The Money View: The Illusion of Control

The video discusses the relationship between inflation rates and exchange rates, explaining how higher inflation in one country can lead to currency depreciation against another. It contrasts 19th-century central bank policies, which focused on pegging exchange rates to gold, with modern policies that target domestic inflation through interest rate manipulation. These modern policies aim for long-term exchange rate stabilization but can cause short-term fluctuations. The video also introduces concepts like covered and uncovered interest parity.

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