The United States dollar Essay Example

worsen existing problems in the US economy. These issues stem from a devalued dollar and include various factors such as the expensive upkeep of a large global military presence. Moreover, government policy seeks to sustain consumer spending, which accounts for 70% of GDP.

Balancing both dynamics mentioned – the military aspect impacting the US economy and the challenges faced by consumer spending – is a very difficult task. The economy is increasingly burdened by the military sector, whereas consumer spending is hindered by household debt, the lack of fiscal policies in Washington, and a housing crisis. To sustain their excessive shopping habits, consumers heavily relied on home equity and low mortgage rates. However, this led to America's household savings becoming negative due to the purchase of numerous imported goods. The stability of the US economy also relies on a consistent inflow of foreign investment into various forms of bonds including US Treasury, federal agency, and corporate bonds. These foreign investments are crucial as they ensure a continuous flow of credit to consumers, enabling them to purchase merchandise from Asian and European countries.

Although there are concerns regarding the decrease in savings and prolonged deficits in the US, foreign central banks still have a vested interest in supporting this system despite the declining value of the dollar. The reason for this is that foreign investors provide American consumers with affordable funds to buy their goods, which creates a continuous cycle that sustains economic growth both within the US and globally. However, major international industrial companies that either export to the US or price their products in US dollars are becoming increasingly worried about the declining dollar. Consequently, these

businesses are starting to move away from accepting payments in US currency.

The dollar's value compared to other currencies, particularly the euro, is being impacted by uncertainty, which is decreasing its appeal.

Works Cited

1. <ww.useconomy.about.com/od/fiscalpolicy/p/US_Debt.htm.> (2008, April 10)
2. Who Gains When the Dollar Stinks.(2008, April 10) <http://yaleglobal.yale.edu/display.article?id=10019>