Stock markets and exchange rates
So every day we have to have a little nugget of "the pound is down against the dollar, the euro is up against the Yen and the FTSE is down 500%" on any news station any time. But why? For the love of God if Japan is buying a whole load of bagettes from France why does that make anyone's money worth more or less? I have decided its just to give posh boys a job that isn't being Ben Fogle. Global financial crisis is pobably just some Tims and Ruperts being in a huff and taking their monopoly pieces home.
PS: If anyone knows the real reason without being all shouty like Mr Willy when he tries to explain it I'm all ears
(willydoc, Fri 14 Oct 2011, 8:36, 6 replies)

You hit it on the head, it's all about being in a huff and monopoly.

( mark morrisons prison shoes I love Willie, Fri 14 Oct 2011, 8:41, closed)

Exchange rates aren't really that difficult to get your head round,
but, other than that, global economics is pretty much as you've described it.
( monster munch person, man, woman... camera... TV?, Fri 14 Oct 2011, 8:55, closed)

ForEx
There's lots of different factors that affect currency values, but mainly it's supply and demand, inflationary factors and monetary policy.

S&D - lots of people think that a particular currency is safer than others therefore demand increases and supply (people willing to sell) dries up. Simple economics states that the price increases.

Inflation - cost of goods in the home economy increases, therefore the real value of the currency (i.e. the buying power) decreases. Money becomes worth less.

Monetary policy - Governments utilise a whole host of tools to manipulate the value of their own currency, currently seen with the Chinese maintaining a low value of the renminbi to increase their export market.

In essence, they ARE all illusory - but the fact that we apply value to money itself is illusory. When money was pegged against a physical commodity THEN it held inherent value, but realistically it's just a piece of paper. The reality of the situation though is that as long as we apply values to currencies, then some will be worth more or less than others, and people will be able to exploit the values by trading in currencies.

Sorry for the lecture, and yes - I KNOW that this is incredibly simplistic, just a bit of an explanation.
( Hunter Stockton was murdered by a bicycle wielding axolotl,.,.,.,., Fri 14 Oct 2011, 10:57, closed)

Interest rates
have a big influence.

Low interest rates tend to cool off foreign investment flows, which is a supply/demand factor.
(username failed moderation, Fri 14 Oct 2011, 12:42, closed)

Monetary Policy
I would argue that monetary policy covers interest rates by the central bank prescribing the nominal rate for others to use. Although not necessarily under the direct control of the Government (rather the theoretically independent Bank of England) Gov pressure on Mr. King will still lead this rate to be set.
( Hunter Stockton was murdered by a bicycle wielding axolotl,.,.,.,., Fri 14 Oct 2011, 15:15, closed)

Ta! - slightly concerned all money is illusory but perhaps will avoid swapping it all for magic beans just yet.
(willydoc, Mon 17 Oct 2011, 7:32, closed)