Basics of International Finance

I have a very hard time wrapping my head around who wins and who loses when economic changes occur between two countries. Below are a historical and a theoretical question that each get at some of the issues I find particularly confusing. Any response would be very much appreciated. 1. How did Europe gain wealth from the primitive accumulation of Latin American silver and gold during colonization? More specifically: (a) Precious metals aren't in themselves much use, so is it fair to say that the boost to European productivity was already latent in the European work force (similar to the way WW2 put latent American labor capacity to work)? (b) Since European money at the time was pegged to precious metals, why did the massive influx from Latin America lead to economic gain instead of massive inflation? 2. I would really love to hear a Marxist explanation of how exchange rates (i.e. the way they affect things like debts, investments, currency reserves, etc. in both the A and B countries), currency devaluations, and currency wars like the one between the US and China work. I can never understand these phenomena no matter how hard I apply myself, which makes me suspect that, as so often with economic theory, the whole point is to prevent regular people like me from understanding. Thanks for all you do from a fan since 2011! I would be so thrilled to hear you address issues like these from time to time.

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  • Andrew Chebuhar
    tagged this with upvote 2018-08-03 10:38:10 -0400
  • Will Yate
    published this page in Ask Prof. Wolff 2017-02-11 14:53:29 -0500