Currency Explained

Often times astute observers of international news, a category you likely include yourself in, will hear that some politician or government minister has commented on such and such country trying to “peg” or fix their exchange rate to a certain value versus another country’s currency. You may be asking yourself what the big deal is if Mexican Pesos are fixed at ten per two British Pounds, let’s say. I’m glad you asked!

If Mexico’s central banking authority (these countries were chosen purely for the sake of argument) decides that they don’t want to allow the value of their currency to rise and fall with market conditions on the world exchange rate market, they may take steps to ensure that the value of their currency is artificially stabilized versus some other country’s. In so fixing the value of the Peso to the Pound, what has in effect happened is that goods produced in Mexico will be less expensive than goods produced in England.

In pegging or fixing the exchange rate between the Peso and the Pound, what the Mexican central bank has in effect tried to do is stabilize trade relations between their countries and also stabilize the value of their currency. In so doing, however the Pound rises and falls, the Peso will do so in at the same rate. This is most often done in smaller nations whose markets are tied to larger ones.

The biggest problem with this arrangement, from the British view, would be that goods from Mexico would permanently become less expensive than goods produced at home in real terms. As such, items that are manufactured in the United Kingdom would be, all other things being equal, consumed at a lower rate than those produced in Mexico by the British markets. This can lead to a trade imbalance, which can have consequences for both countries.


Smart Cards for Students

Ever want to consolidate the number of credit cards, debit cards, and ID’s you have on hand as a foreign student? Now, many colleges and universities are offering another payment method called the Smart Card. Smart Cards for students are being made available through many higher learning institutions and are often incorporated with student’s school ID or room key card, so that students can make purchases, show ID, and gain entrance with one card in hand. These cards are supplied by many colleges and are used to purchase many goods and services on campus or nearby vendors.

Smart cards for students work differently than a credit card or a debit card. Instead, smart cards do not use a magnetic stripe to store information, but rather an integrated computer chip or microprocessor. When the chip is inserted into a vending machine or card on the same network, information stored on the chip is transmitted to the vendor. To put money onto a smart card, the student must insert the card into a payment station, and then insert bills into the machine. Many smart card services have websites which allow the student or the student’s family to put money onto the card online.

These cards are most often used for laundry facilities, vending machines, and small shops on campus. The school’s benefit of offering these smart cards  is that they can limit their services for their students alone. The benefit of using the smart cards for students is that they no longer have to carry coins or cash around to buy small items or use services on their campus.

Additionally, local shops or restaurants often accept payment from university smart cards, allowing students the ability to purchase food or school supplies with their smart card. However, most shops outside of the immediate neighborhood of a university’s campus do not accept smart cards. To buy food or other items at stores that do not accept smart cards, a student will need another payment method at their disposal.