Comments on: “What’s sinking the dollar?” - for IB students

By: Nico

Nico — Sat, 17 Nov 2007 09:08:01 +0000

The US government buys too much from over seas and does not buy enough from the rest of the world. I think that the US is trying to save up its supply for the future, so when everyone else is low on supply, US will have supply left, and therefore can charge any price to the rest of the world. The US, for example, have plenty of area’s to pump up oil with. Many of them the government has decided to leave untouched for the future. The US buy their oil from around the world. This results in the dollar inflating. In the short run US could suffer many problems if they continue to buy so much from the rest of the world without exporting much. But in the future, US’s economy shall boom.

By: optional.xu

optional.xu — Thu, 15 Nov 2007 13:12:00 +0000

So that’s whats really causing the dollar to be going down so fast. The US economy has really taken a beating along with many other countries’ economies with the soaring oil prices. The debt, most of it from the $%#@@! president, isn’t being fixed but actually exacerbated especially from the war in Iraq! Economically, this is devastating as the post mentions that the debts are increasing and the economy is failing. So why is Bush spending more and more on “defense” when the “homeland” is about to fall apart? Oh right, I forgot it’s election year next year… Mess it up as much as you can before you get out eh?

By: Marco Garofalo

Marco Garofalo — Thu, 15 Nov 2007 01:24:45 +0000

This is exactly what my EE is about. Americans are buying too much and selling too little and this has come back to haunt them. The issuing of government bonds (certificates of debt) is funding the deficit spending, but the US does not have any intention of repaying it. As the article points out, “a country as rich as the US can do that for a long time.” But when foreigners own more dollars than Americans do, investors start to worry, especially when the Chinese say they want to move from weak currencies to strong currencies. If the Chinese sell all their US bonds, around $1.1 trillion worth, there could be dire consequences for the US economy.
With the US$ falling against many of the other currencies, the US consumers are finding foreign goods more expensive. They therefore HAVE to consume less, which will narrow the current account deficit.