Thursday, 1 September 2016

Currency is either a monetary or non-monetary item


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/people 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 USD 5.6 trillion global 24-hour-per-day, 5-working-day-a-week foreign exchange market in terms of most 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 daily rate (general price level) can change more than once a day during hyperinflation. The parallel/black market rate can also change on Saturdays and Sundays. This is not the case in the official foreign exchange market which is closed on Saturday and Sunday. 

This generally applies to other national or regional currencies too.

Hyperinflationary currencies are often not traded internationally.

Nicolaas Smith Copyright (c) 2005-2016 Nicolaas J Smith. All rights reserved. No reproduction without permission.

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