I understand when people are perplexed about international finance. Been there, done that. But being perplexed about something can be good motivation to understand it. As a noneconomist (and a much younger person), I had the privilege of experiencing life in different countries such as Turkey, Brazil, and Switzerland, which greatly affected my career choice later.
Throughout the 1970s, the 1980s, and partly the 1990s, Turkey and Brazil experienced political struggles and economic problems. You could feel it in the streets, and bad news was everywhere in the media. Hyperinflation — annual inflation rates reaching 100 percent in Turkey during the early 1980s and several hundred percent in Brazil until the mid-1990s — was simply stunning. At the same time, these countries’ currencies were depreciating. I sort of understood that part because I experienced it in my everyday life. I needed more of these countries’ currencies to buy one unit of a hard currency such as the dollar, the German mark, or the Swiss franc.
By the way, although I didn’t understand what was going on at that time, both official and unofficial (black market) places existed for buying or selling hard currency. Now I would call it foreign exchange restrictions, but then, it was just reality. Needless to say, when you sell your hard currency unofficially, you receive a lot more domestic currency than the official place gives you. Also, the International Monetary Fund (IMF) was part of these countries’ ...