Essay: Devaluation of Currency

Sample Essay

France for a long time has enjoyed the benefits of the ornament industry, which has been like a backbone to the economy as well as the aircraft industry (Buller & Gamble, 2008). Leaving these two industries in the hands of the private sector was going to be detrimental as there was a possibility of collapsing taking into consideration that many firms in various economies had collapsed.

The Bank of France ensured controlled interest rates and this impacted greatly on the various firms within the economy. Controlled interest rates are effective ways of ensuring that the economy does not have much money in supply (Fox, 1998). Devaluation of currency is not only affected at the foreign or international market but on the amount of money in circulation. Too much money in circulation would lead to inflation rates and would make the currency weak against the other currency resulting into poor balance of payments that is deficit and negative terms of trade. Earlier on it was discussed how the balance of payments and the terms of trade affect the financial position of an economy. French government through the controlling of the interest rates ensured that the financial market was strong enough.

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