What is devaluation? This word can often be heard on TV or found on the Internet. However, many people either do not know at all what it means, or they confuse it with other terms.
In this article, we will tell you what is meant by devaluation and what threats it poses for the population of a particular country.
What does devaluation mean
Devaluation is a decrease in the gold content of a currency in a gold standard. In simple terms, devaluation is a decrease in the price (value) of a certain currency in relation to the currencies of other states.
It is worth noting that, unlike inflation, with a devaluation, money depreciates not in relation to goods within the country, but in relation to other currencies. For example, if the Russian ruble devalues by half in relation to the dollar, this will not mean that this or that product in Russia will cost twice as much.
An interesting fact is that often the national currency is devalued artificially in order to gain a competitive advantage in the export of goods.
However, devaluation is usually accompanied by inflation - higher prices for consumer goods (mostly imported).
As a result, there is such a concept as - devaluation-inflationary spiral. In simple terms, the state runs out of money, which is why it simply starts printing new ones. All this leads to currency depreciation.
In this regard, people start buying those currencies that they think are the most reliable. As a rule, the leader in this regard is the US dollar or the euro.
The opposite of devaluation is revaluation - an increase in the exchange rate of the national currency in relation to the currencies of other states and gold.
From all that has been said, we can conclude that devaluation is a weakening of the national currency in relation to "hard" currencies (dollar, euro). It is interconnected with inflation, in which the price often rises for imported products.
