The Site > Old Forums > It Is The Economy, Stupid > Help me understand, Why is the US Dollar still depreciating?

Help me understand, Why is the US Dollar still depreciating?

The causes are very complex and I'm not sure anyone truly understands why.

My take is that Fed just keeps printing more money. And like any valuable commodity, the more of something there is, the less it's worth.

The Euro may be appreciating, but what good is it doing them? Almost all the value is eaten up by government entitlements and high cost of living.

mocycler

reply to ThirdShifter
The good side of a devalued dollar is that we export more.
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reply to Omega

reply to ThirdShifter

reply to ThirdShifter
It is depreciating because we are printing money of which value is backed by only the trust of us government not defaulting on its debt obligation. The more money go in to circulation the less it's valued by other.

reply to lugnut

reply to ThirdShifter
The nice thing about a weak dollar vs strong euro is that it makes the united states look good for European companies to build here.

That is about the only advantage i can think of.
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To All Real Dads. For All Real Moms Every Real
Service.

reply to ThirdShifter
In short, China/other countries have too much of our money and can easily manipulate its price significantly increasing the risk of investing in the US dollar. China now has too much power over the amount of US dollars in supply.

The value of all money is set by the fact that people accept it and how much they will give you to accept it. All money is worth what companies/others will give you for it.
The market demand for money is basically set by what it was actually worth yesterday, what could you buy with the money yesterday, how stable people feel the currency is, and how much they feel it will go up or down.

Now markets are large and hard to keep track of so we have the federal reserve that claims our value of money is set by a complex formula based on our money supply. They do not disclose how they make this up, I suspect rolling of dice or using that popper from the game trouble.
The federal reserve manipulates the money supply by lowering/raising its interest rates, buying back debt, issuing bonds, etc.
Since it is impossible to know how much money is in circulation they basically do whatever they want and claim the value of the dollar to be anything. But the end value is set buy what people will accept so that is why prices are higher in California or cities over the rest of the US.

As far as international exchange that is based on a mix of whatever every country says their money is worth (every country can calculate their value of money or its supply differently), trade (buying things) between countries, how much of their money is available to buy, and what people paid for the money yesterday.
It is heavily manipulated by banks/people/countries that will buy up foreign money cheap and when they see it rising in value they flood the market with more money. China has trillions of our money so they can easily manipulate the price of it on the open market.
Any time China sees our market value going up they can sell a bunch of our money on the exchange to lower its value.

Ultimately our exchange value is going down as there is less demand for our money as too much of our money is flooding the market. One reason I suspect there is less demand for US money is because our huge debt has allowed China and some other countries the power to easily flood the market of our money so buying US dollars has become a higher risk endeavorer.
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reply to Snakeoil

reply to ThirdShifter
The value of the dollar is relative to the value of every other currency in the world. As the value of one currency increases, the value of some other currency MUST decrease. If your currency is at the top of the pile, it has one direction to go, DOWN. If your currency is at the bottom of the pile, it has one direction to go, UP. The closer you are to the bottom or top, the more apt you are to go the other direction.
When you lead the world in space exploration, research and manufacturing, your future looks bright. When you shut down your space program, loose manufacturing jobs and send the jobs that your research provides to another country, your future doesn't look as good as it did in the past. Your currency is tied to your anticipated future and not necessarily to your past.

reply to ThirdShifter
BMW built a plant here, not to long ago.

Why build in Asia, if you are selling to america? cheaper to build in the USA and avoide the import fees.
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To All Real Dads. For All Real Moms Every Real
Service.

but they are hiring Americans. Who cares where the profits go? As long as Americans have a job, and money to spend.
--
To All Real Dads. For All Real Moms Every Real
Service.

reply to Snakeoil
It also makes imports more expensive.

reply to ThirdShifter
Remember that "officially" the debt is around 13-14 Trillion, but really its more like 90-100 Trillion (if you also count all the unfunded liabilities).

Dollar keeps depreciating because the fed prints money. The government knows they cannot pay back the money they owed, so instead of defaulting, they will inflate their way out.