Are there any significant reasons why the US dollar has sunk so much over the months ?

Answer 1

It has nothing to do with the war, or with "irresponsible" fiscal spending (the deficit is low and declining), or with the "bad" economy (the US economy is growing at 3.9%, much stronger than those of Europe, where the Euro is appreciating). Also it has little to do with the lack of a gold standard, since what we mean is that the dollar has sunk against the British Pound and the Euro, which also are not backed by gold.

It's the basics of supply and demand. The dollar will tend to lose value when a foreigner in a foreign country has US dollars on hand, and does not need to employ the US dollars in buying US goods or US assets. Instead he trades those dollars for another currency -- which tends to weaken the dollar versus the other currency (ie, there is an oversupply of dollars versus demand for them). OK?

How does this come about? I think three reasons:

- US trade deficit: US entities buy imports with US dollars from foreigners. This leads to foreigners holding dollars. Often this does not weaken the dollar, because the foreigners will use those dollars to, in turn, buy US exports, or to buy US stocks or bonds or even make direct investment into the US, such as building a factory in the U.S.

So the U.S. can manage to run persistent trade deficits without weakening the dollar; but it's likely that recently trade deficits have gotten just large enough that the supply of dollars is overcoming foreigners' ability to use those dollars.

- Price of oil: This is a subset of the above. Oil is priced in dollars on the international oil markets. As the price of oil goes up, I think it caused a positive feedback loop where oil producers are left with more dollars than they need, which weakens the dollar, which means the next barrel of oil brings in even MORE dollars, which further weakens the dollar, etc.

- U.S. sub-prime/housing problems: Foreigners use US dollars to buy US assets (stocks and bonds and others financial instruments). It's possible the recent problems in the housing and credit markets spooked foreigners away from some US investments, which leads to less demand for the dollar among foreigners.

You put these three circumstances together, I think what we've seen is just a temporary change in the supply and demand for US dollars among foreigners.

By the way ... ALL of these things are most likely cyclical and will swing back to the other direction.

Answer 2

Because of Bush's wars in the middle east, the US government has had to borrow more currency from the Federal Reserve which by the way is neither federal or a reserve but belongs to the private banks. Because of this borrowing and having to pay high interest rates to the "Fed" the "Fed" has had to create more currency out of thin air. The more worthless currency the lower its worthless value goes.

The US government has no "money" it all belongs to the Federal Reserve and has since 1914 when then President Woodrow Wilson signed the illegal legislation into law turning the monetary system over to the control of the private banks. If you don't believe me look up the Federal Reserve on the internet.

Answer 3

Because the dollar no longer represents money it represents currency.

Money is backed up by something that is and has real value, such as gold. The US Dollar was taken off the gold standard in the 70's and so now we are faced with a medium of exchange that is subject to the whims of merchants dabling in currency exchanges.

There are other considerations but the basis of this stems from what I said above.

Answer 4

Besides the rising debt and irresponsible fiscal spending? Many reasons.

The Chinese market is exploding as they go through their little industrial revolution. Gas prices are skyrocketing. Other economies are making a lot more money.

You may also want to look on the federal reserve website for more local economic information:

http://www.federalreserve.gov/

Answer 5

There are a lot of reasons... Its sort of the cumulative effect of them all...

I think probably the worst was when the housing market crashed, due to banks offering sub-prime mortgages without requiring any sort of background checks and no downpayments. People were just returning houses in swarms that they could no longer afford (they were already overextending themselves too far but banks were too greedy to notice or care) once interests rates went up ...

Answer 6

because the us dollar is , unlike the past, not backed up by gold.
the us dollar is backed bu future tax collections from its people, people make less, dollar worth less, and the gov prints it like theres no tomorrow which makes our dollar worth crap

Answer 7

because the US is wasting so much money fighting a pointless war

Answer 8

bc our economy is going down...which is really sad to say! all bc we're spending some much money on stupid things instead of the important stuff!!!....Good job to Bush, he does great things...ha!