The gist is that no matter the strength or diversification of your economy, your currency will never be a reliable store of value if your government's income is denominated majorly in forex. Repeat that to yourself maybe 1000 times, hopefully you will master it.


This short lesson is more than any PhD in money management or central banking because its understanding can to a large extent determine the sustainability of nation building, development and growth in a sovereign state.


DEMONSTRATION.


Norway produces more oil or oil equivalents per capita than most nations on Earth and everything is nationalised. The producing company is nationalised, the income too is nationalised. The income is forex but the Norwegian government make careful effort that their goverment income is denominated majorly in the local Krone. They have a budget surplus every year which represents the forex income. This is not the case in Saudi Arabia, Russia, Nigeria, Venezuela and others who have a large chunk of their government income denominated in forex. Oil income is nationalised and since the oil is sold in dollars to foreigners, the government income from that sector is forex.

Result is that any upheaval in the oil market whether positive or negative will affect those governments that depend on forex for income. When oil price goes up their currency will be stable, when it comes down they will devalue. It does not affect Norway's government because they do not depend on the oil forex.


The lesson is more than PhD and even Nobel laureattes because if it were understood, a lot of problems would be automatically solved.