Currency Depreciation of Foreign Exchange Markets
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Identify an event or policy that could cause a sharp depreciation of the dollar in foreign exchange markets (so possibly 0 domestic inflation but a loss of value in the foreign exchange markets). Here you will need to think in terms of something other than money supply or money supply driven inflation, so wars, natural disasters, default on debt are the sorts of things for which I am looking. How would this depreciation alter your behavior and what impact would it have on your firm?
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Other causes to depreciation other than inflation...
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***this should point you in the right direction. You can take many of these thoughts further like explore specific examples of weather-related effects, but the best seems to be a rapid global shift in dollar based currencies***
There are many reasons that a currency can depreciate in value versus global currencies, however it must be understood that the dollar is a fiat currency, not backed by anything of value such as gold or silver. In fact, fiat currency is backed by what people perceive the currency to be worth. The interesting concept with the dollar is that for a long time (since Nixon took the US off the gold standard - and before that the manifestation of the Federal Reserve), the US dollar was actually the base currency where other currencies were ...
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