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Originally Posted by jorgelito
Thanks Yakk for the clarification. I've "heard" that too. I gotta tell ya, it's been lying in wait and I get an uneasy feeling regarding the "currency bubble". Another thing I don't get, if so many countries are buying US$, then why is the dollar still falling?
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I'm no economist, but I imagine the dollar is still falling simply because the downward pressure as a result of the US "printing money" is SO massive that nobody else has the power to stop it.
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So let's play this out:
With the downward pressure on the dollar slow but steady, wouldn't that make our exports more "affordable" or attractive in overseas markets? At least countries that aren't pegged to us. So let's say the EU & Japan.
As US$ goes down, exports to EU & Japan go up?
Increasing revenue in the US, which leads to more production due to demand, which leads to more jobs, more revenue for state & feds? Generally speaking of course.
But, as US$ goes down, oil prices go up even more (because oil is sold/bought on the spot market in dollars)?
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That's the idea, and that's why other countries are trying to keep their own currencies down, but clearly the US is always going to be doing a lot more importing than exporting. As for financial disaster, I don't see it happening since the US economy is so powerful, but I wouldn't exactly start buying dollars either. After all, I believe during Reagan and Bush I (Boy, Republicans sure do support fiscal responsibility), the current account deficit as a percentage of GDP was even worse. I don't think any other country in the world could get away with what we do, heh.