Why Is the Dollar Falling?

The U.S. dollar is worth less today than it was a year ago. Many factors have contributed to the steady decline in its purchasing power over the past decade, but few are as prominent as the five reasons that follow.

Government Printing

As the U.S. government prints more currency, the money in your pocket loses more of its value. The economic principle of scarcity suggests that resources have value only because everyone cannot access those resources easily or without a cost. When the federal government prints trillions of dollar bills, and everyone can access them easily and in abundance, the value of the dollar falls.

Government Spending

When the government spends more money than it takes in, it amasses a debt that other countries are not eager to fund. When the dollar becomes less appealing to foreign investors, they will be reluctant to invest in the American economy, and the economy subsequently staggers.

International Trade Policy

If the U.S dollar is worth less, other countries get more American products from their currency. Therefore, U.S. international trade policy advisers often see a weak dollar as a way to boost international trade.

Alternative Foreign Currencies

Before the rise of the European Union, few currencies rivaled the U.S dollar. But the dollar now faces competition from a strong euro in use throughout much of Europe, as well as from a British pound that has risen in value over the past decade. The competition means that the U.S dollar is no longer the world's only viable currency option, and many nations have therefore abandoned it.

Poor Credit Accountability

The dollar also suffers when loans go unreturned. When credit is extended or loans given to those who cannot repay, dollars disappear.

References

• The Federal Reserve is printing money from thin air, and the government is issuing trillions of dollars in new debt as it tries to spend its way out of the recession with a huge stimulus package, new lending programs, health care overhauls and automotive rescues.
• Although the United States government officially supports a strong dollar, policy makers have let its value slide in past years because a weaker dollar makes American exports cheaper and more attractive.
• The pressure at home to inflate the currency comes from the corporate welfare recipients, as well as those who demand handouts as compensation for their needs and perceived injuries by others. In both cases personal responsibility for one's actions is rejected.