Depreciation of money is ... Will the depreciation of money?

As everyone who studied political economy knows, money is a commodity, albeit very specific. This concept was invented by many definitions, from highly scientific to joking, but their essence does not change from this. Money, in Marx's words, is a receipt for the right to exploit someone else's labor. And as long as they are minted or printed, such exploitation will exist. And there will always be people who have more than others. And the fight for power is inseparably linked with the struggle for money. Mankind came up with equivalent units for their own convenience at the moment when commodity relations arose. In today's market, complicated by intricate international financial and credit relations, money is being depreciated in different countries. This phenomenon, depending on the degree of the process, is called differently: inflation, hyperinflation, default, stagnation and even the complete collapse of the economy. What are the mechanisms of these processes?

Inflation

The purchasing power of any currency decreases over time. And it's not even in the current Jamaican world currency system based on floating rates - it just adjusts the ratio of the value of various banknotes. If you assess how, for example, the US dollar has lost its solvency in the past three or four decades, it turns out that it is about its multiple fall. The same is true of the Swiss franc or the Japanese yen. The gradual depreciation of money is called inflation, the reverse process is called deflation, which economists also consider a negative phenomenon. The mechanism of these phenomena is quite simple. As the economy of money grows in circulation, more and more, the values provided in exchange for them by the market acquire consumer accessibility. All this is the engine for further development. Inflation within 2-3% is considered normal and even desirable.

Hyperinflation

Until the world's currencies were provided with a gold reserve, that is, during the period of the Genoa and Bretton Woods currency systems inclusive, both the exchange rates of monetary units and prices remained relatively stable. Of course, there were crises and depressions, sometimes very painful, but the dollar (and even cent) remained in value, it was very difficult to earn it. But in countries that have lost their gold reserves (as, for example, Germany after the defeat in the First World War), there was a rapid depreciation of money. This phenomenon was expressed in hundreds or even thousands of percent, and for a sum that recently made up capital, a month later one could buy a pack of cigarettes, or even a box of matches. Something similar happened to the former citizens of the Soviet Union that had broken up suddenly. Such an avalanche-like depreciation of money is called hyperinflation. It is caused by the complete or large-scale collapse of the state's financial system, expressed in the uncontrolled printing of unsecured bank notes and bank notes by the Central Bank.

Default

This new term for our ear broke out in the middle of the clear sky in 1998. The state announced its inability to respond to debt obligations, both in the foreign economic sphere and within the country. This moment was accompanied by hyperinflation, but in addition to it, citizens of the former Union felt other "delights" of default. Immediately emptied store shelves, people sought to spend their savings as quickly as possible, while they still could buy something. Many enterprises were ruined, whose activities were to some extent connected with the banking sphere. The interest rates on loans soared to cosmic values. Doing something other than resale, it became unprofitable, then unprofitable, and, finally, just impossible. A default is the depreciation of money, caused by a complete loss of confidence in the national monetary unit in the domestic and foreign markets. The reason for this is usually systemic errors in the country's financial management. In other words, there is a default when the government spends more money than the national economy can withstand. The depreciation of money in Russia, and then in other former Soviet republics, had other causes, related to the general sharing (between those who had access to this process) of the wealth of the destroyed great country. The "classic" default took place in Mexico (1994), Argentina (2001) and Uruguay (2003).

Inflation and devaluation

The growth of domestic prices in countries with underdeveloped and inefficient production is directly related to the collapse of the national currency. If the percentage of consumed goods has a high import component, there is necessarily a depreciation of money. This is due to the fact that the purchase of all the most necessary is made for world currencies, in particular, for US dollars, against which the rate of the national currency decreases. In countries that are less dependent on external supplies, with high levels of devaluation, inflation is observed only in the range of imported goods and that part of the domestic ones in which foreign components are used in production.

Positive aspects of inflation ...

Inflation, even of considerable size, has an impact on economic processes, not only disastrous, but sometimes even health-improving. An outstripping rise in prices stimulates the holders of savings not to store "rapidly in the stocking" rapidly disappearing stocks, but to launch them into circulation, speeding up financial flows. Operators leave the market, for whom depreciation of money is a disastrous factor due to the low efficiency of their activities. Remain only the strongest, hardy and persistent. Inflation plays a sanitary role, freeing the national economy from unnecessary ballast in the form of weak enterprises and financial and credit institutions that are unable to withstand competition.

... and default

It may seem paradoxical to think that even the complete collapse of the national financial system is beneficial, but there is also a rational grain in it.

First, the depreciation of paper money does not mean that other assets lose their value. Enterprises that have managed to maintain production capacity in the face of severe shocks are becoming the objects of increased attention of foreign and domestic investors.

Secondly, the state, which declared its insolvency, is temporarily freed from annoying creditors and can concentrate efforts on the most promising sectors of the economy. Default is a great opportunity to start "from a white sheet". At the same time, creditors are not at all interested in the death of a bankrupt, on the contrary, they tend to help the debtor, then to get their money at least partially.

Forecasting

However economists of ordinary citizens consoled, pointing to the positive aspects of the crisis phenomena, ordinary ordinary citizen does not welcome the prospect of loss of savings, a decrease in solvency and a general standard of living. He is worried by the question of whether there will be a devaluation of money, under what conditions it will occur, and what to do in order to get out of this situation with the least losses. Well, the world, like the national economy, despite its apparent complexity, operates according to fairly simple principles. The stability of purchasing power and demand is influenced by factors about which, if desired, everyone can learn from open sources. The size of GDP, gold and foreign exchange reserves, the size of external and internal debt, and most importantly, the dynamics of their changes - these macroeconomic parameters speak volumes. Here everything is like in an ordinary family: if money is spent more than it is earned, sooner or later creditors' trust is lost, and the collapse comes. If the situation is reversed, you can sleep peacefully.