The Incredible Shrinking Dollar essays

The Incredible Shrinking Dollar essays This article from the March 21, 2005 edition of Newsweek Magazine discusses the major economic issues involved with the current depreciation of the dollar. The article first discusses the atmosphere that exists in todays economy and possible storm clouds that a change in the value of the dollar could represent. Next, the article goes on to summarize the effect that a weaker dollar could have on the everyday American as well the effect on the balance of payments problem, i.e. the trade deficit that the United States continues to run. The article then moves on to discuss the ramifications that a weaker dollar could have on the rest of the world. Finally, the article goes through two of the possible solutions to the trade deficit as well as what should happen with the value of the dollar. The article begins by painting a picture of the economy in the United States today. Everything seems to be heading in the right direction. Evidence of this is that employment is expanding (2.4 million new payroll jobs), inflation remains low (less than 2 percent for the quarter), and the stock market is up with business investment rising. These are the typical characteristics that a good growing economy should have. The only big exception happens to be that the price of oil has gone up to about $50 a barrel. However, with all that is good going on in the economy there is a potentially worrisome long run problem that exists. It is neither government budget deficits nor a housing bubble. It happens to be something that most Americans probably have not even thought about. It is the value of the dollar. The value of the dollar has been declining at a steady rate relative to major foreign currency. It has dropped 38% against the euro, 23% against the yen, and 25% against the C anadian dollar. Most economists expect this trend to continue. All that this trend means to the typical American is that vacations cost more and that the p...