Declining Dollar
Description: Declining Dollar, Economic Crisis?
The currency of the United States of America, the dollar has long been used as an asset deposit for the wealthy because of its stable value compared to other currencies. However, since the arrival of the Euro, and the declining value of the US dollar, many investors try to switch in their dollars for Euros and other currencies.
The main reason comes from the weakening of U.S economy control power against the world economy as the Brics power are getting stronger.
Enablers:
- Military interventions: Iraq, Afghanistan being the latest two examples in which the US spends a lot of money (investment) and does not profit from it sufficiently.
- Increasing Oil price: The US is particularly dependant on oil.
- Rising trade deficit: The US is importing more products than it is exporting (inflation +1)
- Rising budget deficit: Government spending increases more than government income (inflation +1)
- Risky financial policy: Mainly the Chinese and Japanese government currently invest largely in US treasury bonds to make up for the deficit. But when these investors find better opportunities, the dollar will collapse and chaos will follow. Some believe that the US is in a very uncomfortable financial position.
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Paradigms:
- Before: The US dollar is the safest currency to invest in because of the stable value and strong economy.
- After: The Euro can also be a safe substitute for the dollar. Right now it actually is.
Timing:
Bush administration, and its financial policy of tax-cuts and spending too much. Terrorist attacks, 9/11, war in Afghanistan and Iraq.