Exchange rates

Imagine living in a world where you had to have yen to buy a TV, renminbi to buy toys, and dollars to buy food. Think how complicated life would be.

Surprise. That’s the world we live in. Most TV’s we buy are manufactured in Japan, most toys come from China, and most of our food is produced in the United States. And by and large, the workers who produce those goods want to be paid in their domestic currency.

Luckily, this complexity is hidden from consumers; those nice currency traders handle all the grungy details.

That’s the introduction to an admirably clear introduction to exchange rates by Hal Varian writing in the Times.