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Thursday, 1 September 2016

Currency is either a monetary or non-monetary item

Example: 

US Dollar as a monetary item

The US Dollar is a monetary item only inside the US economy. Its nominal price is the nominal interest rate initially set by the Federal Reserve Bank. Its real price inside the US economy is its real interest rate which is the nominal interest rate charged in a contract or transaction minus the daily changing rate of inflation or deflation as indicated by the US Daily Consumer Price Index.US - Daily Reference CPI-Us Official future United States Daily CPI Sept 2016

US Dollar as a non-monetary item

The US Dollar is generally a variable real value non-monetary item in the hands of entities outside the US economy. US Dollars outside the US economy are non-monetary items in all other non-US economies where they are held. Outside the US economy the US Dollar´s non-monetary price (real value) is mainly determined nano-second by nano-second in the global 24-hour-per-day, 5-working-day-a-week foreign exchange market in terms of all other currencies as well as in many other street markets, etc. where it is traded on the black market also called the parallel market at the daily changing parallel rate or black market rate. The parallel/black market rate can change on Saturdays and Sundays. That is not the case in the official foreign exchange market which is closed on Saturday and Sunday. 


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