Let me copypasta something I wrote earlier as a reply to someone else.
Will add to it specifically for you after this.
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So to understand this better, im going to make a an assumption. Suppose for a moment that countries chose not to print or destroy their money. The amount of money in their economy is set, no amount of money is made or lost. Every country has its own currency. Ok?
Now, the simplest, kind of cop-out answer to your question would simply be:
Of course, it is not that simple. What creates differences in wealth of two countries is the technology they have. Farmers in uganda have to work the field by hand, shoemakers have to make shoes by hand. A farmer in america has machines and so does the shoemaker in america. So lets assume that the american worker, on avarage, can produce 100x as many items per hour worked than a ugandan worker. This means america is 100x richer than uganda. If uganda wanted to sell their beans in america, their one hour of work would only be worth 1/100th of an american hour of work. This means that they can only buy 1/100th of an american hour of work with one hour of their own work. This means that if both countries have the same amount of money per person, so that every american has 1000 dollars and every ugandese has 1000 shillings, then logically, one dollar, which can be exchanged for goods in america, can be exchanged for 100 times as many goods in uganda.
Now, you might think "wont they just buy everything in uganda", but that is a common mistake to make. If an american paid a ugandan with dollars, the ugandan would have sold his 100 hours of uganda work for the equivalent of one hour of american work. It can then buy 1 american hour back. That one hour is worth 100 ugandan hours. Overall he is no better or worse off than if he had just bought ugandan stuff, except that now they have to ship it, which costs money. So no trade will occur in this scenario.
This difference in level of technological (aka productive capacity) leads directly to the different values of the currencies. Trade logically only occurs when both countries have different specialities. If uganda can grow bananas with half the effort of america, and america can grow wood with half the effort, then they will trade bananas and wood. Why?
Remember the exchange rate of shillings to dollars is 100. Ugandans have to work 100 times as much for the same wealth as americans. But for bananas, ugandans work half the normal rate. They only have to work 50 hours of bananas for every american hour. So if they make 50 hours of bananas, they can trade it for one american hour, which they can trade for the equivalent of 100 ugandan hours. The same applies to america, where half an hour of wood can buy you 100 ugandan hours, or the equivalent of 1 american hour. This will lead american to make wood for uganda, and ugandans to make bananas for americans. This causes trade. It is a net gain for both countries involved, because it saves labouring.
Lastly, in real life there are some other factors that make things complicated. Our model assumes that all the money made by the farmers and woodcutters stays in those countries. In real life, bussinesses in richer countries open factories in poorer areas, where they pay the workers less than the amount they worked (this is what marx calls exploitation), and the remainder (the profit) goes back to the original country (such as america). This creates a flow of money back to america without anything real backing it, making it richer and allowing it to import more goods than they would normally (our scenario) could have done. This leads to the undercutting of the native industry by lower priced goods, which leads to job loss and poverty. At the same time, american companies also just move production overseas and do the same trick as described above. This moving of production overseas directly destroys the technology, the factories, the means of production, that made america (or any nation) richer to begin with. This is capital flight, this is what caused Detroit to fall into ruins, the rustbelt, etc.
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