Sinking Dollar, what does it mean

any help?

simply:

The Dollar used to represent high quality goods that were in demand
the demand went down because the world has begun making similar goods
the value of such goods went down and so did the dollar

and I read before it is now an issue for international NBA players because they see their contract shrinking in their local currency
when we are talking about millions - it hurts a lot

China and India have their currencies pegged to the dollar. Japan and a few other asian countries control their currency to keep it from going way up against the dollar.

They are in an interesting pickle. With the dollar falling like it is, it makes buying commodities very expensive for these countries.

However, they also have significant dollar holdings right now and economies which depend on american trade and investment. If they re-value their currencies:
- the dollar will free fall (because they won't buy dollars on the forex to maintiain the peg)
- their current investments in dollars will go down in value accordingly
- it will be much harder for american consumers to buy their goods and american companies to invest in them

At the end of the day, a large dollar correction is necessary and very much at the root of a lot of our current problems. That being said, the correction process would be extremely painful for both americans and asians but it will only be worse if we do nothing.

Right now the devaluation is so fast that the Asian are feeling it more than the Americans. A lof of outsources business models are suffering which leads to high unemployment rate for these Asian developing countries.

Inflation rate is down in Asian economies too but they'd rather have the exports. I think it is time to peg currencies to other commodities (Gold standard?)

Many unbacked paper currencies are pegged to granddaddy of unbacked paper currencies....a classic house of cards on a global scale.

The only thing that underpins the system is the ability of the Fed to in-debt Americans to the hilt....let the major players conclude that we can't or won't honor that debt and the game ends.

Non-religious folks are suddenly realizing they are riding aboard the biggest faith trip in 500 years.

And religious folks are remembering that faith in man-made intrigues typically gets betrayed as such things do not end well.

In a morbid sense this is all fascinating.....not much fun I expect but no worries about growing bored.

It will get much worse as people will lose faith in the American govt. ability to pay it's debt

patsylilly-1 wrote:

It will get much worse as people will lose faith in the American govt. ability to pay it's debt

Hmm, Im going to go ahead and disagree very strongly. Yes the debt isnt being reduced, but the economy is also growing. All debt is bad in a certain way, but is it worse for a millionaire to have $100000 of debt then for someone with $200000 to have $20000 worth of debt? Sure the former is much larger, but the value the person has is also proportionally large. Debt as a percentage of GDP is really what matters.

Even if the American dollar suddenly fell through the floor, sure some unprepared people might become bankrupt, but the value in the economy, human capital, land, infastructure, information, productive capacity dont go anywhere. Its really very reasonable to come to an acceptance that all currencies are floating. Even gold has no inherent value, its just generally more resiliant.

Fiat currency is a destroyer of economies and always has been. That reflects the downward slope we are on.

Some may find it the cause while others may see it as just the symptom....but as an indicator it has historically been infallible as a pointer to terminal decline unless the funny money is abandoned.

boogieman wrote:

Fiat currency is a destroyer of economies and always has been. That reflects the downward slope we are on.

Some may find it the cause while others may see it as just the symptom....but as an indicator it has historically been infallible as a pointer to terminal decline unless the funny money is abandoned.

What economies has fiat currency destroyed? It allows monetary policy to severly hurt an economy, but thats only short-run, and isnt happening in America.

Fiat money has advantages and disadvantages, but its really not that big of a deal.

CoachPopabich wrote:

Right now the devaluation is so fast that the Asian are feeling it more than the Americans. A lof of outsources business models are suffering which leads to high unemployment rate for these Asian developing countries.

Inflation rate is down in Asian economies too but they'd rather have the exports. I think it is time to peg currencies to other commodities (Gold standard?)

You can't use the gold standard, theres not enough gold in the world to represent even 1% of the world's economic output