What makes a currency less or more valuable?

Question

And especially, why is the value of the US Dollar falling? How can we bring it back up?

Answer 1

The problem with most modern currencies is that they are based on nothing. In the past, every dollar could be traded in for that much value in gold or silver. Now, money's value is based on nothing at all other than good will.

Money fluctuates on a lot of different factors. If the US economy gets hurt, traders value it less, so the dollar's value drops. If something bad happens politically or socially, the same thing. If something good happens to the nation, the currency can gain value.

Inflation causes problems because that means the money has the ability to buy less than it did before. Costs have risen but the value hasn't, in short. One factor in that is the amount of money in circulation. If there were only 100 $1 dollar bills in existence, so the only money in the country were those 100 bills, they would be worth more than if there are 1 billion bills around.

Its really complicated, to say the least.

Answer 2

What makes a currency valuable?
What makes anything valuable, someone is willing to pay for it.
People are willing to pay less for a dollar in terms of certain other currencies, making the dollar less valuable in terms of those other currencies.
Why? Well, it is difficult to determine why precisely, because the why is based on the thoughts and actions of millions of people, but esentially, people have begun to value other currencies and assets in other nations more. Financial systems and economic output of so many other places in the world are improving, while the economic output and financial systems of the US are going through some difficult times (high national debt, high trade deficiet, slipping real estate values, etc.).
How to bring it back up? Geez, that's tough. As an individual you could buy more american made products, work more, save more. As a politician/fed chairman you could reduce deficiet spending, raise interest rates, lower taxes (if only you could do all of these at once).

Answer 3

Macro-economic factors. Essentially it's very similar to getting an IOU from a person. Which I IOU would have more value, one from someone with savings and a good job outlook or one with debit and bleak job prospects?

The USA has assumed enormous debt over the last decade, primarily through the war in Iraq. This has also increased oil prices, a chief factor in American financial stability. SO in short, due to increasing debit and high probability of a future recession the American dollar is currently a bad bet for the currency traders that determine exchange rates.

Answer 4

Factors involved, the countries gold and banking capabilities along with stock pile. The import and output of revenue and liabilities.