Who is benefitting from this influx of dollars into our economy? Someone must be. I refuse to believe that the people at the top are so stupid as to keep printing money.
Is it a political play? ie if we save these people we can get their vote.
Is it a lessor of two evils? (Printing money is better than the alternative…)
or (and this is the one I believe it is)
Someone is going to make a pile of money on this one?
There is something going on, and I haven’t figured it out. You don’t let a bunch of poor people buy homes they can’t afford and then take them from them, or just give them to the people. There must be something afoot…
I don’t see where a weakening dollar benefits anyone except other countries who money buys more than the dollar would. Although I’m still learning how economies work. It’s amazing how much you can pick up on this site and some of the financial channels.
Well, although the US Dollar is still the reserve currency in the world, it is NOT central to our US Economy. The engine behind the US economy is CONSUMPTION and CREDIT. Therefore, the stregth of the US Dollar is second priority to the stregth of Consumption and Credit in our economy.
Our currency has gone up and down for 2 centuries. What we should be very worried about is whether the US Dollar will continue to be the “Reserve Currency.” For instance, if oil producers decide to take any other currency for oil besides the Dollar, we are in big doo doo. (In fact, Saddam Husein’s biggest sins were not the atrocities he committed, but his attempt to sell Iraqi oil for Euro - a big no no.)
Teh powers that be believe that as long as the world still believes in the "full faith and credit of the U.S.A. (a.k.a. US taxpayers), the Dollar will remain the reserve even as it dips to record lows. Now, having said all that, I don’t believe the world will tolerate the devaluation any much further and may dump the Dollar as the reserve. That prospect alone should motivate us to raise the rates, let the markets correct and support the resurgence of the Dollar - no matter how painful it is for us in the short term (stagflation and scarcity of credit and lower consumption).
Aside from politicians buying votes (which is part of it), the theory is that if the dollar loses value against other currencies, it improves our balance of trade.
Imported goods cost more, so Americans should buy less of them.
Goods and agricultural products from the USA become cheaper to people from other countries, so they should be buying more of our goods.
Of course it all worked better before our factories closed down because workers in other countries are willing to work for lower wages. But it is working, none-the-less. People from overseas are coming to the USA for shoping trips and there is a very large amount of money coming back into the USA in exchange for agricultural products going out.
If you need a John Deere tractor, or even tires for one, forget about it. Their entire production is pre-sold to overseas buyers. That’s very good for John Deere and their stock holders, and it’s good for America to have money coming in.
The cheaper dollar makes the USA an very attractive place to vacation, and tourist dollars are coming into the country and being left here. (what $comes to Vegas, $stays in Vegas. Also Orlando and NYC)
Yes, that’s true. Not in a political/macro economic view though.
And it’s true that the weakening dollar is supporting the import balance. On the other hand a lot of the western countries (and China) are losing money because THEIR exports are getting more expensive. As soon as the exports TO the US dry up the credit flow dries up too.
In theory, when the dollar goes down in value, our exports are cheaper to foreign markets, and imports are more expensive for us. Therefore, once again in theory, trade deficits with foreign countries should be fixed during periods of domestic currency devaluation. Up until this point, the drop in the value of the dollar has not done much to fix our ever increasing trade deficits with other countries. These imbalances need to be addressed. Meanwhile, congress is rejecting restrictions on tax cuts and spending (whom do you support, tax and spend or borrow and spend?) and they are increasing the federal debt limit.
We need intervention by as many intelligent people as possible to continue this nation’s resilience and financial growth and stability. One of the biggest problems with the subprime crisis is that foreign investors are losing their faith in the American dollar.
So, to the original post, who stands to gain? Once again in theory, exporters, domestic manufacturers, farms, and currency traders who buy foreign currencies which rise against the dollar, or futures options traders who short the dollar.
If there is a hidden agenda, I believe that it may be to make housing more affordable and accessible. Ten years ago, when borrowers were faced with a choice, pay a credit card or pay the mortgage, they chose to pay the mortgage. Now, in many places, that’s not happening. We really are the only nation that has such a high percentage of the population owning real estate, many other nations simply have landlords and tenants. It’s one of the circumstances that give this country such economic strength. In my humble opinion, we cannot afford to lose this advantage.
Finally heard the answer I was looking for: Oil companies.
And considering who is in the White House its no wonder. I heard this on Bloomberg today: Oil’s price is no longer decided by supply and demand, well not to the extent that we thought. And when you think about it, for oil to go from 75 dollars to 100 dollars in less than two years when there are no real shortages or embargos it CAN’T be supply and demand.
That said the price of oil is tied to the value of the dollar. As the dollar’s value shrinks, the price of oil goes up. Oil companies are making record profits, STILL have huge tax breaks, and they still have huge reserves. I have heard about us dipping into our reserves so that we can lower the price. It won’t matter. Until monetary policy increases the value of the dollar, oill will be 100/Barrel.