The Fluctuating Dollar

Presented by: Kathryn Mayes

Thesis Statement

The United States dollar is progressively declining in monetary worth because of the federal government budget deficit and the ongoing trade deficits

  • The United States’ currency has spiraled into a problem for the financial situation of the country as a whole and any other countries that have insured trade agreements with the United States.
  • Many countries are choosing to go “non-american”.
  • Due to the decline in with, the United States has a huge problem that needs to be faced.

So how much is the dollar REALLY fluctuating?

  • In reality it has lost nearly half of its value against most other major currencies since 1985 and is down 33% in the past 11 years.
  • The value of the dollar has decreased below the amount it was at the end of the recession in 2009.
  • In 2032 it will take 150 dollars to purchase a certain amount of goods than it would it purchase the same basket of goods today with 100 dollars. The future “dollar” is predicted by 2032 to have the worth of one-third less than what it is today.

Why is the dollar fluctuating?

The Trade Deficit

  • The trade deficit is when the United States purchases more goods from other countries than exported.
  • While all of these countries are putting money into the United States and getting back a portion of it in different goods, their other portion of money given to the US is contracted to be given back.
  • The relationship between the trade deficit and the value of the dollar is extremely high because if the US has a huge trade deficit then other countries will not want to trade with the United States any longer.
  • No country wants to trade with a country where they are unsure if they will get their money back.

The Federal Deficit

  • There is very little structure when it comes to spending money thus leading to the decline of the dollar value.
  • The country is so stuck on its current spending and tax policies, that improving the economy would leave the deficit so large that the value of a dollar would be nearly nothing.

Dollar Fluctuation History in the United States

How are other countries reacting?

  • China, India, and Japan.
  • This is happening because the U.S. debt tripled during this same time period from nearly $6 trillion to $15 trillion.
  • The dollar still is used for 43% of all cross-border transactions .
  • There are 61% of all foreign currency reserves are in dollars.

Mahmoud Ahmadinejad

In an interview with Mahmoud Ahmadinejad at an OPEC summit in November 2007, a man who hold huge trade agreement between Iran and the United States, stated that "They get our oil and give us a worthless piece of paper,"

Xu Jian

The dollar, according to Xu Jian, is "losing its status as the world currency,"as told at a conference in Beijing. Many world leaders are worried about their investments in the United States due to the inability that America has to be able to pay them back. Many investors are going non-american due to this same problem.

Cheng Siwei

Cheng Siwei, a vice chairman of China's National People’s Congress, states that "We will favor stronger currencies over weaker ones, and will adjust accordingly,"

How else can we fix the debt crisis to help fix the dollar value?

  • Three factors are a higher interest rate, a building tension in the middle east, and the debt ceiling.
  • For example, the value of the U.S. treasuries has declined nearly 20% by selling from China and Japan. This same trend is expected to continue at an even greater rate. the odds of a strike in Syria get higher and higher everyday thus leading to military spending being doubled.
  • The debt ceiling debate is also predicted to go into full force in September when the Federal Reserve has no other options than to revert its debt limit.
  • If the United States knows that the trade deficit is leading to a greater currency weakness, there are ways to predict the trends with the trade deficit every month. Looking further into these trends and reversing some of our military funding could help prevent the collapse of the U.S. dollar.

Looking on the Bright Side

There are a few good things that a lower dollar rate could do for the nation.

  • A declining dollar would put a stimulus for the economy that could help save jobs and help improve profits for the international competitive U.S. manufacturing sector.
  • Nearly 740,000 jobs that were lost in 2002 in this sector.