Randy Inman
Kim K.
The Decline of the Dollar - A Lesson
July 9th 2008 14:18
When I was a kid, we would travel to Canada and I always thought it was super-cool that we could get back more money when we traded in our dollars. That is no longer the case. The Canadian dollar is now worth $1.01 US dollars. Not only that, but the Euro is worth $1.67 US Dollars.
What has happened to the US dollar?
It pretty much started when we stopped using the gold standard. There was a point in time when you could trade dollars for real gold. When inflation got to the point when it didn't seem feasible any more, the geniuses in Washington dropped the gold standard- basically giving no bounds to just how high inflation would be allowed to go.
In the more recent past, the practices of our government have contributed to a the highest inflation rate in 20 years. Whenever the market slows, the federal reserve does this great little thing they call "drop the rates." When this happens, most Americans cheer. OOH- we can get lower mortgage rates now! When the reserve drops the rate, what they've essentially done is open up more opportunity for banks to lend. Where does the money come from that banks can lend? It doesn't. This is what is called "printing money." Every time credit is issued, money is created out of nothing. When money is created, the value of it decreases just like the supply and demand laws of any product.
As Americans get further in debt as individuals and as a whole, our dollar will continue to decline.
The government is living $9.5 trillion in debt- with an increase of $1.7 billion a day since 2007. It has become the standard for people to borrow individually. We borrow for school, or houses, for cars...and in light of the recently market slump, we borrow to pay for groceries or bills.
The recession, the spending, the borrowing, the decline of the dollar...these things are all linked together. You can't throw fake money into the market for a quick boost and not expect that it will further decrease the dollar and just put us in a worse position than before.
What has happened to the US dollar?
In the more recent past, the practices of our government have contributed to a the highest inflation rate in 20 years. Whenever the market slows, the federal reserve does this great little thing they call "drop the rates." When this happens, most Americans cheer. OOH- we can get lower mortgage rates now! When the reserve drops the rate, what they've essentially done is open up more opportunity for banks to lend. Where does the money come from that banks can lend? It doesn't. This is what is called "printing money." Every time credit is issued, money is created out of nothing. When money is created, the value of it decreases just like the supply and demand laws of any product.
As Americans get further in debt as individuals and as a whole, our dollar will continue to decline.
The government is living $9.5 trillion in debt- with an increase of $1.7 billion a day since 2007. It has become the standard for people to borrow individually. We borrow for school, or houses, for cars...and in light of the recently market slump, we borrow to pay for groceries or bills.
The recession, the spending, the borrowing, the decline of the dollar...these things are all linked together. You can't throw fake money into the market for a quick boost and not expect that it will further decrease the dollar and just put us in a worse position than before.
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Comment by Wilson Pon
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The high inflation will also become another burden and deep impact to the whole U.S.