Sunday, June 14, 2009

Clickable A4: Economics: The Strength of the US Dollar

The Event

From Seeking Apha

The tide has turned against the U.S. Dollar. The dollar rose during the crisis as it became a refuge for investors seeking safety. Now, investors are worried that their life raft is springing leaks. And rightly so, for in Thursday’s article titled “Is the Almighty Dollar Dead?” Columnist Dan Burrows says:

It's an axiom of economics that debtors love inflation. The flip side, or course, is that creditors despise it. Why lend money today only to get paid back in devalued bucks tomorrow? That spells trouble for the almighty dollar -- and puts pressure on investors to hedge against it’s almost certain further decline, market professionals say.

The Background
From Wikipedia
The United States dollar (sign: $; code: USD) is the unit of currency of the United States and is defined by the Coinage Act of 1792 to be between 371 and 416 grains (27.0 g) of silver (depending on purity). The U.S. dollar is normally abbreviated as the dollar sign, $, or as USD or US$ to distinguish it from other dollar-denominated currencies and from others that use the $ symbol. It is divided into 100 cents (200 half-cents prior to 1857).

The U.S. dollar is the currency most used in international transactions.[2] Although U.S. dollar is a fiat currency, several countries use it as their official currency, and in many others it is the de facto currency.[3]

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