In This Chapter
• Foreign exchange rates and how they work
• Trade deficits and their importance
• The international monetary system
• Why a strong dollar can be good or bad
In our discussion of foreign trade in Chapter 17, we left out one crucial element: how do buyers and sellers in different countries do business when they all use different currencies? When a giant bluefin tuna is packed in ice and flown from Cape Cod to Tokyo, the fishing boat captain wants to be paid in dollars. But the Japanese fishmonger has nothing but yen. That doesn’t help the Cape Cod captain, who has to pay his crew and his bills in dollars. So the Japanese fishmonger must somehow pay for the tuna in dollars.
How are these ...