Economics idea

[Aphex_Twin]

Any economists here?

When a national currency rises it means exports are affected, while imports are spurred, right?

My proposal would be: create a special index that makes up for the ups and downs of a currency. For instance, when the currency has gone down by 1%, the index would rise to match (call it counter-currency or something). This would de-couple import/exports, loans/deposits from the actual value of a currency.

Would this be feazable? Does this create more stability?

 

[Grille]

Well, I'm not an economists, but (some) currencies (e.g. Dollar-DM) formerly had fixed exchange rates. The system wasn't that static, so adjustments have been made from time to time. So there was no hope for additional profit (or risk of losing profit), at least not on short term. AFAIK, these exchange rates have been abandoned due to inflationary fiscal policy of the US in the '70s, with the war in Vietnam as background (USD changed too fast for the fixed system back then).

I think your index suggestion would be *basically* the same, but what instance would decide upon the actual level in appropriate time? Today, there are too many influencing factors happening on a very short time scale for such index adjustments, I think. World-wide trading may be a matter of seconds nowadays and we could not expect to adjust the index level in time.

Or, on the other hand, if you go even one step further, you would practically create some sort of global currency with that index suggestion... that's pretty difficult to promote, I guess.

 

[Yago]

Well, the way countries do that, is controlling the money-sum. The currency is x. If x is loosing value, they print less of x. X gets scarce and x is gaining value. If x is gaining too much value, x they print less x and x is loosing value. Instead of "print", you could buy and sell it as goverment. The problem with fixing is, that a goverment has to agree with another goverment about that. If they agree, fixing works. Simply put, in the end it's the same, and the problems are the same. Either the state can influence things or the state can't, depends on the position he's in.

The China/US-dispute about those matters is interesting, as China can do what it does, question is, if the US can convince China to not do what it does.

Another issue is, that there are many people and if they decide for whatever reason, we all buy x today, x is gaining value and no one can do anything about it. And vice versa.

 

[The Yankee]

Right, the problem comes when some country pegs its currency to another's. It could either alter the economic landscape for a lot of people (such as when Argentina unfixed its peso to the dollar) or if you have a situation where China pegs its yuan to the dollar. It's a comfortable position for China now, so they don't really have a reason to change it.