Well guys this is the question. The deprecation of the dollar is it good, bad or who cares. I say it is a double sword...look at one side. We export more....stock market goes up...everyone is happy...more jobs created b/c exporting jobs will be more costly..thus people will be working in USA. OR The other side. It is a bad thing...b/c then we have to buy goods from other nations for higher price (i.e. OIL). Dollar will no longer be the dominant currency of the world....people will be judgmental in bringing money in here...etc... etc...etc.. What do you say????
Which countries generally are considered to have a strong currency? Which countries have a weak currency? Which of these countries do you want to live in?
US is in an unique situation.. If we let our dollar slide like we are doing right now we are able to export more..but then we are leveling off on the same plateau as Japan and China...exporter.... Well the currency keeps on going down...we export a lot..lets say..but then other nations want to diversify from the dollar...by doing so they acquire the euro... Now the euro is the new currency of choice...hmm switching positions until China will overtake them which will be when they completely get rid of Communism...which is on the short term horizon.
There was an interesting story in this month's Harper's titled 'Undoing Bush' that made the surprising case that the dollar was and is still highly overvalued. I think they were coming from a pov centered on US manufacturing decay and trade defecit, which are legitimate victims of the clinton dollar, but imho also missing the broader implications of monetary inflation and the inherent (and gargantuan) wealth transfer happening as a result of this systematic long-term devaluation to me, wealth concentration is more of a societal threat than the ebb and flow of specific economic roles (manufacturing, service, etc)
A weaker currency "appears" to benefit a certain few in the short run. In the long run, however, it reduces the buying power of all who hold assets denominated in that currency. If you imagine your currency losing 99.9% of its buying power (that is, the money you have today will buy only 1/1000 of what it will buy in the future), how can that be good? So, if losing "nearly 100%" of buying power is devastating, how can losing 20%, or 50%, or 80% be good? One of the WORST things a government inflict on its citizens is to debase/destroy its currency. Those who argue "the USD is overvalued and needs to come down" are nothing more than short sighted, greedy, criminally negligent liars and thieves!
Excellent Commentary All ...................................................................................... In terms of a particular currency fluctuating in value against another....The question becomes is it good that it rises or falls in value..... If one nevers uses currency ...then obviously there is no effect...and as one has exposure to having to use other currencies that are appreciating versus ones main currency...one would seek to diversify into several currencies..as to reduce ones risk... Money always follows performance...and usually does not lead it.. ............................................................................................... Before the EURO ...Europeans were always cognizant of their peer currencies...US citizens have not really had to think about currency diversification seriously....and probably will not until after significant personal loss... However ..globalization demands that one has has currency risk...and one must manage it... What is interesting to note is that one should always adjoin the available interest payments to the currency in question to attain a proper value for valuation.... Some currencies are more volatile than others ...but when combined with their interest rates....it may even be that the total value is more favorable...even though the currency appeared to be out of favor.... .............................................................................................. What is very promising is that with the advent of the internet...it will be more and more possible to diversify currencies with their accompanying interest rates... What is needed are banks that can offer the internet facility to invest in foreign currencies along with their available interest rates...not just the currencies alone...and not watered down rates just because of supposed conveniences...as there are a few of these around today... What is needed is a true internet facility which is given the legal framework such that any government of the world can offer its certificates...via the internet...with the interest payment facility... A sort of multi government clearing house facility...that any individual could participate in ...at very little cost regarding currency conversion...etc... .............................................................................................. ..............................................................................................
If you have a lot of debt, then a weakening currency is great -- you get to borrow "good money" and pay it off with "bad money". If you have a lot of cash, then a strengthening currency is great -- your savings get to buy more and more stuff as the value of the money appreciates. Guess which alternative the biggest borrower in the history of the world would prefer?