Why are Individual States Denied the Currency Power? | 12 Factors

As human interacts with each other in the various spheres of life, it is not possible to avoid divergent views and interests. Such circumstances lead to conflict between or among the countries in a relationship. Conflict describes as a transaction process existing between individual currencies focusing on different goals, limited resources, or persuasions to pursue their objectives. In this article, we explain why are individual states denied the currency power.

Balance of Currency:

When a conflict exists between countries in an interaction, each country will attempt to influence others to modify their stand or circumstances to meet their goals. The ability to control the prevailing events and other people of interest refer to as power. The currency of such a country is called power currency. It could exist as a balanced or unbalanced power.

Countries Influence:

Where balanced power refers to the similarity in the ability to influence the other party, usually between friends who are at the same level in the society, the unbalanced power exists when one party was superior to the other as a result of rank, age, experience or different yardsticks.

Impact on Relations:

Power becomes good or bad depending on how it deploys by the person who holds it at the time of conflict interaction. Thus, the impact of violence in relationships depends on how it deploys and how the other person perceives it. That summarizes as power currencies, which means how the other party perceives a given resource or strength within the context of interaction.

Power Currencies:

The term of Power uses currency because the ability to influence carries a similar impact as money does. The five power currencies are a resource, expertise, social network, personal, and intimacy. Resource currency exists when one party has control over or unilateral influence on material things such as property, wealth, or money, which other parties require.

Individuals Currencies:

Individuals' power currencies are values you believe you possess that other people desire. It is common in situations where one party is in a privileged position of influence in an organization—expertise currency held by a person who has a particular type of skill.

Currency Devaluation:

Currency devaluation occurs in relative and absolute senses. As the foreign exchange value of one currency drops against the exchange value of other currencies, relative devaluation occurs. For instance, the British pound sterling may trade for more U.S. dollars today than it did yesterday. That does not mean the U.S. dollar is worth less than the day before in terms of real purchasing power.

Primary Currency:

The productive capacity strengthens the economic roots of currency depreciation depends on the economy and the size of its money supply in either case. Almost every primary currency control like a monopoly by legal tender laws. For that, governments and central banks control the factors that influence currency value. Untraditionally considers to be economic factors, and they are nonetheless critical determinants.

Productivity and Absolute Currency Value:

Money exists as a store of value. Employees trade the value of their active labor for a representative amount of cash and then change that expected value for goods and services in the market. As an individual employee makes more value by increased productivity, observes salary increase proportionately. Her employer or customers either give more units of currency or value units of currency.

Value of Currency:

Suppose the money supply in a country fixes but productivity increases, each currency unit must store more excellent value. If the productivity of an economy fixes but the supply of currency decreases, then each unit of remaining currency must store more excellent value. The opposite is true.

Money Monetary:

The value of a unit of a currency drops when productivity declines faster than the supply of money. The most common monetary phenomenon, inflation, is produced the other way around – the collection of money grows faster than productivity. There are more currency units everywhere to absorb productivity, so each one ends up representing less exchange value in the market.

Purchasing Power vs Forex Value:

The foreign exchange markets are particularly complex. Partly there are two types of forex traders. The first type of trader is looking to purchase in a foreign market, so he needs to convert one currency to another. Banks or other major financial institutions perform the vast majority of these transactions on their domestic customers.

International Market:

The second type of trader is simply looking to trade currency with a lower expected future value for currencies with higher expected future values. This currency speculation plays an essential function in international markets, but it is forward-looking and doesn't cleanly equate to current purchasing power or national productivity.

The wide range of possible factors influencing currency value in international markets includes the relative monetary policy between governments and central banks. Differences in economic forecasts between one country and another, the differences in productivity between one set of workers and another, and the relative demand for the goods and services produced between different countries.