How to invest in a currency increasing in value relative to another?
"What you're looking for are either FX Forwards or FX Futures.   These products are traded differently but they are basically the same thing -- agreements to deliver currency at a defined exchange rate at a future time.   Almost every large venue or bank will transact forwards, when the counterparty (you or your broker) has sufficient trust and credit for the settlement risk, but the typical duration is less than a year though some will do a single-digit multi-year forward on a custom basis.  Then again, all forwards are considered custom contracts.  You'll also need to know that forwards are done on currency pairs, so you'll need to pick the currency to pair your NOK against.  Most likely you'll want EUR/NOK simply for the larger liquidity of that pair over other possible pairs. A quote on a forward will usually just be known by the standard currency pair ticker with a settlement date different from spot.  E.g. ""EUR/NOK 12M"" for the 12 month settlement. Futures, on the other hand, are exchange traded and more standardized.  The vast majority through the CME (Chicago Mercantile Exchange).  Your broker will need access to one of these exchanges and you simply need to ""qualify"" for futures trading (process depends on your broker).  Futures generally have highest liquidity for the next ""IMM"" expiration (quarterly expiration on well known standard dates), but I believe they're defined for more years out than forwards.   At one FX desk I've knowledge of, they had 6 years worth of quarterly expirations in their system at any one time.  Futures are generally known by a ticker composed of a ""globex"" or ""cme"" code for the currency concatenated with another code representing the expiration.  For example, ""NOKH6"" is 'NOK' for Norwegian Krone, 'H' for March, and '6' for the nearest future date's year that ends in '6' (i.e. 2016).   Note that you'll be legally liable to deliver the contracted size of Krone if you hold through expiration!  So the common trade is to hold the future, and net out just before expiration when the price more accurately reflects the current spot market." On international stock exchanges, they trade Puts and Calls, typically also for currencies. If for example 1 NOK is worth 1 $ now, and you buy Calls for 10000 NOK at 1.05 $ each, and in a year the NOK is worth 1.20 $ (which is what you predict), you can execute the Call, meaning 'buying' the 10000 NOK for the contracted 1.05 $ and selling them for the market price of 1.20 $, netting you 12000 - 10500 = 1500 $. Converting those back to NOK would give you 1250 NOK. Considering that those Calls might cost you maybe 300 NOK, you made 950 NOK. Note that if your prediction is common knowledge, Calls will be appropriately priced (=expensive), and there is little to make on them. And note also that if you were wrong, your Calls are worth less than toilet paper, so you lost the complete 300 NOK you paid for them. [all numbers are completely made up, for illustration purposes] You can make the whole thing easier if you define the raise of the NOK against a specific currency, for example $ or EUR. If you can, you can instead buy Puts for that currency, and you save yourself converting the money twice. Forex trading contracts are generally fairly short dated as you mention.  Months to weeks.  Professional forex traders often extend the length of their bet by rolling monthly or quarterly contracts.  Closing a contract out a few days before it would expire and reopening a new contract for the next quarter/month.  This process can be rather expensive and time consuming for a retail investor however. A more practical (but also not great) method would be to look into currency ETFs.  The ETFs generally do the above process for you and are significantly more convenient.  However, depending on the broker these may not be available and when available can be illiquid and/or expensive even in major currency pairs.  It's worth a bunch of research before you buy. Note, in both cases you are in a practical sense doubling your NOK exposure as your home currency is NOK as well.  This may be riskier than many people would care to be with their retirement money.  An adverse move would, at the same time you would lose money, make it much to buy foreign goods, which frankly is most goods in a small open country like Norway. The most simple solution would be to overweight local NOK stocks or if you believe stocks are overvalued as you mention NOK denominated bonds.  With this you keep your NOK exposure (a currency you believe will appreciate) without doubling it as well as add expected returns above inflation from the stock growth/dividends or bond real interest rates. The increase of currency value in relation to another is a critical determinant of the economic health. It plays an important part in the level of trade and affects the world’s free market economy. But, they also effect on smaller scale as they create an impact on the portfolio of investors. So, it is suggested that the investors should make their trades wisely keeping in mind the value of other currencies that might your trade. Also, you should check the news daily to get regular updates and be well-informed of any changes happening in the market
"The main pros are more than that. They are  1: stability of prices and interest rates (otherwise these would swing wildly with the economic cycle) 2: Guarantee of trustable legal tender. (otherwise, what's to say for sure that paper money would be any better than say... paying in chicken feed) 3: the employment and output effects of monetary policy. 4: Currency price stability relative to foreign currencies.    Also... it might be a good idea to look who is in favor of Central Banks and who is against.  In favor:  All mainstream economists from any of the major schools (Keynesian, Austrian, Neo-classical, historical, monetarist, ect.)  Against: Lyndon LaRouche, Ron Paul, and Right-wing conspiracy nuts.   Also, last time I checked, currency value of the USD wasn't really the US's biggest problem, even even a problem at all really. Also consider what ""currency"" actually is, before worry about its value." "This is a poor example really. It's not necessary to measure inequality from the position of a janitor. It's more illustrative to measure it from the educated middle class, who have also fallen sharply in household wealth relative to the 1%. This trend is more surprising and disturbing as it runs counter to the great 20th century trend of a rising middle class.  If you want to understand inequality just look at the rate of investment and the relative rate of return achieved by the 1%  Not only is the wealth of the 1% increasing, it is increasing at a faster rate.   Needless to say that difference compounds over time.  Until we have an extended period of the wealthy losing money at a faster rate than the less wealthy, inequality will rise. And also needless to say, that scenario is forever and always unacceptable to the 1%  It's easy to talk about solutions to inequality right up until someone asks ""How are we going to make the wealthy less wealthy in a relative sense?""  At which point you realize there are no serious efforts being made against inequality." "You will make a profit in nominal dollars (or nominal units of whatever currency you used to buy the token).  Whether you'll make a profit in real dollars depends on inflation, and in practice whether it would be possible to sell your existing tokens to someone else for the new price. Suppose when the price was 50 U (50 ""units"", since you didn't specify a currency), you bought one token.  Today you can either spend 52 U for a token, and get a liter of milk, or you can spend your existing token (for which you paid 50 U) and get a liter of milk.  It looks like you are making a profit of 2 U by spending your token. However, whether that profit is real or illusory depends on what else you could do with the token.  For instance, suppose that, since the price of a token is now 52 U, you will have no trouble finding someone who wants to buy your token from you for 52 U.  If you sell your token for 52 U, you'll still only be able to buy 1 L of milk.  So if you measure your wealth in milk, you have made no profit: in the past you had a token representing 1 L of milk, and today you still have a token representing 1 L of milk. Suppose now that in the past, when a token cost 50 U, a hamburger also cost 50 U.  Suppose further that a hamburger now costs 52 U.  So you can sell your token for 52 U, but that 52 U will still only buy you one hamburger.  So, again, if you measure your wealth in hamburgers, your have made no profit.  In the past, you could have sold your token and bought a hamburger; today, you can still sell your token and buy a hamburger, and you'll have nothing left over, so you have gained nothing. If, on the other hand, the price of a hamburger today is still 50 U, then you call sell your token for 52 U, buy a hamburger for 50 U, and still have 2 U left over.  You have made a profit. What this all goes to show is that, in practice, the idea of ""profit"" depends on the overall economy, and whether you could exchange the currency units you have in your possession for a greater quantity of goods than you could in the past.  Whether this is possible depends on the relative changes in price of various goods.  In other words, if you get your money by selling Product A, and later you buy Product B, you may or may not make a profit depending on how the prices of the two products moved relative to one another. Also, in your hypothetical setup, the ""currency"" (the token) is directly linked to the value of a single good, so you can always at least get 1 L of milk for your token.  Most real currency is not bound to specific goods like your milk token, so it is possible for your currency to lose value in an absolute sense.  For instance, suppose you sell a book for $5.  The $5 is not a ""book token"" and you cannot rely on being able to exchange it for a book in the future; in the future, all books may cost $10, and the prices of all goods may rise similarly, so your currency will actually be worth less no matter how you try to use it.  This could happen with the milk token if the milkman announces that henceforth 1 L of milk will cost 2 tokens; your existing token suddenly loses half its value. In sum, it is easy to calculate whether you made a profit in currency units.  What is harder is to calculate whether you made a profit in ""real terms"" (often referred to as ""real dollars"" or ""inflation-adjusted dollars"", or the equivalent in your favorite currency).  The reason this is hard is because the idea of ""real dollars"" is fundamentally linked to the possibility of exchanging currency for goods (and services), and so it depends what goods you're buying.  Inflation statistics published by governments and the like use a ""basket"" of goods to approximate the overall price movements in the economy as a whole." I have heard that people say the greater earning means greater   intrinsic value of the company. Then, the stock price is largely based   on the intrinsic value. So increasing intrinsic value due to   increasing earning will lead to increasing stock price. Does this make   sense ? Yes though it may be worth dissecting portions here. As a company generates earnings, it has various choices for what it can do with that money. It can distribute some to shareholders in the form of dividends or re-invest to generate more earnings. What you're discussing in the first part is those earnings that could be used to increase the perceived value of the company. However, there can be more than a few interpretations of how to compute a company's intrinsic value and this is how one can have opinions ranging from companies being overvalued to undervalued overall. Of Mines, Forests, and Impatience would be an article giving examples that make things a bit more complex. Consider how would you evaluate a mine, a forest or a farm where each gives a different structure to the cash flow? This could be useful in running the numbers here. As the value of a currency declines, commodities, priced in that currency, will rise. The two best commodities to see a change in would be oil and gold. When we speak about a product or service, we generally refer to its value. Currency, while neither a product or service, has its own value. As the value of currency goes down, the price of products bought by that currency will go up. You could consider the price of a product or service the value of the product multiplied by the value of the currency. For your first example, we compare two cars, one bought in 1990, and one bought in 2015. Each car has the same features (AC, radio, ABS, etc). We can say that, when these products were new, each had the same value. However, we can deduce that since the 1990 car cost $100, and the 2015 car cost $400, that there has been 75% inflation over 25 years. Comparing prices over time helps identify the inflation (or devaluation of currency) that an economy is experiencing. In regards to your second question, you can say that there was 7% inflation over five years (total). Keep in mind that these are absolute cumulative values. It doesn't mean that there was a 7% increase year over year (that would be 35% inflation over five years), but simply that the absolute value of the dollar has changed 7% over those five years. The sum of the percentages over those five years will be less than 7%, because inflation is measured yearly, but the total cumulative change is 7% from the original value. To put that in perspective, say that you have $100 in 2010, with an expected 7% inflation by 2015, which means that your $100 will be worth $93 in 2015. This means that the yearly inflation would be about 1.5% for five years, resulting in a total of 7% inflation over five years. Note that you still have a hundred dollar bill in your pocket that you've saved for five years, but now that money can buy less product. For example, if you say that $100 buys 50 gallons of gasoline ($2/gallon) in 2010, you will only be able to afford 46.5 gallons with that same bill in 2015 ($2.15/gallon). As you can see, the 7% inflation caused a 7% increase in gasoline prices. In other words, if the value of the car remained the same, its actual price would go up, because the value stayed the same. However, it's more likely that the car's value will decrease significantly in those five years (perhaps as much as 50% or more in some cases), but its price would be higher than it would have been without inflation. If the car's value had dropped 50% (so $50 in original year prices), then it would have a higher price (50 value * 1.07 currency ratio = $53.50). Note that even though its value has decreased by half, its price has not decreased by 50%, because it was hoisted up by inflation. For your final question, the purpose of a loan is so that the loaner will make a profit from the transaction. Consider your prior example where there was 7% inflation over five years. That means that a loan for $100 in 2010 would only be worth $93 in 2015. Interest is how loans combat this loss of value (as well as to earn some profit), so if the loaner expects 7% inflation over five years, they'll charge some higher interest (say 8-10%, or even more), so that when you pay them back on time, they'll come out ahead, or they might use more advanced schemes, like adjustable rates, etc. So, interest rates will naturally be lower when forecasted inflation is lower, and higher when forecasted inflation is higher. The best time to get a loan is when interest rates are low-- if you get locked into a high interest loan and inflation stalls, they will make more money off of you (because the currency has more value), while if inflation skyrockets, your loan will be worth less to loaner. However, they're usually really good about predicting inflation, so it would take an incredible amount of inflation to actually come out on top of a loan. You buy a share of something for $100.  It goes up by 10% over a year, and you now have $110 in value.  It goes up by 10% next year and you now have $121.  That original $10 increase was compounded even though you're not earning interest because the gains are measured as a percentage.  If, instead, you'd only invested the second year you'd have less value.  Assuming the markets average a positive gain (above inflation) you see greater gains the earlier you're invested. International exchange rates are arbitraged. If I exchange A for B for C and then back to A again, I'll end up with the same amount ex trade fees. Assume this isn't the case. Clearly if I'd gain, someone else loses and I'd make millions by rapidly exchanging. Now assume that I'd lose money on that route. That must be because the reverse route, A->C->B->A gains money. (Again, assuming no fees) So in this case you'd just look at fees. (And as Ganesh points out, that may include future fees)