Those of us that get paid in dollars but live in the most expensive city in the world watch in dismay as the dollar continues to spiral downwards. There must be a floor after which the dollar will begin to rise ? After all the US economy is still one of the most robust in the world, despite the huge trade deficit. And for those that think that the explosive growth in China is eclipsing the value of the $ forget that the relationship between China and the US is akin to a big bank and it’s largest borrower. One cannot fall without taking the other down…..
…. so was the dollar so hugely overvalued 4 years ago when it started to seriously slide ? If so, what has really changed :
a. The perception of the dollar as the prime trading currency of the world ? Does that mean that the dollar’s strength lay in it’s being the currency of trade, rather than the US economy. But everything is still quoted in dollars – and the euro has not caught up yet.
b. The huge trade deficit in the US. Don’t get that one either. It just means that the robust consumer in the US is supporting manufacture and services in the rest of the world. It also means that US companies are shifting production and services abroad to make US companies more competitive and the pockets of the US corporations bulge. And as long as the profits are brought back and evenly distributed within the US – then there wealth creation within the US.
c. Of course if the wealth so created gets concentrated into a fewer hands, then massive unemployment could provoke a major depression in the US – but the treasury will never let it happen.
d. And if the spiraling dollar was seen as a major threat to the US economy or to it’s politics, the Federal reserve would have stepped in by now.
So I need help !! Would someone explain this to me please ? Do I need to get out of the dollar