Can someone explain to me why the dollar has fallen so much?

[skipos]

I'd really like to understand this, as I am kinda dumb when it comes to economics. I'd like a more detailed answer than "because Bush sucks" please.

[truebrit71]

1. Because bush sucks.....oh wait...

..never mind...:evilgrin:

[no_hypocrisy]

2. Because the Treasury has printed more money, putting it into circulation,

and the additional dollars dilute the value wholesale. The Weimar Republic in Germany did the same thing in the Twenties to pay off its reparations to Britain and France, and see how well that worked out.

[skipos]

4. That makes sense. But why did the treasury print more money? What was the goal? nt

[no_hypocrisy]

13. We have amazing deficits. Not enough money in reserve and not

enough revenue from taxes, collections of fees and penalties, etc. If the government were a consumer, it would have declared bankruptcy by now.

We owe China trillions of dollars for treasury bonds with interest (and other bond holders), we have the general budget to pay, we have the war ('nuff said?), the almost $10 trillion federal deficit, the monthly trade imbalance, and we don't have enough money. So the Treasury has been requested to print more money. That way debts are technically paid with the sufficient funds instead of declaring insolvency. It's as if you had a printing press in your basement every time you went over on your credit card. But in this case, it's legal tender, and the more dollars in circulation, the value of the dollar per se decreases. BTW, the Treasury stopped reporting how many dollars it was circulating since March of last year (the M3) b/c if "investors" of the t-bills understood how many extra dollars are now in circulation, they'd try to call in their loans right away. (Imagine China is owed $100,000 on a note, but for the fact there's more money in circulation, their payback of that amount is really worth $75,000 and they're getting stiffed.)

[TahitiNut]

16. "liquidity"

The "money supply" is composed of more than mere cash. It includes a variety of IOUs (debt instruments) and accounting fictions. The federal government stopped reporting M3 some time back. That was, imho, a warning.

[Mr Rabble]

30. Not a warning TN-

But rather a sure sign that things were off the cliff already.

Look at it this way: by the time the guys who print the money decided that the public should be informed that they were no longer going to publish one of the key indicators of the money supply, they had obviously known that things were FUBAR far earlier. Without question, the government and the FedRes's primary enemy (us) is a few years behind the curve when it comes to the state of the economy. They only tell us what they want- when they want.

At this point the only thing stopping the US from total collapse is the fact that a total madman is at the helm. I imagine that our lenders are terrified that * will nuke 'em if they stop loaning us money.

[notadmblnd]

19. every time a loan is taken out new money is created

what is not created is the $$ to pay the interest. Most recently, the fed printed major $$$ to prop up the sub prime mortgage crisis. One of the problems is that these mortgages were sold off as mutual funds for investors and now, people losing jobs and not being able to pay their mortgages has caused the industry to bleed dollars.

[Warpy]

12. Yes, and he had to keep printing money because that's what

the debt means. Since he decided that rich people and corporations didn't have to support the country and wars that were making them rich and keeping them corporate, he didn't collect enough in taxes to run his wars plus the amount of government it takes to keep the country running well enough that we don't rise and murder the rich and corporate in their beds.

Basically, what is driving the dollar down is the GOP debt. As the dollar dives, prices rise and the people at the bottom are getting those 2% "merit" raises every year and wondering why it doesn't manage to stretch over that 10%+ inflation rate.

The rest of the world, minus China, is voting "no confidence" in the US economy under the GOP. China will lose patience at some point and join them. When that happens, we will see huge inflation in the cost of everything we used to make.

This is only the beginning unless we get these people OUT.

[mainegreen]

22. Hell, they don't even print most of it anymore. Most is poofed into existence as data.

[Ganja Ninja]

3. Too much money going out of the country and not enough ...

coming back.

[L. Coyote]

5. The National Deficit, the negative balance of payments, oil importing, drought

A nation's currency is just printed paper. It is only as valuable as what it can purchase, including other currencies.

[Junkdrawer]

26. I maintain strongly, to this day, that exporting the bulk of your industries...

will eventually have a negative impact on your economy.

Call me Old Fashioned.

[L. Coyote]

27. Add outsourcing overseas to balance of payments deficit!

[ThomWV]

6. Because its value has been lost to debt.

We have great debt and little ability to repay it.

[Virginia Dare]

7. Investors are losing confidence in the American economy..

so they're not buying dollars, they're dumping them in favor of other currency. That's my layman's understanding of it.

[Jackpine Radical]

8. All of the above.

Beginning with Bush Sucks.

[ixion]

9. exactly

including the Bush sucks post.

[AndyA]

17. This is all exactly right.

Especially the Bush sucks part.

Irresponsible management of the country by the President and his Administration is the cause.

Bush has been a failure at everything else he's done, why should we expect anything different of him now? The man is an international disgrace.

[MissMillie]

10. from Yahoo Answers and from The American Prospect

http://ph.answers.yahoo.com/question/index?qid=20071003224441AAhZ8gv

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=10&year=2007&base_name=the_high_dollar_the_real_cause

[Romulox]

11. Because the longterm fundamentals of our economy are WEAK

The idea that one can live on borrowed money from cradle to grave is a baby boomer's delusion. :eyes:

Eventually, somebody has to pay it back.

[sinkingfeeling]

14. The primary reason is our overwhelming debt. We are borrowing something like $1.75 billion a day.

Wish I could just borrown a couple of grand each day and not worry about ever paying it back.

http://www.brillig.com/debt_clock/
The National Debt has continued to increase an average of
$1.75 billion per day since September 29, 2006!
Concerned? Then tell Congress and the White House!

[PDJane]

15. In general terms,

Because the US has been living beyond its budget, both privately and governmentally. The money for the war in Iraq has been borrowed, most from abroad. Instead of an increase in taxes to help pay for this debt, the government gave tax breaks to the top. They borrowed the rest, which means a tax burden for folks who aren't born yet to pay for it.

While the USD was coupled to oil and the oil bourse was dominated by the US, that might have worked. Thanks to belligerance, Iran has cut the amount of oil it sells in USD to 15%. Iraq was starting to deal in Euros in the oil for food programme. Russia is dealing in Euros and other currency.

The balance of trade has shown a defit for a very long time; the US is now a net importer of food, along with almost all consumer goods.

The sub-prime mortgage crisis is spreading world-wide, and there's a lot of useless paper out there. The paper was sold to various institutions, and those loans are now defaulting, making the paper worthless. That is bringing down banks world-wide; Britain and German banks have collapsed because of this worthless paper, and CIBC in Canada has taken a huge hit from these loans.

The loans were given to people who could not afford them. They were encouraged to lie about income and assets, in some cases. The loans were given, the folks who were lent the money had credit card bills and families to feed, and are now defaulting on those loans...and there aren't enough hard assets to cover the paper.

Add to that the consumerism that demands cheap goods, cheap food and cheap oil, and a rebellion by a number of the third world countries who produce those cheap goods to the detriment of their own food growing abilities and their own evironments, and things get dicey. China holds a great deal of USD; in the past year, it has been advising smaller Asian neighbours to divest themselves of USD.

Whether there will be another great depression or not depends on whether the USD can make a soft landing. It looks less likely.

[Cha]

18. Thanks for asking this question, skipos..

The answers are what I suspected but it's good to have it explained by people who do understand Economics.

Everything bush has touched turned to shite why would our US dollar be any different?

[Andy Canuck]

20. The dollar has fallen for a number of reasons.

1.) is because they have doubled the money supply in the past six years on the idea of the dollar's inalienable right to be valued strongly, and that isn't the case of course.

2.) the Sub prime fiasco has forced the Fed to lower interest rates in order to give mortgage holders a better interest rate on their mortgages, but mortgages are actually pegged to the bond market, becaue the bond market more accurately reflects long term idea of an economy's well being. And bond prices are not dropping. High bond prices reflect fear in an economy, because bonds are safer than stocks so people put their money in bonds when times are bad. The prime lending rate reflects short term money lending.

The rest of the world is not lowering their interest rates in response to the US lowering it's rate . What that means is the US is no longer seen as a financial leader, with other nations considering pegging their currency to the Euro.

3.) Oil- really the US dollars has been backed by the US's control of oil and oil revenue, and the US has lost control of the those taps. Oil producing nations have vast cash resources, backed by oil.

4.) Wih the sub prime fiasco, the world is seeing that a high prortion of the US dollar is inflated and lacks real value to any set commodity or real estate. So it is a question of confidence, and that is the truth of any strong economy, confidence, it is the magic that builds great institutions and the world no longer has it in the US economy. The world looks at the US and says they will never be able to pay it back, they owe trillions without the means to repay. And as belief fades in an economy so does the economy and that is the main reason the dollar is falling.

[whistle]

21. $350 billion pushed into the money supply by the Federal Reserve

...in less than six weeks put the value of the dollar which was already on shaking ground into even greater scrutiny and the world is finding that the dollar can no longer be relied upon for a stable rate of exchange so U.S. dollars are being dumped at a discount.

[ProfessorGAC]

23. The Money Was Already There

They added M2 money to the M1. That money already existed. It wasn't newly printed.

Thus, that's not the reason.

The reason is because the debt load of the U.S. Gov't is too high. The leveraging causes the fundamental value of the promise upon which the money is based to become higher risk. So, it's intrinsic value falls.

The speculators and currency tradcrs are accounting for this loss is intrinsic value. The flow of extra, but already existing money, into the M1 does not lead to this.
The Professor

[whistle]

29. Thank you for explaining that, so how did it get into M2? And if there is an M3

...M4, M5, etc. how did the money get into those pools? And, didn't BushCo stop reporting on these various M series statistics precisely to cloud and confuse the issue of how all this fiat currency comes about? Somewhere along the pipeline of currency flows it is being printed out of thin air.

[ljm2002]

24. One aspect that has not been mentioned...

...is that our banks conned foreign investors when they sold subprime loan packages as if they were safe investments when they KNEW otherwise.

The US has been known as a safe investment haven in large part due to trust in the veracity of the information provided by our financial analysts, as well as trust that our financial institutions adhere to strict accounting rules, and are regulated in a way that keeps them from playing games with money. None of that is true anymore, and the world has noticed. The chickens are coming home to roost.

Here is a great and easy-to-understand article on this aspect of the crisis, I have excerpted some but you really should read the whole thing:

From http://www.thetrumpet.com/index.php?q=4288.2525.0.0&

"The world’s economic system is built on trust. Money is no longer backed with tangible assets.
.
.
.
"Trust in America is quickly disappearing. Why? Because America single-handedly brought the international financial system virtually to its knees by foisting off fraud-ridden subprime debt on an unsuspecting world, which resulted in the ensuing credit crunch."
.
.
.
"As with all parties, the fun and games eventually end. Suddenly the world woke up to the fact that subprime mortgages were just that—subprime—regardless of what American ratings agencies and banks pretended. As the U.S. housing market slumped, suddenly nobody wanted any American mortgage securities anymore, let alone subprime ones."
.
.
.

[opihimoimoi]

25. The President is not doing the JOB of stabilizing our Nation...

He is over spending to the point of devaluing the Dollar....among other things....he is not a good leader at all... and so are the GOPers....this is why the GOP gonna get their asses come Nov 08

[ieoeja]

28. Everyone here is partially correct, but missing the primary reason.

The primary reason it is dropping is the same reason corn prices dropped when the Mississippi River flood wiped out a substantial percentage of the crop. That drop violated the most basic rules of economics. The reason corn prices dropped is because the people buying the corn decided to pay less money for it. They did not need any other reason.

The primary reason the US dollar is dropping right now is because the people buying the US dollar have decided to pay less money for it. The people in this thread have posted a lot of reasons why they might have made that decision. And they are probably correct.

However, I can add a reason for that decision I haven't seen elsewhere in this thread yet. For the past half century the US dollar has ALWAYS lost value under a Republican president. Given that fact, then when idiot got elected -- and proved to be more Conservative than your average Republican -- who in his right mind was going to speculate on the dollar INCREASING in value?