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Comment by Tobias42 | Hacker News Reader

I think it is a psychological issue. If salaries get cut by 30% across the country, people go to the streets. If you devalue their currency, most people don't even realize it and just accept that the prices for certain imported goods went up.

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I can understand the psychological aspects, but I can't accept that economists see that as a serious issue. It is like "oh dear, we can not cheat our citizens anymore", like saying "governments need the ability to defraud the population". They should instead seek to educate the population.

It's not just that, while devaluation alters import prices local prices like rent and service costs don't fluctuate. So a 30% devaluation doesn't make people 30% poorer.

Of course it would: in your example, the landlords would be poorer because they would collect less rent. Likewise for service providers. Perhaps you could argue for public services, but for those the government could just lower the fees instead of devaluing the currency.

But thanks to your example I see it has more subtleties: it is also a question who to take the money from. Making landlords poorer might be an easy sell to the majority of the population - if the population would have any idea of what is going on, which I doubt.

Services might just go away if they make less money.

No, landlords would NOT be poorer, they're taking in exactly the same as before devaluation. Devaluation directly effects ONLY imports (more expensive) and exports (cheaper): it effects the local economy only based on how much it depends on each.

That is simply false. Think it through.

I am being paid a number of arbitrary denominators of value per time period.

Government declares that the arbitrary denominators of value now buy half the number of a different arbitrary denominators of value they did previously.

Because I am a locovore Luddite (for the sake of the argument), everything I buy is made in the country, with materials produced in the country.

How does the devaluation effect me?

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