Why is US Dollar dropping?

anyone?

btw, here's a related discussion from a few weeks ago:

http://www.tbd.com/content/post/16088

I think the dollar is dropping against foreign currencies because USA buys much more from foreign countries then we export.

Wish I knew . . . it does make it hard, especially when travelling

You have a dollar?! Please loan it to me at 5%, please..... On a serious note, the US government has been unable to fall back on the savings of its citizens, ( who refuse to save money) it was forced to finance its current budget deficit with foreign capital. Because consumer spending and the federal deficit kept the dollar high for awhile, the rest of the world was practically scrambling to invest in the United States. Not anymore.. With a war budget spiraling out of control, and shrinking value against the Euro, it can be said that we are in a bit of trouble. Shame too.

Well, let's see... Our dollar's value is based upon credit that is itself based upon our inflated home values. The dollar is purchased by external investors only when it's seen as stable. The dollar is purchased by external investors only when oil-producing companies peg their oil barrels to it (they're all switching to the euro). The dollar is a commodity, like cotton; if cotton becomes useless or not worth the price, people will stop paying for it, and its value will decline... same with the dollar. But the reasons are very simple:

1) Banks hold 1 - 3% of their deposits as assets. Unfortunately, in the past few years, most of the "assets" were home mortgages; either theirs directly or purchased from other banks. Since many of the loans are too expensive for people to afford, and shouldn't have been loaned, a lot are defaulting and are worthless. This makes the assets of the bank worthless and they are in danger of closing. So, the federal reserve rescues the bank by giving them billions of dollars to operate. They've printed almost a trillion extra dollars in dozens of small injections over the last couple of months. When a trillion dollars is added to the money supply, your dollars are worth less, because there is more out there. This occurred over and over and over the last couple of months, adding up to almost a trillion in diluted money. Here is an example article about that:

http://www.cnbc.com/id/20211772/

2) Iraq switched to selling their oil in euros in 2000 (hm, wonder why we invaded). Iran switched to euros recently (wonder why we're going to attack them). OPEC is considering switching to Euros too

http://www.energybulletin.net/7707.html

http://news.monstersandcritics.com/middleeast/news/article_1374475.php/Tension_over_dollar-weakness_boils_over_at_OPEC_summit__Roundup_

If OPEC switches to euros, euro will replace dollar as most important currency, and people will buy that instead, which will further diminish the dollar.

3) China threatens to dump dollars to flood the market, scaring dollar investors:

http://www.atimes.com/atimes/Global_Economy/GA27Dj01.html

Those are the three main reasons, although there are plenty more sub-reasons. Personally, I think people in charge want the dollar to decline to fit in better with the Canadian and Mexican currencies so it will be easier to accept a North American union like there is a European union -- people will point to how well the euro performed after the EU. The ultimate goal is to merge the US with other countries to water down our peculiar national rights to make us easier to govern. But that's just my opinion. http://www.humanevents.com/article.php?id=15017

When people in other countries buy dollars or trade their goods for dollars, they are relying upon the wealth of the American people to back up that dollar; otherwise, it's just a piece of paper. It's not hard to look around and ask yourself just how wealthy the average American is -- not very. In fact, they're all in debt. The only wealthy Americans are the corporate elite, and their labor won't back up those dollars. They only take the fruits of others' labor; they don't labor themselves. They'll just move to another currency or country if the people fall flat. And the world is starting to realize that, so they don't want dollars... and they're right. Most americans will have a hard time and that's unfortunate This is the best video ever explaining the nature of money:

http://video.google.com/videoplay?docid=-9050474362583451279

~Anonymous Anomaly

I don't entirely agree with anomylous but I'm not going to bother arguing with said poster.

I'll just say:

Let the dollar fall. Fix the trade imbalance.