The long-term devaluation of the currency will inevitably lead to a sharp rise in real estate and abnormally high housing prices, which will make people unable to afford housing and eventually lead to the instability of the economic structure. At the same time, it has an impact on export income: the devaluation of a country's currency reduces the value of domestic goods relative to foreign goods, which makes foreign people increase their demand for domestic products, while domestic residents reduce their demand for foreign products, which is conducive to domestic exports and reduces imports.
In international trade and lending activities, the party that accepts the devalued currency will suffer losses, while the party that pays the devalued currency will benefit from it. Exchange rate changes in major industrial countries will also cause turmoil in the international financial field. The exchange rate instability of major currencies will also have a great impact on the national reserve system and the international financial system.
Financial crisis refers to the crisis of financial assets, financial institutions and financial markets, which is manifested in the sharp drop in the price of financial assets, the collapse or near collapse of financial institutions, or the collapse of a financial market such as stock market or bond market.
Excessive consumption in the United States and excessive savings in Asian emerging market economies are the deep-seated reasons for this crisis. For a long time, domestic savings in the United States have been at a low level, and the foreign economy has shown a long-term trade deficit. The average annual deficit accounts for 6% of the total GDP, and these deficits are mainly paid by printing dollars.
However, residents of China, Japanese and other Asian countries and oil-producing countries are saving excessively, maintaining a trade surplus for a long time and accumulating a large amount of US dollar reserves. These dollar reserves outside the American economy need to find corresponding financial assets to invest, which provides a basis for the emergence of Wall Street financial derivatives and the bubble of domestic asset prices in the United States.
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Generally speaking, when the currency depreciates, the central bank of this country will take various macro-control measures. For example, raising the deposit and loan interest rate, issuing central bank bills, and raising the bank's deposit and loan reserve can regulate the currency circulation. If the regulation is not effective, there will be overheated investment and the growth of trade exports. The long-term surplus of trade exports will lead to trade friction and eventually lead to trade contraction.
Baidu Encyclopedia-Currency devaluation