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The Falling Dollar

Look to the right: you'll see a graph detailing the declining US Dollar against the euro. It took another tumble recently amid fears that another Bush term will spell more record deficits. As I understand, the declining value of the $ means it'll actually be easier for the US to pay back its debts by devaluing them. Meanwhile, as I understand, American exports will appear more attractive due to their declining relative price. On the other hand, the US still has a record high trade deficit; the declining $ means the US GNP becomes weaker. I would like to sit down with an economist of some kind and understand all the ins and outs of currency value. Is a declining $ bad? Is the Bush administration's professed commitment to a Strong Dollar disguising "benign neglect?" What are the consequences?


At 1:28 PM, Blogger Miguel said...

I was thinking it was like a market-based information aggregator on the subject of how good the official US of A is. I think the debt is in the form of treasury bonds which pay out a fixed dollar amount at the end of a term; if there's a perception that dollars will be worth considerably less in x years, the bond is a bad buy and that's self-reinforcing (to you, dollar holder and spender, it means inflation). I think our economy has been altered so we focus more on services than physical goods, so we may find out which service industries "export" well.


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