Two years of a good and financially conservative President would fix this. It’s the war debt as much as anything, too.
Damn Bush.
Agreed.
That’s not how it works.
First of all, paper currency and coin are a tiny percentage of the money supply.
Second, money is created by banks. When you drop off your paycheck at the bank it doesn’t just sit there in their vault. They loan most of it out for a fee (interest). Those fees are ultimately driven by the interest rate set by the Fed.
So basically, when inflation rises, interest rates go up making it more expensive to borrow money and reduces the money supply.
The exchange rate between two currencies is basically a function of the relative stregth of those economies. If the US Dollar is falling relative to the Euro, then it demonstrates a percieved weakening of the US economy relative to the EU. On the plus side, a weakening dollar encourages domestic manufacturing and foreign investment.
Additionally there have been several countries (cough China cough) who have purposely tried to KEEP the US dollar ‘strong’, for the purpose of trade. I think the dollar would have adjusted long before this but for this intentional and artificial process.
On as serious a note as I intend in this thread, the US dollar will not ‘tank’…if by that the OP means it will drop into complete free fall. It will adjust down in the short term, but this isn’t likely to mean much more than US goods will become more competetive on the world market while other countries goods will become relatively less competetive here in the US (i.e. they will cost more). Eventually the dollar will re-adjust upward again, which will mean our goods will again become relatively uncompetetive on the world market.
-XT
Do we have a candidate that fits that bill currently? They need to have a plan to extract us from Iraq as quick as possible.
McCain is fiscally conservative, but maybe too much of a hawk. Rudy is not a fiscal conservative and he is a hawk. Ron Paul would do it, but ::shudder:: he is basically a Libertarian and that would set us down the road of isolationism and has many none fiscal ideas that seem wacky/scary.
Clinton seems to be financially responsible, she won’t attempt adding any liberal programs without a way to pay for them. I am not a big fan of them, but fiscally Bill Clinton did a very good job.
Edwards and Obama I have no reason to trust at all to be fiscally responsible.
The other Republican conservatives are moral conservatives not old school fiscal conservatives.
Jim
a good President isn’t enough. You need 271 congressmen, too.
You’re probably right about all this, but I can’t help thinking that we’ve moved a lot closer to the day when the U.S. dollar will no longer be the world’s reserve currency.
Another good economic upturn for USA will correct that. There must of been a lot of people thinking the same thing in the seventies.
Jim
It also had a lot to do with the 1985 Plaza Accord, an agreement among countries including the U.S. to weaken the dollar. The currency had become quite strong after Paul Volcker jacked interest rates up and was hurting American manufacturers in foreign markets.
Manufacturing never “left” the US, US manufacturing output has been rising at a good clip for the last decade or so, and productivity has never been higher.
Perhaps in total dollar volume, but haven’t the types of manufacturing industries changed?
If the US was suddenly cut off from all overseas trade, would it be able to manufacture everything it needs right away?
Define ‘right away’. And ‘needs’. 
The answer is…we would probably be able to eventually manufacture what we ‘need’, as defined by the essentials. It would simply cost more and perhaps we wouldn’t have as many choices in products as we do today. But we’d squeek by I’m sure.
-XT
Also, if you consider how much US debt China owns, with a falling dollar value, wouldn’t they need to suck up American dollars like a vacuum to get paid in the future?
Another government move with a tanking economy is issuing bonds. I took macroeconomics a couple years ago but I do remember that there are 3 kinds of currency and you can measure the velocity of a country’s money supply. Basically, you need to look at national money supply to predict impending doom.
If the US was suddenly cut off from all overseas trade, it (and the rest of the world) will have much more pressing concerns than being able to “manufacture everything it needs right away”.
I’m going to go out on a limb here and say that while such an event isn’t completely outside the real of the possible, the idea that it may happen “Suddenly” probably is. In the mean time, you really have to visit an American aircraft carrier in the flesh some time. It should be enough to put your mind at ease with respect to being “suddenly cut off from all overseas trade”.
I’m not sure the Nimitz would help if the sea suddenly decided to rise 20 metres and swamp all the existing ports…
There’s no other game than “intentional and artificial”, the exchange rates of currencies in the bigger scheme (not your vacation trip) is entirely a result of different people sitting down and deciding what they believe is bet. It might be the national bank of one country (The Fed in the U.S.), it might be investors, brokers or whatever.
I actuqally think it’s better for the world if the $ is strong. The U.S. is the richest country in the world and can thus afford to pay a little steeper price for for Swedish Volvos (A Ford Motor Company) than we do here, thus increasing the wealth here, which in turn makes it possible for Volvo to sell more cars here, making money for Ford, giving wealth back to Americans. With a weak dollar, imported goods will become dearer in the U.S. which is gonna hurt a lot of smaller countries that are dependant on export.
The only negative effect would be that travel and staying in the U.S. is very expensive for us, and I really want to go, having not been over in eight years.
There are still harbors that have locks, right? Plus smaller ports on rivers and in the Great Lakes.
China ties the value of it’s currency to the dollar. As long as that is true, they will continue to make stuff for us and ship it to us.
Ron Paul wants to return the U.S. to the gold standard. He has very a lot of…interesting ideas about fiat currencies. Although I’m not exactly sure if President Paul would be able to do anything about that if he wanted. Wouldn’t that take Congressional support?
If the sea suddenly rose 20 metres, which it wouldn’t do but I’ll play along, do you really think anyone would give a flying crap about trade supluses and how the dollar’s doing on the currency markets?
There wouldn’t BE any currency markets. Most of the big ones are in coastal cities.