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1 Night Stand | Why does US Dollar keep decreasing in value? |
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 |
 
beesting
|
A lot of good answers here but please allow mine.
First, you have to realize that dollars are promissory notes. That means they are I.O.U.'s that only keep their value if the issuer maintains confidence that the dollar can be exchanged for other things of value. {oil,Gold, wheat, etc.}
Second, when too many dollars are injected into the worlds monetary system to bail out a close to insolvent bank, as was done recently, the value of the dollar depreciates because of the strict "Natural" law of supply & demand.
Third, this has a snowball effect. When countries holding tremendous amounts of dollars, see the dollar value declining, naturally they want to trade the dollars into a currency or Precious Metal, that is gaining in value simply to keep the purchasing power intact that they already have. When these dollars are sold or traded it further depreciates all the dollars in circulation.
Now when this happened in 1933-34 the Fed began to contract the entire supply of dollar denominated money, leading up to the great depression.
Despite what every modern American economist {except Ron Paul} tells us, Gold/Silver is REAL money.
**************************************... |
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Ranto
 |
Here are the two main reasons by currencies lose value:
1. Imbalance of trade with foreign countries. If a country is importing more than they had been or less than they had been, that will cause FX rates to fluctuate.
2. If interest rates increase faster in one country than another, then that will cause the currency to fall relative to the other country. One major factor for increasing interest rates is if the country is borrowing a lot. The US deficit is much higher under the Bush administration. |
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Think Richlyâ„¢
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For many reasons.
I've answered this question so many times, I will just copy and paste my answers here.
>>>
Several factors.
Here's a few that are major contributors to the dollar weakness.
1) The trade deficit. The US dollars (and all other fiat currencies) are backed by the country's economy and production. The US economy is in decline, and production is in decline.
2) The budget deficit. The United States is running on record budget deficits in trillions of dollars, and also has unfunded Social Security and Medicare liabilities that run in over 50 trillion dollars over the next few decades.
3) The housing/credit bubble crisis. The US is going through a massive credit bubble collapse, and it is only the beginning.
4) The petro-dollar. The US dollar was the exclusive currency of choice for oil sales. Now, oil is being sold in euros, yen, and rubles. There is less demand or need for holding dollars to buy oil.
5) Inflation. The Federal Reserve had lowered interest rates and pumped billions of dollars into the economy to save many financial institutions from going bankrupt due to the credit crisis. This creates a massive inflationary pressure on the US dollar, and thus it declines in value. More money in circulation = less value for a dollar.
6) Consumer based economy. The US economy is no longer a production based economy. It is now supported by consumers spending money on imported goods. Most of that money comes from credit, since consumers were mortgaging their homes to buy big screen TVs and SUVs and such. Now, with the credit bubble and housing bubble collapse, the consumers cannot borrow money that easily anymore, thus creating a shrink in the consumption, and therefore, a weaker economy. |
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berkshire1043
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Too much national debt. This means less people in the world want to hold dollars, so it goes down. |
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Chesh
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Because we have centralized and private bank that can print off American Dollars at anytime. Which is a recipe for inflation. Last i looked we were at a dollar actually being worth 4 cents. |
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Hybrin
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Multiple reasons, as you've probably read. The biggest one is the Fed artificially keeping interest rates low. When a national debt is increasing, like ours, interest rates would naturally rise in a free-market with an increasing supply of bonds (debt).
However, to artificially keep them low, the Fed buys bonds in the open market with 'new' money. This devalues the currency in two main ways, the obvious is increasing the supply lowers the overall value. The other is the lower interest rates disencourages foreign investment. |
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FALLENMALAK
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The More They Print It, The Less Value It Has.
It Does'nt Cost Them That Much To Print It.
Also Remember: The Federal Reserve is'nt Federal or
Reserved, neither Government, Just Privately Controlled
and Owned By " Banksters ". |
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Taco Muncher
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because of the war costing us more than we have to spend |
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manish
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since US dollar is closely linked with all other currencies is is a free floting one it usually decreases in value when other currencies appericiates in value and US economy is also not working properly which also helps in decreasing its value |
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axel bushing
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The longer people work and acquire skills, the more they want to be paid for their labour.
Higher labour costs mean that employers have to charge more for their services or for the commodities they make or sell.
Higher costs for things and serives mean that people need to make more money to keep living at the level to which they have become accustomed.
This merry-go-round of wages and prices results in the dollar or ruble or euro losing half its purchasing power over a period of ten years.
At one time, a penny was a day's wages. Now pennies are worth less than it costs to make them. In a couple of generations the dollar will have become an object of similar derision, replaced by the Lincoln or the Jefferson.
Over the last hundred years, the devaluation has been a steady 50% per decade, regardless of what the Fed does. |
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