Obverse of United States one dollar bill, seri...

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It is no surprise that the dollar has started to plunge on world markets. When the Federal Reserve prints more dollars to pay for the “stimulus plan” and the boondoggles of federal spending, a higher supply of dollars cannot keep up with demand.

Once Presidents Roosevelt and Nixon took the United States off the gold standard, the dollar’s value has been determined by a floating currency market. That is, its value is determined by how much investors are willing to pay for dollars versus other currencies such as the pound, the Euro, or the yen. Like any market, the currency market is subject to the law of supply and demand. Demand drives value up; greater supplies tend to drive prices down. And if supply goes up and demand goes down, that is the worst situation in which a product, such as the dollar, is sold. With billions of new dollars added to the supply, it is impossible for demand to keep up; thus, the dollar’s value begins to go down. At first this mainly affects American international travelers who have to spend more dollars in currency exchanges to get a particular country’s currency. Over time, the lower value of the dollar affects the prices of both imported items and domestic items. Higher prices mean less buying, and this means that there will be less need for workers, compounding the problem of unemployment.

Some have argued that abandoning the floating currency market for a return to the gold standard will help bring stability to the dollar. I am not an economist by profession, and I defer to them to argue this point. It has always made me uneasy to know that the only thing giving the dollar value is investor demand. I do know enough about economics to know that flooding the currency market with dollars fuels inflation, with all its poisonous effects on the U. S. economy. The United States must either get its spending under control or face the possibility of hyperinflation, defaulting on its bonds that China and other countries buy, with the result that the economy spirals into recession followed by a full-fledged depression. The American people may be too spoiled by government benefits to support limited spending–if so, they will have only themselves to blame for inevitable economic ruin. The future of America seems as uneasy as the future of the dollar.

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