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Message: <blockquote data-quote="me2cool" data-source="post: 27486966" data-attributes="member: 396331"> <ul> <li data-xf-list-type="ul">Money is what we use to buy goods & services.</li> <li data-xf-list-type="ul">If the gov increases the money supply (print money), but the goods & services we generate stays the same, then the prices of goods & services increase, which we call as inflation.</li> <li data-xf-list-type="ul">Inflation directly affects the purchasing power.</li> <li data-xf-list-type="ul">There is something called purchasing power parity (PPP). PPP talks about amount of money needed to buy the same amount of goods in every country should stay the same. (e.g. Ounce of gold should be the same in the US and Sri Lanka)</li> <li data-xf-list-type="ul">Now since Sri Lankan economy has inflated, we need more LKR to buy a ounce of gold than it was before. Assuming amount of USD to buy a ounce of gold in USA has stayed the same, now we can say LKR has depreciated against the USD.</li> </ul>Every currency can devalue. Even USD. However, the impact of USD devalue on US economy is minimal, because their foreign debt is also in USD. So the federal reserve in the US can simply print money and pay that off. Our foreign debt is in USD, which we cannot print, hence need to generate USD through exports & other means.PS: As you can probably understand already, printing money is not always bad, if the production increases with it.</blockquote>

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