I have been reading that the U.S. dollar is in serious trouble...how concerned should we be?
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M$4 Answers
The US Department of the Treasury Bureau of Engraving and Prnting.
14th & C Streets, SW
Washington, DC 20228
(877) 874-4114 (toll-free)
http://www.bep.treas.gov/
This is part of the Department of the Treasury and is in no way related to the Federal Reserve.
After printing, it is issued ( sold ) to the Federal Reserve for distribution into the banking system it then becomes an obligation of the Fed. When the fed sells one dollar bill to the public ( through a bank ) they are then obligated to buy it back ( through a bank ).
The Federal Reserve:
The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system.
Over the years, its role in banking and the economy has expanded.
Today, the Federal Reserve’s duties fall into four general areas:
• conducting the nation’s monetary policy by inf luencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates
• supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers
• maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
• providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system Most developed countries have a central bank.
For complete details, see ( Loads very slowly, be patient. )
http://www.federalreserve.gov/pf/pdf/pf_1.pdf
It is a private corporation created by Congress with certain governmental powers. It has only the powers that the creating legislation gives it. Those powers in theory can be changed at any time by Congress. It is owned by its shareholders, its member banks. They own stock in the Fed just like you can buy stock in say General Electric.
It does loan dollars to the US Government. It is loaning MASSIVE amounts of dollars to the treasury right now to fund the stimulus package but they are NOT the dollars printed by the Bureau of Engraving. They are dollars it holds as reserve accounts from its member banks. ( There are other ways too )
At the end of each year, it voluntarily pays 100% of its profits to the US Treasury.
It does have the power to create money out of thin air, as does any bank.
So much for the Fed. That is not the question you asked anyway.
You asked about the value of the "Dollar"
You are not really interested in currency. Currency is composed of the paper dollars you carry in your pocket to pay for incidental expenses. The value of the "dollar bill" is zero. It has no value of its own. It has a nominal value only because you and I say it does. That value is determined by the value of the dollar in the larger sense. It is not related in any way to our nation's reserve of gold or silver. The gold backing was removed in 1933. For several years after that the US issued currency backed by silver. That backing was removed in 1964.
Today our currency is fiat money. Fiat is the latin word we would translate as "let it be done". This means that our currency has value only because we say it does. Look at a dollar bill. In the silver days, it said:
This certifies that there is on deposit in the Treasury
of the United States of America
One Dollar in Silver
Payable to the bearer on demand.
Today it says only
The United States of America
One Dollar
See:
Well over 99% of all the "dollars" in existence are virtual, They exist only in accounts and consist only of bits in computers.
Now to your real question, Should you be worried about the value of the dollar?
The answer is yes, most definitly.
The value of your virtual dollars will determine how much stuff you can buy.
If the value of the dollar declines, the most immediate effect will be that imported goods ( Oil, clothing, etc ) will become more expensive almost overnight. You have noticed already how quick the price at the pump increases whan the price of oil goes up. If the decline continues, the prices of domestic goods will increase too. This is caused by inflation. Inflation means "your money is worth less".
How far can it go? Nobody knows. Right now the Congress and the Administration are doing every thing possible to decrease the value of the dollar. ( I am not bashing Obama, George was no better. ) The hype you hear about the strong dollar policy is just that. Hype.
What makes the value of the dollar decline? This is a very complex question that has many interlinking answers. I am going to present only these:
The international value of the dollar is determined by how much of their local currency or goods, other Governments, Corporations, and investors are willing to pay for dollars. That is determined largely by the following:
Are dollars in large supply and readily available? If so, they are worth less.
Are more investors selling them than buying them? If so they are worth less.
What is the risk that they will be worth less in the future before I can use them? That depends largely but not exclusively on how fast they are being created - How fast the US government is issuing debt.
What are the interest rates? Can I earn more by buying dollars than by holding my own currency. If not ( rates are low ) they are worth less.
When you add 5,000 to your credit card debt, you are issuing debt, exactly like the US Government. Somebody has to buy it, the credit card company. When you do this your debt goes up and your likelyhood of being able to pay goes down - as does your FICO score. If you attempt to obtain a mortgage, your rate will be higher. ( Your dollars are worth less so you have to pay more to get the same mortgage. )
The US Treasury is already seeing this result:
They are already beginning to have trouble selling bonds. This will only get worse unless the insane spending spree is stopped.
30 years a banker
40 years a fed watcher
50 years an investor
See embedded links.
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M$
Claims about the dollar being in trouble at the moment are just right wing rubbish. They are looking for excuses to break unions, end social programs, etc. and understand government spending about as well as Hoover did. So don't worry unless they get elected.
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M$
You want to own shares in business that get paid primarily in cash, and can adjust their prices rapidily, like shippers at a seaport. No long term accounts receivables.
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M$http://en.wikipedia.org/wiki/Federal_Reserve
http://www.ronpaul.com/
http://www.restoretherepublic.net/home.php
http://www.freedomtofascism.com/
http://www.endthefed.us/
There are surely hundreds of site with just as many opinions but any rational open minded and inteligent person should be able to listen to the opinions and facts and arrive at your own conclussion.
Darron
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M$
As pointed out in another answer, this answer has at least two factual inaccuracies. One, the answerer has admitted in his comment to the other answer. He did not, however, acknowledge his error on the continued existence of specie currency (our currency is no longer backed by gold or silver specie).
Since the question asks for opinion, the rest of the answer is unobjectionable, but the factual basis is, at least partially, incorrect.
Yes you are absolutely right about that, we are not using Spec currency but instead Fiat currency. We are using Federal Reserve notes issued by the Federal Reserve which is not a Federal agency nor are they a Reserve. I will remember this question in the future when answering another question that regards subject matter that is so disturbing to me and I will certainly make sure my personal feelings don't interfer with my ability to give an answer accurately!
Darron
F.Y.I. If I was not disabled and unemployed from serving in an un justifiable war in Iraq and I could afford to save for my future again I certainly would not be filling shoe boxes with stacks of Federal Reserve notes! Anyone who has read all of this will surely find the link to the following story of interest!
http://www.campaignforliberty.com/article.php
I thought this answer was quite well-reasoned and balanced. At its core, it reached more or less the same conclusion as the other answer, but was more factually-based, and explained the material more clearly.
Personally, I don't think bankers are unreliable sources or evil, per se. :-)
I apolagize for one thing, I incorrectly said the Federal Reserve prints money when I meant to say they issue money. The Federal Reserve claims that they give 100% of their profit back to the American Government, now if that were true then why does the Federal Reserve charge the government interest for the money they need? Politicians buckling to pressure from banks and financial institutions have gradually been changing banking and finance regulation laws since the early 70's until now and look at the financial state of our country's economy right now due to banks, bankers and financial institutions. America had fair warning of what was starting to happen when we had the savings and loan failures in the 80's but instead everything was business as usual. Now look where we are for not requiring banks and financial institutons to adheare to stricter regulatory standards and produce accountability for their activities. No offence intended but there is absolutey no question that our economy is currently in a state of near devistation due to the greedy and unethical actions of bankers. That being said, regardless of how lengthy of an answer you can write you are still a banker by your own admission and your lengthy response does not even answer the original question. It seems as though your real intent is to challenge me and my answer not to actually answer the original question. Your rating my answer as unhelpful really is low coming from a former banker and Federal Reserve supporter!
Well, there does seem to be a mistake in my answer.
The last $1.00 bill graphic should not be there and in its place it should have the following link:
http://www.foxbusiness.com/story/stocks-end-lower-poor-treasury-auction-results/
As to answering the original question please refer to line three after the first $1.00 bill graphic. The one that says:
"Now to your real question, Should you be worried about the value of the dollar?"
This is just conservative dogma, it does not describe the actual factors at play in current international finance. Also, it does not address the question "should I be concerned" at all.