2007-09-21 04:06:46 · 7 answers · asked by Anonymous in Politics & Government ➔ Government
well, think about our deficits. The flip side of that is that other nations are now building up mountains of US cash. They're accumulating it a lot faster than they're spending it, so there's less demand around the world for our dollar. This is a direct result of our horrific trade imbalances. Since we're importing a lot more than we're exporting, we're basically allowing other nations to accumulate these massive dollar holdings, which directly affects the value of our dollar, since there's less demand for it worldwide.
But consider the quandary that these other nations are in. If they stop accepting US Dollars, then that could set off a worldwide selloff of USD and the dollar would tank. But that would then destroy the value of their own dollar holdings. It's a real quandary for them too: keep accepting ever-depreciating USD, or stop accepting them and risk losing the value of ALL their dollar holdings. Around the world, you're seeing nations surreptitiously and slowly trying to get rid of their dollar holdings.
On a different note, when the government keeps lowering the interest rate, it makes it more difficult for them to raise the mountain of foreign cash that it needs every month just to stay solvent. With the govt lowering rates, foreigners (and we Americans too for that matter) won't be interested in US bonds anymore; they will try to get a better return elsewhere, in other investments. On the other hand, if the govt RAISES rates, then it risks even more home foreclosures here at home, and foreclosures are already skyrocketing. Our own govt is in a quandary of its own.
2007-09-21 04:21:22 · answer #1 · answered by Anonymous · 2⤊ 0⤋
Massive debt, massive trade deficits, interest rate differentials...and all the smart people riding the trend.
2007-09-21 11:12:11 · answer #2 · answered by ? 6 · 1⤊ 0⤋
We went off the gold standered and just print what we need.
2007-09-25 20:43:01 · answer #3 · answered by Anonymous · 0⤊ 0⤋
When you play with play money their comes a time when you have to pay up.
2007-09-26 05:26:35 · answer #4 · answered by Mogollon Dude 7 · 1⤊ 0⤋
Power and greed
2007-09-25 14:56:28 · answer #5 · answered by jenny 7 · 1⤊ 0⤋
Investors are smart..........Why hold the dollar?
2007-09-21 11:10:30 · answer #6 · answered by Anonymous · 1⤊ 2⤋
Why don't you ask Bush?
2007-09-21 11:14:19 · answer #7 · answered by humm 2 · 2⤊ 1⤋