Empty currency refers to investments made by investors who believe that one or more currencies will become worthless, in order to gain from the devaluation process。
When it comes to money investments, it is necessary to mention the currency's exchange rate. Countries needed to set prices for commodities when exchanging goods and trading internationally. Within each country, commodity prices are priced in the national legal currency. Thus, in international trade, countries need to establish exchange rates between different currencies, which are exchange rates。
If investors do not favour currency a, the exchange price of currency a will decline. In other words, over time, currency a of the same amount will be less and less convertible. So investors can use that judgment to make empty currency a. The entire investment process could be simplified into the following models:
(i) the investor borrows large amounts of assets from others and agrees to return the assets in currency a after a certain time. The asset could be expressed at this time in 10,000 currency a, and after maturity the investor would have to return 10,500 currency a。
(ii) the investor used the asset as an investment or converted it to a non-depreciable, cashible in kind. It can also be converted to other currencies that do not depreciate。
(iii) prior to the agreed time, currency a depreciated and the real value of the currency decreased. At this point, the real value of the 10,500 currency a represents less than the value of the assets originally borrowed, and once the arrears have been repaid, investors can earn the corresponding difference。
