Why Does the US Dollar keeps falling?

Question

Since the Bush Economy is doing so great.

Answer 1

The Bush economy is doing far from great. Growth has been mediochre compared to the Clinton years and is already slowing drastically despite the continuing boom in the economies of China and India. Unemployment has been increasing and another recession appears imminent.

But the key element behind the falling dollar is debt. As we have to pay off foreign debt (both public and private) in foreign currencies we have to "buy" those currencies to do so. As with any product - when more people are looking to buy than sell, the cost will increase. So the value of the currencies of the countries to whom we are indebted are increasing - or to look at it from the other direction - the dollar is decreasing.

a_bush - while what you say is true you are ignoring two other factors.
1. With the falling dollar not contributing to growth as we are headed towards another recession - Americans are becoming effectively poorer. Our standard of living is decreasing.
2. Because the phenomenal amount of debt we have accumulated is largely measured in currencies other than USD we find the cost of servicing that debt is increasing. This would appear to be countering any benefit from improved Terms of Trade.

Answer 2

you're maximum suitable with regard to the U. S. dollar falling, yet i do no longer think of Russia on my own has the potential to bankrupt the U. S.. in fact, China has greater potential to bankrupt the U. S. than Russia does (because of the fact that China has greater US dollar reserves and it additionally buys bonds from the U. S., i.e., lend money to the U. S.). And the two international locations are no longer too friendly to the U. S., so as that they are able to gang up on the U. S. in terms of funds. All they could do is start up merchandising the U. S. dollar reserves or supply up paying for US bonds, and start up paying for greater gold and Euros. yet, 'elegance&brains' is robust - US is doing it to itself via extensive deficits in the two commerce and budget, and irresponsible spending. Plus, the Fed lowering the expenditures would not help the dollar, and inflating the money furnish via pumping money (created out of thin air) will destroy the dollar. the two the U. S. government and the customers are deficit spending, so we are honestly doing it to ourselves.

Answer 3

While a devalued dollar makes exports cheaper, we just don't manufacture as many goods in this country as we used to. Most of our goods comes from other countries so a weaker dollar makes them more expensive for the average consumer. It's true that inflation reduces the value of our debt, but other countries that loan us money won't like their investment losing value so at some point the Fed is going to have to raise interest rates to appease the debt holders (this will make borrowing money for a house or car more expensive for the rest of us), or they risk the chance that the debt holders start dumping US currency in large amounts weakening the dollar even more.

The reason the dollar is losing value is because of the Fed keeping interest rates extremely low for too long in order to bring us out of the last recession (It was the low interest rates and not the tax cuts that spurred the economic growth of the last six years). The availability of so much cheap money eventually caught up with us and now we're going to pay for it.

Answer 4

There is not enough exporting. The import is more than the export and dont blame Bush alone for it. people have to stop going to walmart and buying crap for heavens sake atleast buy the American flags which is made in the United States. And not everyone has to study business. In my school everyone is some kind biz grad or economics, or litrature. Thats because the system makes them hate math. Many of my professors tell me in the classroom that I dont want you do the math so do it this way.

For heaven's sake people have to learn science and get into manufacturing sectors.

Answer 5

The dollar has fallen in value in the last week because the Federal Reserve dropped the prime interest rate by 1/2%.

This has the effect of encouraging lending, and since $1 loaned has a multiplier effect on the economy, an increase in lending puts more dollars out into the marketplace.

When the number of dollars being traded goes up, it's value goes down.

(Bush has very little influence over the Fed, and the economy is still doing great. The value of the dollar is only one small aspect.)

Answer 6

You know, I was cleaning houses one day and I kept finding pennies all over floors. My friend that I work with kept sweeping them up and throwing them away. That night, I told my husband about it. We estimated that America probably throws away up to $20,000 dollars away in pennies every couple of days. I wonder what would happen to the economy if people just kept cashing their coins in...and the big jars of coins they have stashed away in closets...etc.

Answer 7

Bush economy is only doing great if you are an illegal immigrant, he has created a deficit that the USA cannot repay,We owe so much money to China that they vitually own us thanks to policies of Clinton and Gore, and Bush's Iraq war, that is why the world no longer has faith in the American dollar.China and Russia will soon take the leadership in the world economy thanks to the policies of the above mention trio.

Answer 8

It's because the United States has a really big trade deficit.

Answer 9

NAFTA, the EU, and the ability for Americans to file for bankruptcy on a whim. We either let the world hose us over or we commit economic suicide from within.

Answer 10

First responder's answer is totally witless. There are several reasons: continuing trade imbalance, large oil imports, and recently a cheapening of money to limit problems from the subprime mortgage mess. These problems are worldwide, as the fate of Northern Rock illustrates.