According to news articles the value of the dollar is falling. "One key reason for the dollar's woes is the bulging U.S. trade deficit, which is likely to top $600 billion, or 6% of GDP, in 2004". Since January 2002 the dollar has declined 25% against the euro and 16% against the Japanese yen. Global investors believe that the United States is more threatened by turmoil in the Middle East and the terrorist threat than Europe and Japan are. Investors appear to believe that the United States' financial stability is at higher risk than other major economic powers'.
Both are true statements considering the United States' current situation in the Middle East. Keeping the dollar strong isn't about keeping it strong against other currencies. Rather, it was a policy of keeping the dollar's internal qualities strong. For foreign countries or even this country to have faith in its currency is something that needs to happen. "You want them to see the currency as a good medium of exchange. You want the currency to be a good store of value.
You want it to be something people are willing to hold". The news articles that I have read pertaining to the declining greenback has given me a different point of view on the money in my possession. For what money is worth, your knowledge on what you do with it is very important. Since I am not investing my money globally or locally at the moment in time, my point of view is that of an inept, in debt college student that thinks he is making all the right decisions.
The economic principles involved in this article are that of money and banking in chapter 13. Another principle has to do with investing and the overall value of money.