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Old 09-17-2011, 09:08 PM
 
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Recently, Germany paid off its final War War I debt - 94 million pounds. What kind of impact does this have on England, Germany? More specifically, how is England receiving money from Germany differnet than England just printing more money? On the same token, after transfering the money to England, why wouldnt Germany just go back and reprint that money they just sent to England? Econmics is not my strong point, and so I apolgize in advance is this is a stupid question. I'm simply trying to understand the impact on a country's enconomy when currency is sent to another country or if currency is received from another country.
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Old 09-17-2011, 11:03 PM
 
Location: Here.
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Originally Posted by tomno00 View Post
More specifically, how is England receiving money from Germany differnet than England just printing more money?
In the first case, England is gaining money which they can in turn spend. In the second case, England is gaining nothing and devaluing their currency in the process.

Quote:
On the same token, after transfering the money to England, why wouldnt Germany just go back and reprint that money they just sent to England?
They could, but it would cause devaluing of their currency. That's what they did in the early 1920s Hyperinflation in the Weimar Republic - Wikipedia, the free encyclopedia .
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Old 09-20-2011, 05:03 AM
 
Location: Victoria TX
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Originally Posted by tomno00 View Post
Recently, Germany paid off its final War War I debt - 94 million pounds. What kind of impact does this have on England, Germany? .
No impact at all. That's only about a pound per person over a lifetime. People lose more than that in their sofas.

But concerning your general question, it's all a matter of what are called "convertible currency". Some countries have convertible currency and some don't, and like all money definitions, everything hinges on Trust.

Most of the industrialized democracies have "convertible currency", which means that their central banks have earned the trust of other nations to NOT just print money with profligate abandon. However, some countries are not so careful about making sure their money is based on some solid resource, and it is virtually impossible to exchange those currencies for dollars or euros or pounds.

Germany and UK use convertible currencies, which means the British trust the Germans to protect the value of the money that they use to pay their debts. London knows that the Germans will not just print up a bunch of German money had hand it over to the Brits, because if they did so, the German currency would no longer be trusted, would lose its status as convertible, and they would be unable to import goods using their money in the transaction. Britain doesn't really care if someone in Germany pays them in pounds or euros, because both are recognized as equally convertible.

Which is why esteemed barristers are not sending you greetings promising you a suitcase full of Nigerian naira in an airport locker. Nobody would walk across the street for a suitcase full of Nigerian money, unless they're really into Nigerian hookers. Because if you go to the airport an pick up a suitcase full of naira, the Nigerian government will just print some more to replace it.

The only purpose of Nigerian money is to enable Nigerians, within their own country, to have a medium of exchange to circulate domestic goods and services. When Nigeria imports medicines or cement, they have to pay for it with convertible currency, which they can only obtain by exporting Nigerian goods and accepting payment for them in convertible currency. Nigeria ships a crate of mangoes, receives euros for them, then uses the euros to buy computers from Korea. No mangoes, no computers.

Last edited by jtur88; 09-20-2011 at 05:31 AM..
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