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International Currency - Essay Example
Author : mohrsamanta
Pages 20 (5020 words)
Since 2005, the dollar has lost almost hundred per cent of its value against the Euro, one-third of its value against the British pound and Japanese Yen, and almost one- fifth of its value against the Canadian dollar. All in all the U.S. dollar declined against all 16 major currencies except the yen as global stocks advanced, reducing traders' demand for safety in U.S…
However, it is not secret that dozens of countries all over the world including Great Britain define the value of their currencies through a fixed exchange rate with the dollar. Many others, especially in Asia, keep their currencies tightly linked to the U.S. currency (Altman, 2004)
Much of the world has come to realize that the dollar's value is steadily being undermined. But few Americans understand that the government along with the Federal Reserve is accomplishing the undermining. And few also realize that the main cause of the continuing failure of the American dollar is federal indebtedness brought on by virtually uncontrolled federal spending. Responding to the vast hole they have dug for all Americans, the US leaders have paid the nation's bills by borrowing from almost every corner of the globe and by creating more currency out of nothing (inflation). According to the statistics from 2006, the YS current-account deficit equals $857 billion that is absorbing the major part of the world's capital outflows. To finance this constant deficit, the United States has accumulated trillions of dollars of foreign debt, depreciating their currency, the dollar, and appreciating other world currencies. ...