Why is the American dollar worth so little?

Question

I am just confused. What causes our dollar to be worth more or less on the international market?

Answer 1

Inflation is the primary reason. Our faulty economy is also another reason that the value of the dollar has diminished.

Answer 2

Has to do with our trade deficit - we buy more goods from overseas than we sell overseas. (This is in reference to total dollar value of goods in and out of the U.S.) Since we sell less than we buy, we aren't bringing in enough money to cover what we buy.

So, the U.S. Treasury issues bonds - essentially, government IOUs - that foreign governments (or foreign banks, corporations, or individuals) buy, thus providing us with cash that we can use to cover the trade deficit.

Keep this up, and the dollar becomes less and less desireable because we keep building up debt by issuing bonds - and at some point, our ability to repay is in doubt (relatively speaking - the U.S. is still THE economic power). Additionally, how many dollar-denominated bonds can someone buy before the novelty wears off (i.e. the marginal utility flattens to zilch)? Eventually, the bond market becomes saturated, and no one has a need or desire to buy our bonds.

At this point, we become Mexico/Argentina/Britain of the 1990s.

Answer 3

Supply and demand. Foreign companies need U.S. dollars to buy goods, services and assets in the U.S. U.S. companies need foreign currencies to buy goods, services and assets abroad. Whatever imbalance exists between the two is amplified by speculators...

Answer 4

Because the government likes to spend money that we don't have so if you spend more than you have you tend to be worth less...