Hi Coke,
Actually, my earlier post pointed to local costs of living as one benchmark to determine whether foreign payment rates for local labor is "exploitative." Since you focused on inflation as one aspect impacting spending power, pls keep in mind that inflation is very much factored into the exchange rate of a currency. High inflation triggers worries of capital flight which triggers de facto if not official devaluation. If not counteracted by an IMF bailout or some sort of fiscal austerity plan, this leads to a vicious cycle. Thailand is another example. In 1997, the baht dropped against the US $, prices soared, exchange rate kept dropping until a fiscal plan was put into place. Just look at what happened to Brazil in the 80s and Russia in the 90's.
Also, its not as hopeless as it seemed, in your hyperinflation scenario [experienced periodically the world over from Brazil to Argentina to Russia], the rich people would not stand idly by and see their existing cash turn to dust....most hedge against these through short term deposits with Central banks. These deposit accounts post [during hyperinflation times] super high interest rates [in an attempt to keep local money from being converted to dollars and leaving the country]. The rich would then get returns 1-3 % above inflation so they preserve their wealth.
Quote:
Originally posted by Coke
...the exchange rate doesn't have to do anything with that.
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