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Usually when currencies are devalued, the percentage change is given in relevance to USD or EUR. Is there a way to measure the currencies change in value to itself or to all the world's currencies combined?

3

The measure of change of value of a currency in relation to itself is inflation (or deflation).

  • Thanks! What about all the world's currencies combined? – user62060 Aug 30 '17 at 11:54
  • If you and I each have a $1 bill. We could trade our $1 bills and be in exactly the same position. Over time our $1 buy less stuff in the US Dollar economy, so did the USD lose value or did the stuff gain value? More than stars in the galaxy there are ways to calculate what something is (or should be) worth. BUT, one unit of one currency is not fungible with one unit of another currency. I'm not sure why you would want a way to measure the value of a basket of currencies because you can't trade the currencies for each other and stuff varies in price from region to region. – quid Aug 30 '17 at 22:20
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It's very hard to measure the worth of an abstract concept like money, particularly over long periods of time. In the modern era we have things like the Consumer Price Index (CPI) in the United States, where the Bureau of Labor Statistics literally sends "shoppers" out to find prices of things and surveys people to find out what they buy. This results in a variety of "indexes" which variously get reported by media outlets as "inflation" (or "deflation" if the change in value goes the other way). There are also other measurements available like the MIT Billion Prices Project which attempt to make their own reading of the "worth" of currencies. Those kinds of things are about the only ways to measure a currency's change in "value to itself" because a currency is basically only worth what one can buy with it.

While it isn't "all the world's currencies combined", there is a concept of the International Monetary Fund's "Special Drawing Rights (SDR)", which is a basket of five currencies used by world central banks to help "back" each other's currencies, and is (very) occasionally used as a unit of currency for international contracts. One might be able to compare the price of one currency to that of the SDR, or even to any other weighted average of world currencies that one wanted, but I don't think it's done nearly as often as comparing currencies to the basket of goods one can buy to find "inflation".

Even though one might think what would be important to measure would be overall Money Supply Inflation, much more often people care more about measuring Price Inflation. (Occasionally people worry about Wage Inflation, but generally that's considered a result of high Price Inflation.)

In order to try to keep this on topic as a "personal finance" thing rather than an "economics" thing, I guess the question is: Why do you want to know? If you have some assets in a particular currency, you probably care most about what you'll be able to buy with them in the future when you want or need to spend them. In that sense, it's inflation that you're likely caring about the most. If you're trying to figure out which currency to keep your assets in, it largely depends on what currency your future expenses are likely to be in, though I can imagine that one might want to move out of a particular currency if there's a lot of political instability that you're expecting to lead to high inflation in a currency for a time.

  • Thank you! That was really helpful. I guess this shouldve been posted on stack exchange economics instead of here. However, the purpose of my question was that I wanted to know if there's any absolute way to measure a currency's worth instead of realting it to only one (or even 5 (SDR)). Do you think it is viable if i compare a currency's value to the average of all the world's currencies? Is there such a thing? – user62060 Aug 30 '17 at 11:58
  • @user627154: Well sure, you could, but I'm not sure what actionable information one would get from doing so. I care much more about "What can I get for my money in the future?" than "How much money of other countries could I get?". I think you may be looking for more of an economics point of view and so, yeah, feel free to post over on Economics. – user42405 Aug 30 '17 at 12:32
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As the value of a currency declines, commodities, priced in that currency, will rise. The two best commodities to see a change in would be oil and gold.

  • 1
    Commodities change in cost per currency unit based on far more than that currency's devaluation. See the other answer provided - inflation attempts to be a measure of relative cost of all of a 'basket of goods' (ie: food, housing, fuel, consumer electronics, etc). – Grade 'Eh' Bacon Aug 28 '17 at 17:16
  • Inflation can be skewed by political policies. Gold is used by banking system for settlements. Oil is a needed commodity. I trust these two far more than published governmental inflation numbers. See shadow stats. Also Libor scandal. – paulj Aug 28 '17 at 18:21

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