By Fred Barbash
Washington Post Staff Writer
Sunday, February 7, 1999; Page H01

Currency Report • Currencies in crisis • The Beanie Baby guide to currency • A world of currency woes • Traveling abroad: Using foreign money • The value of a strong dollar Exchange Rates Major Currencies Africa | Asia | Europe Middle East | North America South America | South Pacific Euro Report • Europe and the Euro • Euro-Conversion Timetable • Quiz: Test your Euro smarts • The Euro and travel. News, Data & Reports International Markets Brazil Economy Asian Economy U.S. Markets • Recent Post news on foreign markets and currency

The currency crises of the past two years have also created a crisis for America's parents: What to tell the children when they come home from school, as they inevitably will, and say, "Dad, Mom, why did they devalue the Brazilian real?"

"I don't understand that stuff, honey," is not an acceptable answer. Herewith, therefore, a parent's guide to currency turmoil.

The most important thing to know is that currency is like any other item that's bought and sold--it generally obeys the law of supply and demand. The greater the supply of a currency, the less it's worth; the less the supply, and the greater the demand, the more that currency will cost.

Be not intimidated by such arcana as "currency boards" and "crawling pegs." It's all just like Beanie Babies.

The main reason Beanie Babies have value, apart from cuddliness, is that the manufacturer made it known there would be a limited number. Beanie Baby speculators therefore could confidently expect increasing demand and therefore greater value.

The Beanie Babies are likely to hold their value until and unless the people who buy them decide they like Furbies more, perhaps because of an irresponsible rumor that some Beanie Baby baron is about to dump his supply on the market all at once. The Beanies already out there would become less valuable. This would start a flight to Furbies and the financial pages would report that Beanie Babies declined relative to Furbies.

Now, it's a shame that children have to be exposed to this stuff at all. It's ugly out there. And remember they may be shy about bringing it up. Thus, parents should prepare them for the possibility of Beanie Baby panics ahead.

A Beanie Baby panic would occur if Beanie Baby owners started selling en masse. (This is what has been happening with the Brazilian real.) This decline could be reversed if some large institution, such as The Furb, intervened to buy up Beanie Babies, reducing the number in circulation and bolstering their value.

This would be decided by Alan Beanspan.