Us Dollar

[KipWellsFan]

The US dollar seems to be continuing to flounder as the Canadian dollar is reaching 12 and a half year highs versus the greenback. Also, the US dollar is having record lows against the Euro and Yen. Why is this happening, is it going to get turned around, what are the consequences.

 

http://yahoo.reuters.com/financeQuoteCompa...24665469_newsml

 

http://www.canada.com/businesscentre/story...12-188e89d1851a

 

southsider I expect input!

[FlaSoxxJim]

To add to that, Greenspan is starting to push for a controlled devaluation of the dollar. This would be to keep from scaring off the lender nations that continue to finance our monumental and still growing debt. The problem is (from what my non-economics brain can follow) that if this is done too fast there are potentially huge problems that could put us back into recession, but if it is done too slow or too superficially the lender nations will still perceive risk and bail out.

[southsider2k5]

Everything I have read has indicated that the current account deficits are the biggest thing to blame. I have a hard time believing that seeing as, as a percentage of GDP they CADs really aren't different than they have been historically. My theory has always held that the Bush admin is trying to lower the cost of our exports to try to give artificial price raises to companies that do business overseas, and simultaniously make imports that much more expensive for people who want to do business here. For example, with the Euro moving from about 1-1 against the dollar to a Euro buying 1.3 dollars that means US companies doing business in Europe just got a 30% price raise without the usage of tariffs, or price increases. It also means that European companies doing business in the US are recieving essentially 30% less money, unless they raise their prices. It gives an form of protection to the American companies, without having to fight with the WTO and without cutting costs, or raising prices in order to do it.

[jasonxctf]

here's the easiest way to explain it. Let's use US Dollar versus Canadian Dollar as an example.

 

If the US Dollar is strong versus the Canadian Dollar (let's say $1-$1.50) this means that every dollar exchanged would equal $1.50 Canadian.

 

If the US Dollar is weak versus the Canadian Dollar (let's say $1-$1.10) this means that every dollar exchanged would equal $1.10 Canadian.

 

Now, with a strong US Dollar, one could purchase items from Canada cheaper (basically with less US Dollars) than one could with a weak US Dollar. In return with a strong US Dollar, Canadians pay more for US products and with a weak US Dollar, Canadians pay less for US products.

 

The main problem our nation is facing with weak US currency is tied to us importing more than we are exporting. (Trade Deficit) So with a weak US Dollar our trade deficit grows because our money isn't as highly valued and thus forces us to pay more for foreign items. (Cars, electronics, etc) We as consumers indirectly pay more with weak US Currency because importers/exporters as well as manufacturers and retailers jack up the price on these goods to make up for the weak currency rate.

 

The flip side is that with a weak US Dollar, products made in the USA are cheaper for foreign consumers. This might spike demand for our products, but with a weaker dollar, once these foreign monies are converted... revenue dips.