Monday, September 29, 2008

Greenbacks


Since this is a topic of discussion where ever I go these days I thought I would write a bit about it. The value of my home in Yuma, for example, was purchased for 131000 dollars, today that same amount is worth 139,077.33 per the consumer price index. So really my money is worth about five percent more in just a few short years. That really isn't bad when you think about it. Of course, I am not taking into account of what the land value is but just the basic value of the money.

The big things on people's minds seem to be the strong versus the weak dollar. Well, do people really know what that means? I don't think so. So here is my interpretation and if you think I am way off you can look it up yourself.

Strong dollar
Means: American-made goods relatively expensive for foreigners. Consumers at home and abroad buy less costly goods from countries other than the U.S. Sales of U.S. companies erode, prompting them to lay off American workers and outsource jobs to countries with cheaper labor. Foreign imports are relatively inexpensive, interest rates remain low or moderate if inflation is controlled, and the standard of living is relatively high.

Weak dollar
Means: American-made goods and travel to the U.S. less expensive for foreigners, boosting the sales of U.S. manufacturers and prompting them to increase production and hire workers. The growth of U.S. exports helps trim the trade deficit. A weak dollar also attracts increased foreign investment in U.S. real estate and capital markets. A weak dollar makes foreign imports and overseas travel more expensive for Americans; the U.S. standard of living falls because the dollar buys less. If traders believe the dollar will continue to weaken, they may invest in stronger currencies of other countries.

So you can see there are pros and cons to either scenario. It seems that currently we are looking at a weak dollar. So financially I, myself, don't plan on buying anything from China or Germany for awhile if I can help it.

The dollar is currently used as the standard it was once the gold standard but now more than 90 percent of the world economy uses the dollar as the standard. This partly due to the open economy that we have in the United States. The big question rising now is if the dollar will be replaced by either the euro, and perhaps the Chinese yuan. I personally don't see this happening in my lifetime, but what could happen if Europe and China's economies continue to grow at their current rate a division may occur and trading will be separated into three parts.

What I have found, in my own research, is the downturn of the dollar started with the embargo of OPEC in the late seventies. That may be reason enough to start, and mean really start, using all of our resources and find alternative ways of replacing this resources. I am not saying go green necessarily but I do mean we should be using our greenbacks and not other countries.
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