# How do you measure the strength of a currency? **URL:** \ **Category:** Factual Questions\ **Created:** [November 27, 2001, 12:30pm UTC](https://boards.straightdope.com/t/how-do-you-measure-the-strength-of-a-currency/95486 "2001-11-27T12:30:18Z")\ **Posts on this page:** 5\ **Page:** 1
**Author:** ![sirjamesp](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@sirjamesp](https://boards.straightdope.com/u/sirjamesp)\ **Post date:** [November 27, 2001, 12:30pm UTC](https://boards.straightdope.com/t/how-do-you-measure-the-strength-of-a-currency/95486/1 "2001-11-27T12:30:18Z")
This question popped into my head whilst reading [this](http://boards.straightdope.com/sdmb/showthread.php?threadid=101042) thread about the gold standard. In it, **samclem** mentions in passing that: > [@](#): > > \*Originally posted by samclem \* > The strongest currency in the WORLD today is the US dollar. We’re kicking serious butt around the world currency market. This may or may not be good. Depends on a lot of things. This got me thinking - how is one currency rated against another? What does “strongest currency in the world” actually mean? We hear a lot about currencies strenthening and weakening against each other, which is clear enough. But how does one go about actually saying that one currency is stronger than another in absolute terms? ---
**Author:** ![Cougarfang](https://avatars.discourse-cdn.com/v4/letter/c/c67d28/32.png) [@Cougarfang](https://boards.straightdope.com/u/Cougarfang)\ **Post date:** [November 27, 2001, 12:33pm UTC](https://boards.straightdope.com/t/how-do-you-measure-the-strength-of-a-currency/95486/2 "2001-11-27T12:33:52Z")
First, you take a sledgehammer… ---
**Author:** ![China\_Guy](https://avatars.discourse-cdn.com/v4/letter/c/779978/32.png) [@China\_Guy](https://boards.straightdope.com/u/China_Guy)\ **Post date:** [November 27, 2001, 12:35pm UTC](https://boards.straightdope.com/t/how-do-you-measure-the-strength-of-a-currency/95486/3 "2001-11-27T12:35:09Z")
purchasing power parity is perhaps the idea you’re looking for to “equalize” different currencies. The Big Mac index is also along those lines. Some economists look at what it costs to buy a big mac in different countries since a big mac is composed of the ingredients, labor, marketing, rent, financing costs, etc and therefore a reasonable indicator of purchasing power or price levels between countries. Here’s a link to the big mac index [http://www.oanda.com/products/bigmac/bigmac.shtml](http://www.oanda.com/products/bigmac/bigmac.shtml) ---
**Author:** ![royjwood](https://avatars.discourse-cdn.com/v4/letter/r/ce73a5/32.png) [@royjwood](https://boards.straightdope.com/u/royjwood)\ **Post date:** [November 27, 2001, 12:42pm UTC](https://boards.straightdope.com/t/how-do-you-measure-the-strength-of-a-currency/95486/4 "2001-11-27T12:42:55Z")
When samclem states that the US dollar is the strongest currency in the world what does he mean? After all, the British Pound is worth approximately 50% percent more than the US Dollar. And several other countries also have currencies that are worth more. However, the international currency is the US Dollar, it is also the most widely accepted currency in the world (by number of countries that accept it or use it). ---
**Author:** ![JRDelirious](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jrdelirious/32/9531_2.png) [@JRDelirious](https://boards.straightdope.com/u/JRDelirious)\ **Post date:** [November 27, 2001, 3:43pm UTC](https://boards.straightdope.com/t/how-do-you-measure-the-strength-of-a-currency/95486/5 "2001-11-27T15:43:40Z")
> [@](#): > > \*Originally posted by royjwood \* > \*\*When samclem states that the US dollar is the strongest currency in the world what does he mean? After all, the British Pound is worth approximately 50% percent more than the US Dollar. And several other countries also have currencies that are worth more. > \*\* And indeed, a currency’s relative standing as “strong” or “hard” is NOT the same thing as its nominal valuation per unit of issue (but strength or weakness affects the exchange rate). An Italian Lira is 2,200 to the dollar. A Cuban peso is 21 to the dollar. Guess which of those two amounts of each would a currency trader rather have in his hand, if he can’t have the one dollar. You want a currency that the market trades in with confidence because they trust that it will continue to be valuable – or exchangeable for somethign valuable. “Strong” or “weak” refers as to the expectation that the market value will hold steady, rise or fall relative to all other currencies and to actual things-to-buy. And that depends on the strength of the economy underlying it, and the soundness of the fiscal and monetary policies that regulate it, as perceived by the market. The U.S. Dollar is “strong” (for now) because the U.S. has been the biggest _single_ market economy in terms of production, consumption, trade, and added value of goods and services, all such transactions conducted in a free market that will give you an answer as to what-can-you-get-for-US$1 promptly and clearly; endowed with physical and intellectual capital that allows for an expectation of sustained economic activity; located within a stable and powerful political and social system.