How does the dollar get devaluated?

Question

I'm trying to understand why the dollar's share of the world's total foreign exchange reserves are shrinking?

Answer 1

They are just pieces of paper the U.S. prints off.  They have printed so many off (partly due to paying for the war) that the law of supply and demand means they are worth less.  Also, oil is traded in dollars.  Since oil is becoming more valuable, the dollar is less valuable in comparison.  Since the dollar is worth fewer gallons of oil, it becomes worth fewer of other items also.

Answer 2

I agree with another responder.  The dollar is just what the US prints out.  Unfortuantely its got itself into the following problem: the more it prints out, the less value it becomes.  The less value it becomes, the more it becomes devalue.  That problem is only getting worse.  

That problem is getting worse cause of growing national debt.  During the Clinton years the debt steadied due to surpluses (budget) and we were beginning to pay down the nat. debt.

However, during the last 8 years, our debt has shot up.  http://www.cedarcomm.com/~stevelm1/usdeb...  If you look at that site, you can see that the debt has gone up a lot.  Reason for this is because of irresponsible fiscal policy.  With two very costly wars (and no plan for them, if we had a plan for them our costs could be cut down), economic slowdown, and tax cuts to the rich (which don't pump revenue or money into the economy- the rich don't spend much of thier money), deficits go up.  And with deficits going north, debts go with them (debt is just addtions to the deficit...in other words, the more deficit goes up, the more debt goes up http://zfacts.com/p/519.html )

now you may be wondering to me- why does debt cause our dollar to become devalued?  How does debt affect our dollar?

Well the more debt goes up the more dollar's worth heads down.  Because we need more money to pay our debts, our worth goes down.  More dollars printed-> to pay off higher debts.  More debt, more printed, more dollars in the market-> devaluation of the dollar.

This is a problem that won't be solved soon.  Our debt is extremely high.  9 trillion.  Its going to take a very long time to put this one down.

I can only hope the next one (Presidential candidate Obama or McCain) will stop the national debt from rising, stop the deficit, and increase value to our dollar.