devaluation

(redirected from devaluate)
Also found in: Dictionary, Thesaurus, Legal, Financial, Wikipedia.

devaluation,

decreasing the value of one nation's currency relative to gold or the currencies of other nations. It is usually undertaken as a means of correcting a deficit in the balance of paymentsbalance of payments,
balance between all payments out of a country within a given period and all payments into the country, an outgrowth of the mercantilist theory of balance of trade.
..... Click the link for more information.
. Although devaluation occurs in terms of all other currencies, it is best illustrated in the case of only one other currency. For example, if the United States is losing money in its trade with Japan, a decision may be made to devalue the U.S. dollar by 10%. Whereas previously one dollar may have been worth about 100 yen, a 10% devaluation causes it to be worth only about 90 yen. Such a move causes Japanese products to become more expensive for Americans and U.S. products to become cheaper for the Japanese. The net result of such a devaluation is that U.S. exports tend to increase and imports tend to decrease, thus helping to reverse the balance of payments deficit.

Devaluation

 

an official lowering of the value of the monetary unit.

A monetary reform is usually accompanied by devaluation, which is implemented in capitalistic or feudal countries by a legislative measure to reduce the gold content of the monetary unit or to lower the rate of exchange of paper money in relation to gold or foreign money.

Devaluation at the present time is evidence of the crisis of the capitalist foreign-exchange system (as one of the manifestations of the general crisis of capitalism); it is a consequence of the loss of value of money and of a significant and prolonged balance of payments deficit. Devaluation encourages export but increases the foreign indebtedness of a state and causes a rise in prices of imported goods. By the same token, devaluation intensifies the political and economic contradictions of capitalism. The burden of devaluation, through the rise in prices and tariffs, is carried basically by the working masses; this in turn lowers living standards and intensifies the class struggle.

Before the general crisis of the capitalist system, devaluation to a greater or lesser degree contributed to the stabilization of the monetary system because it was (directly or indirectly) accompanied by a restoration of the exchange of the symbols of value for gold or silver (in coins or in bullion for the use of private individuals). Devaluation was implemented openly or in a concealed form. In an open devaluation, money was exchanged at a lower rate (for example, in Russia in 1839, 1 silver ruble equaled 3 rubles 50 kopeks in assignats); in a concealed devaluation, the exchange of money was effected at the nominal value but with a reduction of its gold or silver content. Thus, in 1897 in Russia, gold money was exchanged for bank notes using the ratio 1:1, but the gold content of the ruble was reduced by one-third, that is, from 26.1 to 17.4 doli of pure gold (1 dolia = 0.044435 g).

After World War I (1914-18), a number of devaluations were effected in capitalist countries (such as the open devaluation in Germany in 1924 and a concealed devaluation in France in 1928). Since the 1930’s devaluations, as a rule, have not brought stabilization to the monetary system and have not restored the exchange of bank notes for gold by private individuals; they have been carried out basically by means of reducing the official rate of exchange of bank notes. The first mass devaluation of capitalist currencies occurred at the end of 1949, when Great Britain and 36 other countries reduced the ratio of exchange of their currencies to the American dollar by from 12 to 30 percent and more. The second mass devaluation was effected in 1967 by Great Britain and by 25 other countries (the reduction of the rate of exchange amounted to 5 to 25 percent). In August 1969 the French franc was devalued by 11.11 percent. A total of more than 400 devaluations took place from 1949 to 1971 in capitalist states (more than once in some countries).

With the intensified world monetary crisis, the American dollar, which is the key currency of the capitalist world, was devalued by 7.89 percent in December 1971. Devaluation of the American dollar entailed devaluation of the currencies of many capitalist countries, but at the same time the currencies of the major capitalist countries—the main trade competitors of the USA-were revaluated. Devaluation often occurs in developing countries, especially those of Latin America. Thus, from 1965 to 1971 there were more than ten devaluations in Argentina and about ten in Brazil.

V. A. DROZDOV

References in periodicals archive ?
Morever, the increase will take place only if Indonesia's competitors do not devaluate their currencies.
During the day there was more talk about whether China will devaluate the yuan, and whether the Hong Kong dollar will come off of its peg to the U.
Contrary to his statement that justice is being used to devaluate and dishonor the office, our system of accountability actually dignifies the office.
Economically, Indonesia's economy continued to grow throughout the global downturn, but if the rupiah continues to devaluate against the dollar it could affect the domestic pharmaceutical industry.
All of this is done to devaluate NLA's achievements but Albanians know best who is who and what he has done," stressed Neziri.
Moreover, the Maastricht Treaty obligated the states willing to join not to devaluate their currencies in the two years preceding their accession.
He added that at present there are no plans to devaluate the yuan.
These troubles prompted the country to devaluate its currency to counterbalance loss to the dollar and floated an austerity package involving cuts in subsidies on sugar and petroleum products.
This was countered by the United States and its allies in the Plaza Accord by adopting the principle of intervening in currency markets in order to devaluate the Dollar.
As long as we force the banks to devaluate assets that are worth par at maturity, we will create opportunities for hedge funds benefiting from this market inefficiency derived from accounting rules that create a gap between book value and real value in the 100s of billions of Euros/Dollars.
Sudan was forced to devaluate its currency to prevent it from sliding further against the dollar.
The government in February devaluated the dong by 10% from nearly 11,000 to the dollar to nearly 12,000, and Prime Minister Phan Van Khai said in March his government did not have any intention to further devaluate the currency at that time.