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The dollar has been fairly strong lately. Do you think this will
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Despite our government’s consistent emphasis in maintaining the value of the
dollar - which is important in its continual attempt to borrow money from the
rest of the world -, I believe that our current administration is ultimately
leaning on the benefits that come with the depreciation of the dollar.
Firstly, our country has a tremendous amount of debt and paying it off
with depreciated dollar is a way to force other countries that hold our
treasuries to share in the burden of our economy.
Secondly, it encourages “buy
America.”
The idea is not necessarily just to make our exports cheaper to
foreigners as the dollar devalues. The
key is to make imports more expensive.
The reason is that we are the world’s biggest consumer and the government wants
to keep consumption within
America.
Doing so leads to another goal of the administration, which is lowering the
unemployment rate. For example, food
production such as tomatoes has increasingly been outsourced to Mexico because the cost of
production is cheaper there. A
depreciated dollar will make the costs of producing tomatoes in Mexico more
expensive and may shift some of these farming employments back into our country.
Another benefit of devaluing the dollar is that inflation leads to
increased spending by consumers. People
will be forced to spend today as their buying power decreases tomorrow.
It will certainly give our economy a boost because two-thirds of our
economy is comprised of consumer spending.
Lastly, printing money excessively will inflate assets prices as more
money is being circulated in our economy. |
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