation can either be in the form of a monetary debt, which imposes “overtly economic obligations by the usurer”, or in the form of ethical debt, which produces “moral obligations and emotional attachment created and maintained by the generous gift.” (380)
Chaos In The Currency Markets Currency
Crisis Of The EMS Essay, Research Paper Chaos in The Currency Markets : Currency Crisis of The EMS 1. What does the crisis of September 1992 tell you about the relative abilities
The International Monetary Fund Essay Research Paper
The International Monetary Fund The original policies and goals created in 1944 by the International Monetary Fund(IMF) differ little from the main focus of the organization at present. The IMF was created to rebuild and stabilize the world economy after World War II. And to this day it continues in its efforts to support and stabilize the economies of its member nations.
The Euro Essay Research Paper On January
The Euro Essay, Research Paper On January 1, 1999, eleven European countries replaced their national currencies and introduced a single European currency, the Euro. As of then, the Euro is considered to be the official currency in the eleven participating countries. Bills and coins of the national currencies will remain in circulation as sub-denominations of the Euro until January 1, 2002, when they will be exchanged against new Euro coins and bills.
Wealth Essay Research Paper Dan NeffPeriod 43697WealthThere
Wealth Essay, Research Paper Dan Neff Period 4 3-6-97 Wealth There are differences between those who are born wealthy and those who earn money. Wealth, especially monetary wealth, means the person can meet all of their needs and wants with great luxury and still have money left to use, waste, save, or share.
European Monetary Union Essay Research Paper The
European Monetary Union Essay, Research Paper The liberalization of trade is a historical phenomenon, which goes back a long way. Never before has any regional grouping made up of sovereign countries succeeded in taking economic integration as far as the European Union has done. Customs duties between European countries started to come down steadily in the early 1950s and disappeared entirely in 1968 with the introduction of a customs union and the implementation of the common external tariff.
Eu Social Policy And Monetary Policy Essay
, Research Paper The integration of Europe has created a new government that could be labeled as intergovernmental, or supranational. Most would agree, that in reality, it is a delicate balance of the two. However, you can identify specific policies within the EU as more intergovernmental or supranational.
The History Of The Euro Essay Research
Paper Michael Younan The History of the Euro Recently members of the European Community have proposed the “Euro” as the name of a united currency. The idea for a common currency is not a new one. For years European banks have been using ECUs as the basis for the European Monetary System and it will now be exchangeable equally for new Euros.
Everyday Use Essay Research Paper Tradition
Everyday Use Essay, Research Paper Tradition: “Everyday Use” and “The Lottery” Essay written by Pia Adams Tradition is an important part of everyone’s life. Some people follow traditions so deeply rooted in their everyday life that they don’t even recognize them as such. Why do you cook rice a certain way? Well, that’s the way Grandma always did it.
Smoking Essay Research Paper Smoking
Smoking Essay, Research Paper Smoking Studies of ex-smokers show that their risk of dying from smoking-related disease decreases with each year of non smoking. Encouraged by such evidence,
How Did The Special Agencies Of The
United Nations Help To Provide A Better Quality Of Life Essay, Research Paper At the outbreak of the Second World War, in 1939 the League of Nations collapsed.? However
Is The United Nations The Answer To
The Worlds Problems? Essay, Research Paper Michelle Curtis Is The United Nations The Answer To The Worlds Problems? The issue of whether or not the United Nations should be disbanded is a complex two-sided answer. Some may say that no the United Nations should remain in society because of all the good the organization has done for the world such as UNICEF.
SupplySide Economics Essay Research Paper SupplySide EconomicsEssay
Supply-Side Economics Essay, Research Paper Supply-Side Economics Essay Question Supply-Side economics and policies would best benefit the economy in the case of a recession in the year 2000. Supply-side policies are made of several important points to regulate the economy. Supply-side policies consist of stimulating the economy by production, cutting taxes, and limiting government regulations to increase incentives for businesses and individuals.
Us Affairs Essay Research Paper The US
Us Affairs Essay, Research Paper The U.S. plays a major role in most of the international affairs because the U.S. is considered to be a powerful nation. The Economy of America is strong, and the military power is one of the biggest in the world. There was a Persian Gulf War back in 1991 when the U.S. attacked Iraq.
Monetary And Fiscal Policy Essay Research Paper
Monetary and Fiscal Policy The Monetary and Fiscal Policies, although controlled by two different organizations, are the ways that our economy is kept under control. Both policies have their strengths and weaknesses, some situations favoring use of both policies, but most of the time, only one is necessary.
Federal Monetary And Fiscal Policy Essay Research
Paper The management of the money supply and interest rates is what is known as monetary policy, The Federal Reserve System (the Fed) was established by an Act of Congress in 1913 and consists of the seven members of the Board of Governors in Washington, D.C., and twelve Federal Reserve District Banks.
Articles Of Confederation Essay Research Paper Soon
Articles Of Confederation Essay, Research Paper Soon after the Revolutionary War in America, a new government was started when the Articles of Confederation (Articles) were adopted by the Continental Congress. The Articles set up a democratic government that gave the States the power to make their own laws and to enforce them.