inflation what really happens....the effects on....

chic

Silver
Nov 20, 2013
4,305
1
0
i do remember the peso went to 50...but no one would trade dollars for it...
what are the effects on the country... please try hard not to crap all over this....
this is for peeps who know...been there...banker types...bis. owners...
i do know that w/inflation prices rise...what else?
 
Aug 6, 2006
8,775
12
38
i do remember the peso went to 50...but no one would trade dollars for it...
what are the effects on the country... please try hard not to crap all over this....
this is for peeps who know...been there...banker types...bis. owners...
i do know that w/inflation prices rise...what else?

It is unclear what you want to know.
Obviously some people traded dollars for DR pesos at 50, or they would not have risen.
When absolutely NO ONE wants a country's money, it becomes really worthless. That was what happened to Zimbabwe not too long ago.
 

chic

Silver
Nov 20, 2013
4,305
1
0
no,,thats tourist exchange...what happens to the people ...does local food cost them more? are they affected? does the dollar exchange influence? what?
hard to figure....at 40 rd to a dollar then 50 rd to a dollar.. i know i need less dollars to buy things as i get more pesos for my dollar... at 50 1 peso is 2Cents?
so us peeps laugh to the bank?
 
Aug 6, 2006
8,775
12
38
You should ask around about this. What happened when the peso went to 50 per dollar is history. It happened. Al you have to do is ask those who were here.
 

the gorgon

Platinum
Sep 16, 2010
33,997
83
0
i do remember the peso went to 50...but no one would trade dollars for it...
what are the effects on the country... please try hard not to crap all over this....
this is for peeps who know...been there...banker types...bis. owners...
i do know that w/inflation prices rise...what else?

first thing to do is to get your terminology right. the relative decline in value of the currency is not inflation. it is devaluation.
 

Cdn_Gringo

Gold
Apr 29, 2014
8,671
1,133
113
What you are asking about is a very complicated and variable laden principle of Keynesian economics. It is not a simple one answer fits all scenario nor is it a conversation that lends itself to a forum because the replies are long, complicated and really, really boring.

During an inflationary period, the value of the local currency may or may not depreciate. Inflation is usually brought about by an increase in available wealth that allows people to spend more for goods and services - the laws of supply and demand - if more people want to buy cerveza and have the money to pay for it, the cost of cerveza will rise to meet the new demand. If the coffee bean crop is eaten by worms, the the cost of coffee will rise due to the reduced amount available for sale in the market place. Both examples contribute to inflation. Simply, stuff costs more because more people can afford to pay more or there is less of a something and a bunch of people want it, so the price goes up.

What I think you are after with your question is the effect of deflation on a local economy. The reduction in purchase power of a currency and the resulting inability of a local population to afford even the basics. That scenario if not corrected can and usually results in real hardship.

I'm going to stop here or I'll have to go on and on for pages. You figure out exactly what it is that you want to know and if I can answer you in 10 minutes I will. Otherwise you need to go to the biblioteca and get a book on econom?a.

Nothing makes my head hurt more that a long drawn out discussion of economic theory; it's mostly BS and nobody really understands the cause and effect of how it works anyways.
 

the gorgon

Platinum
Sep 16, 2010
33,997
83
0
What you are asking about is a very complicated and variable laden principle of Keynesian economics. It is not a simple one answer fits all scenario nor is it a conversation that lends itself to a forum because the replies are long, complicated and really, really boring.

During an inflationary period, the value of the local currency may or may not depreciate. Inflation is usually brought about by an increase in available wealth that allows people to spend more for goods and services - the laws of supply and demand - if more people want to buy cerveza and have the money to pay for it, the cost of cerveza will rise to meet the new demand. If the coffee bean crop is eaten by worms, the the cost of coffee will rise due to the reduced amount available for sale in the market place. Both examples contribute to inflation. Simply, stuff costs more because more people can afford to pay more or there is less of a something and a bunch of people want it, so the price goes up.

What I think you are after with your question is the effect of deflation on a local economy. The reduction in purchase power of a currency and the resulting inability of a local population to afford even the basics. That scenario if not corrected can and usually results in real hardship.

I'm going to stop here or I'll have to go on and on for pages. You figure out exactly what it is that you want to know and if I can answer you in 10 minutes I will. Otherwise you need to go to the biblioteca and get a book on econom?a.

Nothing makes my head hurt more that a long drawn out discussion of economic theory; it's mostly BS and nobody really understands the cause and effect of how it works anyways.

actually, deflation is the opposite of inflation. during inflationary periods, too much money chases too few goods. the opposite happens during deflation, a period in which aggregate demand decreases, and too little money chases too many goods.
 

amp

Bronze
Oct 5, 2010
730
8
18
To put it simple, the price of goods in the country will increase in value (inflation) and the buying power of the peso will drop (deflation).

This will make it harder for low and middle class people who will have to work harder to afford things they are already struggling for.

Make sense?
 

hammerdown

Bronze
Apr 29, 2005
1,466
107
63
To put it simple, the price of goods in the country will increase in value (inflation) and the buying power of the peso will drop (deflation).

This will make it harder for low and middle class people who will have to work harder to afford things they are already struggling for.

Make sense?

Agreed, to make it real simple, peso devalues, price of fuel goes up and so does everything else.......
 
Jan 9, 2004
10,898
2,226
113
i do remember the peso went to 50...but no one would trade dollars for it...
what are the effects on the country... please try hard not to crap all over this....
this is for peeps who know...been there...banker types...bis. owners...
i do know that w/inflation prices rise...what else?

A rising peso can be caused by many variables. Understand that a rising peso 45 to 46 to 47 is usually caused by a rising number of pesos being printed AND weaker demand for those pesos. Classic supply and demand.

So when that happens, and there is static economic growth, you have more pesos trying to buy the same amount of goods in the economy, triggering rising prices, which then triggers government to print even more pesos to keep purchasing power of those holding pesos from eroding too badly.

If the peso continues to rise and you do not have either economic austerity or an increase in the production of goods to buy.....you end up like the Weimar Republic...or bringing the example up to date...Venezuela. They currently "enjoy" 60+% inflation and a shortage of dollars.....and, as you said above "no one would trade dollars for it." Probably the single most devastating thing for all the people are shortages as people buy in bulk fearing rising prices. Venezuela is now rationing food and there are shortages of basics like cooking oil, etc.

The effects can be devastating on the locals because prices tend to front run inflation and salaries remain static or rise even slower.

No one really benefits per se...but those with other stronger currencies at least are not further impoverished.

Moral of the story, right now have as much of your money outside the peso as is possible/necessary, preferably dollars...as the Euro is also expected to weaken further.


Respectfully,
Playacaribe2
 
Last edited:
Jan 9, 2004
10,898
2,226
113
To put it simple, the price of goods in the country will increase in value (inflation) and the buying power of the peso will drop (deflation).

This will make it harder for low and middle class people who will have to work harder to afford things they are already struggling for.

Make sense?

To be clear, my bolding of your use of the term deflation should read inflation.

Deflation is an economic term of art referring to falling prices and falling demand....but I understood what you meant.

Respectfully,
Playacaribe2
 

Cdn_Gringo

Gold
Apr 29, 2014
8,671
1,133
113
Economic theory is not simple and cannot be made simple. That's why the "experts" with a Phd often cannot reliably predict or manipulate the system. All we can usually do is apply the theory and hope the market responds as expected.

A drop in value of a currency is not a prerequisite for inflation. It often coincides, but you can have an inflationary economy with a strong currency.

The printing of excess currency does bring about an immediate devaluation and often precedes or stimulates inflation but is not generally seen as the primafacia cause of inflation. It can be said that excess currency in a market place makes inflation all the more likely.

I don't know enough about the foundations of the DR economy so it wouldn't be prudent for me to comment or speculate further.

(Screw it my head hurts. I'm going to start drinking and look for spiders...)
 

jimmythegreek

Bronze
Dec 4, 2008
1,066
4
0
A rising peso can be caused by many variables. Understand that a rising peso 45 to 46 to 47 is usually caused by a rising number of pesos being printed AND weaker demand for those pesos. Classic supply and demand.

So when that happens, and there is static economic growth, you have more pesos trying to buy the same amount of goods in the economy, triggering rising prices, which then triggers government to print even more pesos to keep purchasing power of those holding pesos from eroding too badly.

If the peso continues to rise and you do not have either economic austerity or an increase in the production of goods to buy.....you end up like the Weimar Republic...or bringing the example up to date...Venezuela. They currently "enjoy" 60+% inflation and a shortage of dollars.....and, as you said above "no one would trade dollars for it." Probably the single most devastating thing for all the people are shortages as people buy in bulk fearing rising prices. Venezuela is now rationing food and there are shortages of basics like cooking oil, etc.

The effects can be devastating on the locals because prices tend to front run inflation and salaries remain static or rise even slower.

No one really benefits per se...but those with other stronger currencies at least are not further impoverished.

Moral of the story, right now have as much of your money outside the peso as is possible/necessary, preferably dollars...as the Euro is also expected to weaken further.


Respectfully,
Playacaribe2


When the DOP moves from 45 to 47, the currency is falling in value and the USD and other currencies are rising against the DOP.
 

Criss Colon

Platinum
Jan 2, 2002
21,843
191
0
38
yahoomail.com
?GOODS? increase in COST, not Value!
I changed $5,000 US dollars at 56 to 1.
Used the money to do ?Home Improvements?!
Costs went up, but never came back down much, if ANY, when the peso went to 26 to 1.
Those of us fortunate to have a stead stream of US dollars have somewhat of a Hedge against the devaluation of the DR peso, vis a vi the US Dollar.
?C-mon 50 to 1?!!!!!!!!!
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Jan 9, 2004
10,898
2,226
113
Economic theory is not simple and cannot be made simple. That's why the "experts" with a Phd often cannot reliably predict or manipulate the system. All we can usually do is apply the theory and hope the market responds as expected.

A drop in value of a currency is not a prerequisite for inflation. It often coincides, but you can have an inflationary economy with a strong currency.

The printing of excess currency does bring about an immediate devaluation and often precedes or stimulates inflation but is not generally seen as the primafacia cause of inflation. It can be said that excess currency in a market place makes inflation all the more likely.

I don't know enough about the foundations of the DR economy so it wouldn't be prudent for me to comment or speculate further.

(Screw it my head hurts. I'm going to start drinking and look for spiders...)

As I stated above, "a rising peso can be caused by many variables."

And when it happens and accelerates...even non PHD's understand it....much the same way you do not need to be a weatherman to know its raining.


Respecfully,
Playacaribe2
 
Jan 9, 2004
10,898
2,226
113
When the DOP moves from 45 to 47, the currency is falling in value and the USD and other currencies are rising against the DOP.

Semantics. A rising number of pesos per dollar, euro etc., means the value is falling.

Perhaps that was not clear.

What is clear now after seeing the direction of the dollar and the continued add on debt and balance of payments in the DR is...without intervention, the peso is likely to get to CC's target of 50:1 by the end 2015.


Respectfully,
Playacaribe2
 

the gorgon

Platinum
Sep 16, 2010
33,997
83
0
Agreed, to make it real simple, peso devalues, price of fuel goes up and so does everything else.......

everything that is imported. at the same time, remittances have more value, and therefore those who rely on outside incomes gain a benefit from devaluation.
 

Criss Colon

Platinum
Jan 2, 2002
21,843
191
0
38
yahoomail.com
AND, maybe BEFORE!!!!!!
If Venezuela demands payment of the 4 BILLION DOLLARS that the DR owes them for oil purchased with 30 year credit, LOOK OUT!!!!!!
Also the DR CONTINUES to borrow new money to pay Old Debt, AND takes on EVEN MORE international debt at the same TIME!!!!
Lets see if the introduction of dollars that Expat Dominicans bring, and/or send, into the DR in December lowers the exchange rate THIS YEAR????
My guess, Not Much!!!!!
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