5.25.2007
Foreign Perspectives on the Dollar
Yes, other countries are conducting international business in Euro. Yes, some of that business used to be conducted in Dollars. But that is only part of what supports the value of the dollar.
The United States is an extremely stable country that is also a huge marketplace. We allow and encourage innovation like no other country, and don't place impediments in the way of instant success. You can get as rich as you want, as fast as you want, if you are smart enough.
Another factor supporting the value of the Dollar is that people all over the world NEED the dollar to have value. First, many non-Americans put their money in Dollars in the United States because they know it will be safe.
Second, you mention the exchange of goods and services in exchange for Dollars. Remember the end results of that exchange: we have their goods, they have the Dollars. If the bottom falls out of the value of the Dollar, it is the the trading partners who will be hit hard, not the U.S. After all, we are not holding those Dollars. China et. al. is. Even China's recent diversification won't change the billions in Dollar assets that make up their wealth. It is China at risk, not the U.S.
Third, the U.S. population has a horrible savings rate. To answer your question, what savings?
5 comments:
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HomeImprovementNinja said...
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Well, by your analogy, post WWI Germany should've been fine when their currency collapsed. Sure, the chinese et al. will get hurt if the dollar collapses, but so will we.
The US has been the reserve currency b/c the US it's the biggest manufacturer. Dollars can only be redeemed in US goods (wheat, software, commercial real estate etc). Since we're buying so much from the Chinese, they don't know what to do with all our dollars, so rather than stick it under a mattress, they have been putting it into Treasury bills (4% is better than nothing, right?). But when they develop their banking sector, the Yuan could easily replace the dollar.
1) china will surpass us as the biggest manufacturer by 2020.
2) why invest in something that gives you 4% interest, but loses 20% in principal?
For now, the CHinese, Hapanese and Koreans think it's in their best interests to keep the US economy afloat. We thought the same thing in the 1900s when we tried to keep the UK economy afloat. The result wasn't good for us.
Why don't you check out Rothbard's "America's Great Depression". You can get a free PDF copy on the Mises.org website. -
10:58:00 AM
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Anonymous said...
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everything is happening slowly
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5:56:00 PM
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Anonymous said...
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Another factor supporting the value of the Dollar is that people all over the world NEED the dollar to have value. First, many non-Americans put their money in Dollars in the United States because they know it will be safe
YOU'VR GOT TO BE KIDDING -
6:18:00 PM
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Econo-Girl said...
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HomeIN - No, the difference there is that Germany was being made to pay massive reparations that was money not going into infrastructure. So they printed more money to pay the debts. That's why the currency went into inflation.
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7:26:00 AM
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Anonymous said...
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AInt the usa printing more money nowdays_?will it go to inflation?
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3:47:00 PM
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"They are getting rid of the dollar to,but slowly slowly.So in the end no one will pay you interests for the green paper,will get rid of it,and then you'll end up trillionaires: in worthless paper." Comment on Econo-Girl
"It is strange that no one in the usa dares to talk about this.To warn the people that HEY maybe in a few years your savings will worth nothing..."