The Slumping Dollar

The dollar has declined almost dramatically against other currencies over the past week or so causing a barrel of oil to rise above $50 for the first time in months. Since the end of last summer that dollar began an appreciation trend and it appears that it is over. The Federal Reserve's policy backed by the Treasury is to make more money. The policy of quanitative easing is also being used in the UK. By increasing the money supply it weakens a country's currency. In these economic times, a weaker currency would lead investors to sell the dollar and US Treasury bonds and that means that the US government would have a harder to find financing for its debt. As I hoped, I have mentioned on this blog or in the other one, that stimulating the economy with more debt, where debt is the reason for this recession could be really dangerous. A depreciating dollar could lead to high inflation and a spike in interest rates crushing any chance of a real recovery.

The Obama Administration is calling for the EU and other nations to work in concert with the US treasury and set more money aside to stimulate their economies. If these countries follow suit than the US dollar shouldn't slump as it has been doing recently. If these countries do not, than the currency may slump even further threaten the stability of our economy and our ways to fight the recession. Check out the NYTimes or Bloomberg