Why is the US dollar decreasing in value?

Question

and does oil have something to do with this?

is it true that europeans are paying america's debt? if it is true, why are they doing it? dont they have better things on which to spend their money?

thanks to all who try to solve this for me!

Answer 1

The price of oil has some to do with it. The national debt has a lot to do with it and the fact that people felt compelled to spend more than they make causing personal credit problems has a lot to do with it as well. And no, Europe is not paying America's debt!

Answer 2

Because of the increase in debt both public and private . With nothing backing the debt .

Answer 3

The dollar is falling relative to other things because the Federal Reserve has been creating so much money over the last six years. Rapidly increasing supply of something equals falling price.

Answer 4

For most of my life the US dollar was strong, the exchange rate with other currencies changed but did so normly only to a small degree, minor shifts for the most part and if there were dramatic shifts they tended to be due to a crisis in the other country, not on the part of the US. The Dollar was worth more than a Canadian Dollar, the Pound was worth more than a US Dollar but typically only about $1.50 or so, and when it was first launched, the Euro was worth less than the US Dollar (I should have invested in Euros as rather quickly it reached parity with the US Dollar).

But in the past year, the US Dollar has fallen, fallen considerably and dramatically and seemingly there is little end in sight. The Canadian Dollar is now at least at parity and is with increasingly frequency worth more than the US Dollar. The Euro is now worth considerably more than one US Dollar.

As I write this $100 US is worth about 50.5 UK Pounds or about 64.75 Euros or about 102 Canadian Dollars.

On the eve of 9/11 a US Dollar was worth 1.10 Euros, today it is worth 64.75.

To put this in another way, on 9/11 if you earned $100,000 a year the equivalent income in Europe would have been $110,000. today an income of 110k euros would be $170,000 US at today’s exchange rates.

Someone who in the US earned $10,000 a month in 2001, would have had to earn 11,000 euros. That same 11,000 euros would now be the equivalent of earning $17,000 a month here in the US. That’s the same as getting an extra $7k a month, or roughly speaking getting a 70% pay raise.

70% if nothing else had changed, if you had started at the same salary in 2001 but decided to get paid in euros not US dollars and hadn’t gotten any raises in that time.

So what has happened? Why has the US Dollar fallen so much, so quickly and with for the most part little awareness on the part of the general US citizens?

There has been a similar, but not quite a dramatic change in the exchange with the UK Pound. Someone who had earned the equal of $100k US in Pounds in 2001 would now have a dollar equivalent salary of about $125,000.

In the case of Canada in 2001 the US Dollar was worth over $1.55 Canadian, someone earning $100k in the US would have had a Canadian salary of $156,000 Canadian. At current exchange rates that would be about $152,000 US, though earlier this year the US Dollar had fallen to as low as being worth $0.90 Canadian.

The change over time is not quite a dramatic against the Japanese Yen, from a dollar being worth 120 Yen in 2001 to being worth about 100 Yen today.

The US Dollar to Israeli Shekel has fluctuated widely since 2001, in 2001 $100k US would have been about 430k in Shekels, now that same level of earning would be about $125k US.

In short for most of the current century everyone in the US would almost certainly have more buying power had early on in this century they had gone to work someplace outside of the US and earned in a currency other than US Dollars. Comparatively speaking people who were at nearly par in terms of levels of earning and income in 2001 have now moved into very different levels of income and buying power.

This is always a bit tricky, to a degree there are other factors that have to measured, better than gross income is likely a comparison of actual take home pay, though since taxes in many countries of the world help cover health care costs unlike here in the US (but here in the US many people receive health insurance and other benefits from employment that don’t show up as earned income) full comparisons are complicated.

But to keep it relatively simple in most cases US incomes on the world stage buy far less today than they would have just less than 7 years ago. Nice (very nice) new car for cash less in most cases.

However though we’re entering into a tough year perhaps, if the financial press is to be trusted, for the most part few parts of the typical American life have gone up by a comparable amount. Gas prices at the pump have risen, here in San Francisco they currently are hovering around almost $4 a gallon for premium, but that continues to be a couple of multiples cheaper than in most of Europe and earlier this year they were down closer to $3.00 though at around these prices about a year ago as my old post shows. In my lifetime the price of gas has gone up considerably, when I had my first car over 16 years ago I recall some days when gas was $1.00 a gallon or less, but that was rare.

Since 9/11 however and even before then the US has been taking a wide range of steps, accelerated since 9/11 which I think are at the root of why the US Dollar has been falling relative to other major currencies. In combination these steps plus a marked decrease in the competence of our government and how it has managed our economy have combined to make the US Dollar something fewer and fewer people want to rely upon as the unit of transactions or the measurement of wealth.