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Mar 1, 2015

Currency Value

Posted By Snow at 3/01/2015
Exchange
Rate
United States
Of America
KSA sells oil
to US in $
KSA buys bag
from UK in £
Kingdom Of
Saudi Arabia
United
Kingdom
$1 = £1 receives
$100
exchange
£100

payment
£100 — £70
BALANCE £30
receives
£70

if exchanged
£70 = $70
$1 = £0.6 receives
$100
exchange
£60

exchange + balance
£60 + £30 = £90

payment
£90 — £70
BALANCE £20
receives
£70

if exchanged
£70 = $116
$1 = £0.4 receives
$100
exchange
£40

exchange + balance
£40 + £20 = £60

cannot afford £70
BALANCE £60 = $150
no purchase

BALANCE 1
£70 + £70 =
£140 = $350
afford 3 oil barrels

BALANCE 2
$70 + $116 =
$186 = £74
afford 1 oil barrel

What changes the values At the current exchange rate £60 is $150
but this $150 cannot even afford 1 bag
when it used to afford 2 bags
Different
balances

Why currency value fluctuations seems...

The table shows a simplified imagined trading between nations — where the United States buys oil from Saudi Arabia, and Saudi Arabia buys luxury bags from United Kingdom. If this table is right — say when the US$ decreases in value — since Saudi Arabia sells oil using the US$, even when they sell the same amount of oil at the same price, their income decreases so much until they can't afford luxury bags from United Kingdom anymore.

With
RM300
I am a millionaire
in Indonesia
And see how the United Kingdom has different balances bcoz of the exchange rate. This means more money (profit) can be made simply by exchanging money — without the need to deliver commodities. When profit (or loss) can be made like this, it seems it will increase (or lose) money, out of thin air.

So that's the power of currency exchange? Did I understand it right? But since money is not a commodity — don't you think it is ... wrong (=-=)v والله أعلم

A plate of delicious biryani RM10
KWD0.82   GB£1.79   EU€2.47   US$2.77   TR₺6.94
AED10.16   SAR10.38   CN¥17.35   JP¥331.08

Buy 30 with 7% discount at 1 million Rp

Perhaps a single accepted currency makes transactions easier across regions, like the Euro €
And this currency represents gold, in which the gold is entrusted in an international vault

INTERNATIONAL

UNITED
STATES
SAUDI
ARABIA
UNITED
KINGDOM
GOLD VAULT
1 Dinar = 4.25 grams
currency to
represent Dinar
(paper / digital)

currency in circulation

United States
Of America
KSA sells oil
to US in
Gold Dinar
KSA buys bag
from UK in
Gold Dinar
Kingdom Of
Saudi Arabia
United
Kingdom
receives
D100
payment
D100 — D70
BALANCE D30
receives
D70
receives
D100
payment
D100 — D70 = D30

BALANCE
D30 + D30 = D60
receives
D70

BALANCE
D70 + D70 = D140
receives
D100
payment
D100 — D70 = D30

BALANCE
D30 + D60 = D90
receives
D70

BALANCE
D70 + D140 = D210

I seek refuge in Allah SWT from errors
Only Allah SWT Knows Best والله أعلم

Regarding the oil :: يوشك الفرات أن يحسر عن كنز من ذهب فمن حضره فلا يأخذ منه شيئا


3 comments on "Currency Value"

Snow on Mar 2, 2015, 10:55:00 AM said...

Why do I feel the currency market is like playing Drug Lord...

Snow on Mar 4, 2015, 10:54:00 AM said...

Is this why foreigners own properties when they don't even live there;
while the locals who actually do cannot afford the houses?

Big Red X

. the government is to protect its citizens

. the housing projects are to shelter the locals first as they live there
     . all citizens deserve to afford a home for their families
     . homelessness should not happen when there are vacant houses

. the priority is less on foreigners as they don't live there, they probably:
     . treat it as vacation house
     . rent it (outward cashflow), or
     . transact it for profit (profiteering)

Imagine it like exporting your food for higher price, but then your citizens become starved. So please, it's not all about the money - this is a humanitarian issue. ♥

Snow on Mar 7, 2015, 10:32:00 PM said...

Real businesses can be wrecked by currency exchange. It can cease businesses.
When businesses cease, it lessens the production of commodities:
. Less commodities → more demand → price inflation
. Less commodities → less jobs → more unemployment

I'm afraid if the warped money circulates mostly among the super rich.


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