Boring-Ass Reality
The recent rise in value in the US dollar does not imply that that the dollar is strong. Other indicators, such as the recent investment in federal bonds, may connote strength in the dollar relative to other currencies. However, I would argue that the dollar is not necessarily "strong" as other leading currencies are weak. Two reasons. One,the USA's economy is inflated by subsidies and mass specie (printed dollars). Two, the USA's federal reserve has yet to raise interest rates.
The US dollar is not necessarily "strong." The USA is trying to grow its economy. The USA needs a weak dollar in order to maintain low retail prices. Low retail prices keeps people spending money. If people spend money, companies can borrow more and hire more people. Governments increase tax revenue. The refusal by the fed to raise interest rates germinates from the goal of US-federal policy makers to maintain a weak dollar in relation to the Chinese yuan rmb, among others.
Other countries are investing in the dollar in order to prevent a run on their own country's currency. For instance, Brazil has held two dollar auctions in one month in order to quell the rise in the Brazilian currency. Meanwhile, the UK and the Germans have increased investments in the US bond market in order to hedge losses associated with the falling Euro and certain failing Euro-zone economies, like Greece. Other states depend on a strong US economy to serve as a market for exports and as a reliable investment of capital. Without strong exports, manufacturing countries have no market. No one is buying the product. If no one is buying the product, investment returns are shallow to none, and rare. The states which non-US dollar currencies represent rely fully on a strong dollar in order to maintain consistent and manageable rates of economic growth. A strong dollar can be used to curb overheating, which tends to cause inflation.
Do you see the fix? The US wants a weak dollar while some other countries want a strong dollar. The inverse is currently true. (Or would that be the reciprocal?). The US Dollar is holding down the value of other currencies. Perhaps not maliciously, but certainly. And other countries are causing the strength to save their own asses.
Speculation: if the fastest growing economies in the globe today maintain export rates throughout the year, these economies will look to abandon the dollar as the reserve currency. If they do not abandon the US dollar, or if China does not revalue its currency in June or this summer, then the US will print more dollars. If these countries abandon the dollar, then expect the value of the dollar to plummet in way that causes inflation within US boarders, thus reducing the USA's borrowing power.
Fifteen percent of the USA's income in 2008 was borrowed. (2009 IRS Publication and Instructions 10-40A. pg. 90.)
*Keep in mind, also, that two things are occurring in the US: amnesty for illegal border-crossers and a rise in the price of oil. The illegal border-crosser issue is big because what happens is that the amnesty granted to the illegal border-crossers entitles the immigrants to health insurance and Pell grants recently provided for in law by the passage of US House Bill 3590. I make the assumption that "illegal border-crossers" contain impoverished immigrants, and the impoverished constitute the entitled. Thirty million more people will be entitled to a program that was budgeted to provide for 30 million people. Can the US economy handle that? I would argue no. Not only "no," but "Are you fucking out of your mind?!" The price of oil falls in the mix, because the price of oil is tied to the US dollar. Roughly every summer when the price of oil gets too high the federal gov't prints more money to reduce the price of oil. That way people can drive more and spend more. Amnesty and the price of oil drastically legitimize the decision to print more dollars.
A peculiar notion now that I think about it. Used to be, the nobility were considered to entitled. People came to the US to escape the noble system. Used to be, you had to go slay a dragon to earn nobility or chop off a man's head in battle and save the queen or fuck the duchess. Now, all you've got to do is quit your job and sign up for welfare or go back to college.
Happy birthday Kynlan.
The US dollar is not necessarily "strong." The USA is trying to grow its economy. The USA needs a weak dollar in order to maintain low retail prices. Low retail prices keeps people spending money. If people spend money, companies can borrow more and hire more people. Governments increase tax revenue. The refusal by the fed to raise interest rates germinates from the goal of US-federal policy makers to maintain a weak dollar in relation to the Chinese yuan rmb, among others.
Other countries are investing in the dollar in order to prevent a run on their own country's currency. For instance, Brazil has held two dollar auctions in one month in order to quell the rise in the Brazilian currency. Meanwhile, the UK and the Germans have increased investments in the US bond market in order to hedge losses associated with the falling Euro and certain failing Euro-zone economies, like Greece. Other states depend on a strong US economy to serve as a market for exports and as a reliable investment of capital. Without strong exports, manufacturing countries have no market. No one is buying the product. If no one is buying the product, investment returns are shallow to none, and rare. The states which non-US dollar currencies represent rely fully on a strong dollar in order to maintain consistent and manageable rates of economic growth. A strong dollar can be used to curb overheating, which tends to cause inflation.
Do you see the fix? The US wants a weak dollar while some other countries want a strong dollar. The inverse is currently true. (Or would that be the reciprocal?). The US Dollar is holding down the value of other currencies. Perhaps not maliciously, but certainly. And other countries are causing the strength to save their own asses.
Speculation: if the fastest growing economies in the globe today maintain export rates throughout the year, these economies will look to abandon the dollar as the reserve currency. If they do not abandon the US dollar, or if China does not revalue its currency in June or this summer, then the US will print more dollars. If these countries abandon the dollar, then expect the value of the dollar to plummet in way that causes inflation within US boarders, thus reducing the USA's borrowing power.
Fifteen percent of the USA's income in 2008 was borrowed. (2009 IRS Publication and Instructions 10-40A. pg. 90.)
*Keep in mind, also, that two things are occurring in the US: amnesty for illegal border-crossers and a rise in the price of oil. The illegal border-crosser issue is big because what happens is that the amnesty granted to the illegal border-crossers entitles the immigrants to health insurance and Pell grants recently provided for in law by the passage of US House Bill 3590. I make the assumption that "illegal border-crossers" contain impoverished immigrants, and the impoverished constitute the entitled. Thirty million more people will be entitled to a program that was budgeted to provide for 30 million people. Can the US economy handle that? I would argue no. Not only "no," but "Are you fucking out of your mind?!" The price of oil falls in the mix, because the price of oil is tied to the US dollar. Roughly every summer when the price of oil gets too high the federal gov't prints more money to reduce the price of oil. That way people can drive more and spend more. Amnesty and the price of oil drastically legitimize the decision to print more dollars.
A peculiar notion now that I think about it. Used to be, the nobility were considered to entitled. People came to the US to escape the noble system. Used to be, you had to go slay a dragon to earn nobility or chop off a man's head in battle and save the queen or fuck the duchess. Now, all you've got to do is quit your job and sign up for welfare or go back to college.
Happy birthday Kynlan.