What is meant by a weak dollar? Explain it in a way such that a lay man in economics can understand.?

Question

What should US do to recover from it

Answer 1

Our economy is bad and the rest of the world knows it. Here's an example (numbers are estimates and have not been researched). 5 years ago 1 euro=1.10 US dollars. That means that the Euro was slightly stronger than the US dollar. Now, because everyone hates Bush, we are in a war we cant win and spending trillions, the mortgage crunch etc..., our national debt has increased. The rest of the world knows this. If we give a country $1, they know we don't have the wealth to back it up like we used to, so in their minds a dollor is worth less. So now, 1euro=2.00 American dollars. Our dollar is very weak when compared to the euro. Say we are buying a shipment of cars from Germany that costs 1 million Euros. That shipment would have cost 1.1 million dollars 5 hears ago, but costs 2 million dollars now. Weak dollar. The importance of this is that because we use dollars here in the USA, we see inflation. We end up paying more for everything.

Answer 2

It means that there is not as much demand for dollars as there is for other currencies, and thus its price (exchange rate) goes down (depreciates) accordingly.

Answer 3

It has to do with exchange rates, which most people would understand from traveling abroad (even to Mexico).  If you were to travel to London today, it may cost you 2 dollars to buy 1 British pound, the local currency, so that you could buy things while there.  In six months, it may only cost $1.75 to buy 1 Pound.  If that scenario happens, the dollar would have become stronger.  If instead it costs $2.25, the dollar has become weaker.

More commonly, we buy products from overseas.  How many of the items you buy say "Made in China?"  The weak dollar makes these items cost more.  On the plus side, it also makes items made in the US less expensive overseas, so our exports tend to rise.  Unfortunately, just the amount of oil we import every day probably cancels this advantage.

While the explanation about why the dollar is weak is probably too long to explain here, it depends in large part on interest rates.  If the Federal Reserve raises core interest rates, the dollar would probably appreciate, but obviously higher interest rates in the US cause other problems.

Just another example of how you can't make everybody happy.

Answer 4

A simple answer:  You can buy less with your same $1.

Answer 5

The supply of dollars available on the market is too high.

If you went to Canada now and traded one American dollar for a Canadian dollar, they woud only give you 80cents for your dollar.

Your dollar is worth less than it was, and is considered weak.

Answer 6

The dollar´s value against other world currencies has declined due to a great number of factors such as declining production, foreign adventures etc. The way out of this mess is for America to take the technological lead again and stop throwing money away in foreign ventures which are ultimately unwinnable.

Opium production now in Afghanistan  is higher than at any other time in its history.

Answer 7

The strength of a dollar can be measured in three ways.  One way is to compare it's purchasing power relative to other currencies.  The second way is to compare its present purchasing power relative to its original purchasing power when the currency was first created.  And the third way is to compare its purchasing power relative to some absolute standard of purchasing power.

The easiest way to measure the dollar's strength is to compare its purchasing power relative to other currencies.  If an ounce of gold costs $925 USD or 585 Euro.  Then you can clearly see which currency is the stronger one of the two.

But comparing the dollar's purchasing power to it's original purchasing power is hard to do accurately.  Because many of the things people used to buy 200 years ago are no longer manufactured and sold.  And many of the things people buy now didn't exist 200 years ago.

Some people say that gold is an absolute standard of value that can be used for measuring the purchasing values of all currencies.  But not everyone agrees that gold has absolute value.  Supply and demand affects gold prices as much as it affects the prices of other valuable commodities such as food and fuel.

The way to keep the US dollar strong relative to other currencies is to limit its supply in the economy.  When people have less dollars to exchange into other currencies.  Then people who want to exchange despite the shortage of dollars will be willing to pay higher prices for the US dollar in their foreign currencies.

And a good way to limit the supply of US dollars is to make the borrowing of US dollars expensive through higher interest rates.  When the interest rate is high.   Then people are less willing to part with their dollars and exchange them into other currencies.  And many people can't get more dollars by borrowing them because they have to pay too much interest on their US dollar debts.

Answer 8

A weak dollar is one that really does not reflect the same value amount in gold. To make the dollar strong we must pay off the national debt and reverse our trade deficit which means that we buy more than we sell,especially from China.In order to do this we must keep our factories in the United States,but Capitalism is killing our country because of greed involved in the production of commodities over seas. Our country started declining when we started moving businesses over seas and now most of our products are manufactured over seas. We could still make a profit in manufacturing in this country but greed fuels the machine. Hope this helps. This is by no means the full answer to your question because there are many variables involved here including war,natural disasters,terrorism,etc.Oh,one thing I almost forgot to mention is illegal immigration. When they work over here and send money home that also hurts America.Please don't get me wrong,I am all for a legal immigrant living and working in this country. This country was founded on immigration and has been made up of many different nationalities and creeds. Well, I hope this helps you to understand it all a little better.