Originally Posted by
Kapusta
Inflation does not happen to a country, it happens to a currency.
Inflation rate of the US dollar is very much relevant when buying in US dollars.
This would be correct -- sort of. Higher inflation for the US$ means a lower exchange rate, which means it'll take more US$ to buy the number of New Taiwan Dollars needed to obtain that bike, or bike frame, or whatever. But in
real terms (adjusted for inflation), it's a wash, since each dollar is worth less.
Reverse the logic for inflation of the New Taiwan Dollar, with the same net result in real terms.
In other words, flexible exchange rates should make all of these scenarios moot...As long as a few assumptions are met.