Deflation Recovery

Discussion in 'Ask any question!' started by YLC, Apr 24, 2016.

  1. YLC

    YLC Member

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    I have a couple of questions that all link to each other.

    During the crash in 2009-ish, I believe there was deflation because people started to save money rather than spending it (please correct me if I'm wrong with this to begin with)? At the bottom of the crash, the exchange rate of USD to CAD was less than 1 to 1. For the purpose of this question, let's assume it was 0.85 to 1, so at that time I was able to use $0.85 CAD to buy $1 USD.

    How then, has the USD recovered from the deflation to now have an exchange rate of ~1.24 to 1, or in general how does a country recover from deflation to make it's currency worth more than the other country again?

    Was the quantitative easing a factor (a form of devaluation?), whereby the influx of available cash allowed people to purchase foreign goods, causing a demand for that other country's goods so that they would devalue their currency to increase exports to the US? From that, the USD would rise again because other countries want to export more goods to the US.

    Now, why would the US not want to lower the USD/CAD exchange rate now, so that there could be more exports to help businesses in the US?
     
  2. Gray Wolf

    Gray Wolf Well-Known Member

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    Pretty complex question there YLC. :D Most economists can't agree on the importance of the many factors that cause the ups and downs of one country vs another's currency. Mainly though it is that country's inflation rates, interest rates, trade balance, trade terms, country's debt level (deficit spending thus printing money) and the overall political volatility in a particular country. An economist could probably write an entire book on each factor and still not cover everything that might change the value of currency.
     
  3. YLC

    YLC Member

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    Thanks for the reply. Macro-economics is hard to understand...
     
  4. StockJock-e

    StockJock-e Brew Master
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    The US does not decide what it wants the exchange rate at, its a free market and the market will decide.

    QE helped boost business in the US or at least it was supposed to. The low rates and terrible returns on bonds meant you need to be in equities to be making anything.

    Because the equity market looks strong, the US economy looks strong which makes people more confident about the US dollar vs the Canadian dollar.

    This is just my rough interpretation, but also keep in mind that Canada's exposure to commodities is hurting its dollar.
     
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  5. Ciao (Sheppy)

    Ciao (Sheppy) Well-Known Member

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    I tried to give my thoughts but after several tries I give up (my English is too weak for a complicated answer :() so I agree with Gil in short is +/- that...
    btw YLC you quote >>so at that time I was able to use $0.85 CAD to buy $1 USD.<< I think was the other way round
    2009>>> http://www.x-rates.com/average/?from=USD&to=CAD&amount=1&year=2009
    2016>>> http://www.x-rates.com/average/?from=CAD&to=USD&amount=1&year=2009
     
  6. Gray Wolf

    Gray Wolf Well-Known Member

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    Spero che tu sia italiano. Provare a tenere un traducono come Google apre in una scheda separata del browser e digitare ciò che si desidera digitare e vedere se non si traduce per voi. Esso non può essere perfetto erano tutti amici qui e capiranno. :)

    https://translate.google.com
     
  7. Ciao (Sheppy)

    Ciao (Sheppy) Well-Known Member

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    Jerry are you politely trying to say that my English is so bad that I need to be translated? :(:(:(
    unfortunately the Google or any other I saw are as bad if not worse then me :D;)
    it is ok on words but not sentences many time doesn't make sense
     
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  8. Gray Wolf

    Gray Wolf Well-Known Member

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    No offense intended at all Ciao. :D You said it not me, that why I suggested the translator for "complicated" stuff. I have no problem reading your stuff and your English is way way better then my Italian :D (which is non existent like most Americans)
     
  9. Ciao (Sheppy)

    Ciao (Sheppy) Well-Known Member

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    Jerry I was joking :D I wasn't offended....
    what I meant was that when the "conversation-thoughts" are very technical I find a bit difficult to explain what I really think without getting misunderstood.... regarding the "G translating" as I said isn't any good for it traslate worse then me :D
    YLC sorry about these O/T (if you like I can delete mine)
     
  10. YLC

    YLC Member

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    No worries. Thanks for the inputs.
     

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