The Taliban Strengthens its Currency

[JustDave]

I copied this from a headline of the Insider. I couldn't read further because I don't subscribe. I can't tell if this economic indicator is good or bad, but it struck me as interesting.

• Afghanistan's afghani has surged 9% against the US dollar over the past three months.
• The Taliban's tight controls have made the currency the world's best performer since July 1.
• But Afghanistan's economy has suffered since the group reclaimed power in 2021.

 

[Robb.hisself]

I copied this from a headline of the Insider. I couldn't read further because I don't subscribe. I can't tell if this economic indicator is good or bad, but it struck me as interesting.

• Afghanistan's afghani has surged 9% against the US dollar over the past three months.
• The Taliban's tight controls have made the currency the world's best performer since July 1.
• But Afghanistan's economy has suffered since the group reclaimed power in 2021.

Recently I read an article reporting that Treasury Secretary Yellen warned Americans that the strong American dollar will decline in value in the years ahead. So, the article you quoted sounds right. As a currency gets more valuable then its exports become more expensive, and its economy suffers. Also, as a country's currency declines in value imported goods become more expensive. (Meaning that inflation in the U.S. is going to continue.)

 

[JustDave]

Recently I read an article reporting that Treasury Secretary Yellen warned Americans that the strong American dollar will decline in value in the years ahead. So, the article you quoted sounds right. As a currency gets more valuable then its exports become more expensive, and its economy suffers. Also, as a country's currency declines in value imported goods become more expensive. (Meaning that inflation in the U.S. is going to continue.)

I've actually tried to understand this on several occasions in the past, but got nowhere, so let me ask why the following wouldn't work:

If a stronger dollar makes our exports more expensive, why not just sell our exports at a cheaper price? It seems like the practical value of a widget wouldn't change from one country to another regardless of the difference in the strength of currencies.

Also, it the value of the dollar was very strong, wouldn't the raw materials to make a widget be less?

 

[jimintoronto]

I've actually tried to understand this on several occasions in the past, but got nowhere, so let me ask why the following wouldn't work:

If a stronger dollar makes our exports more expensive, why not just sell our exports at a cheaper price? It seems like the practical value of a widget wouldn't change from one country to another regardless of the difference in the strength of currencies.

In international trade, the price of the item is only one part of the cost to the overseas buyer. You have to add in the cost of transportation from a US port, to the country where the buyer is located. Then add on the cost of import duties that the buyer has to pay to their own Government, and the cost of currency exchanges. Getting a 40 foot sea can container shipped from a port in New Jersey to India is going to cost the buyer thousands of their currency, whatever currency it is. Just TRY and tell U.S. companies that your Government is going to control their prices on over seas sales. Never going to happen. That would be "restriction of free trade " .

I live in Canada. Our Canadian dollar ( today ) is valued at 76 cents U.S. So when a U.S. tourist comes to Canada, their U.S. dollar is worth about 30 percent more than ours. Because of that we welcome U.S tourists that come to Canada, because their spending is GOOD for OUR economy. JimB.

 

[JustDave]

Transportation is a cost that we assume we have to pay. Duties are an issue with our respective governments, but those costs have to be paid no matter what is being imported, so it seems like lowering the price would create more sales. Profit margins are big in capitalism, so it seems like there is lot of room for price adjustments. Maybe not.

 

[jimintoronto]

Transportation is a cost that we assume we have to pay. Duties are an issue with our respective governments, but those costs have to be paid no matter what is being imported, so it seems like lowering the price would create more sales. Profit margins are big in capitalism, so it seems like there is lot of room for price adjustments. Maybe not.

A hypothetical example.

A company in Texas is sending a shipment to their customer in Indiana. In my world the customer pays for the shipping, not the seller. Same thing for overseas trade. Import duties are not all the same in a given country. The percentage of duty charged depends on what the item is. If you are importing gravel into Canada, the percentage of duty will be very low, but if you are importing a luxury automobile , the duty will be much higher based on it's estimated value. JimB.