1. I note that the currencies of a few countries have depreciated so much as to become almost worthless. In fact, in these countries the US dollars are accepted in payment rather than the local currencies.

2. How do these currencies depreciate? As a non-financier and non-economist can I venture to suggest. The experts can tell me that I am wrong. Or they can just ignore me.

3. I believe that currencies depreciate if a Government tries to chase increasing cost (inflation) by increasing pay. Unions and workers generally believe raising the minimum wage would solve the problem of increasing cost of living.

4. What happens when the pay is increased? It will buy only a little more than what the previous pay bought. Over time the cost of living would go up again as the increase in the pay increases the cost of production.

5. Now we are back to square one. The pay increase does not yield the expected increase in purchasing power. In fact the rise in the cost of production due for the increase in the cost of labour etc. will reduce the purchasing power of the increased pay to below the previous pay.

6. Now there will be a demand for another increase in pay. If this is agreed to there will be the same result i.e., the new pay will not increase the purchasing power but would increase the cost of production.

7. The story of the depreciated currencies of these countries is the same-chasing increased cost of goods or services with increases in pay. It should be noted that the purchasing power does not increase much with increases in pay. In fact the effect of the increased pay on cost of production and all overheads would result in higher cost of living i.e., higher cost of goods and services as compared to the previous costs.

8. In other words the cost of goods and services increase repeatedly over the years as income chases increases in cost. This means that more and more money will be needed to pay practically the same amount of goods or services that at the beginning were bought with less money.

9. When I was a boy way back in the 1930’s I was able to buy a small plate of mee (noodles) for just 3-5 cents. Today I have to pay at least RM3-5.

10. In the 1930’s I would get 100 plates of mee for the price of one plate today. There is a thousand percent depreciation of the Malaysian Ringgit. Actually, we are not so bad. But in some countries the attempts to chase rising cost of living by increasing income is so often and so great that the purchasing power of the currency decrease even more. And so we see the currency failing almost completely.

11. But of course, the depreciation of the currency is not only due to increasing income to meet increases in the cost of living. It is also caused by corruption, issuance of bank notes and currency note of higher values, currency trading and short selling and many other factors.

12. Lately Malaysia has been increasing minimum pay frequently. We need to be careful. The Ringgit might suffer the same fate as the Rupiah and Turkish lira.

13. There are ways of reducing the devaluation of currencies. The expert can tell us.