Jason Mark

Today's Lesson: Why the Fed Raised Its Rates in 1931

If the dollar is to rise in value a combination of two things must happen. Other countries begin investing more heavily in the U.S. supporting economic growth while the price of money goes up in effect making it more expensive to borrow. I know lowering interest rates makes borrowing money more attractive, but it doesn't change WHO should be borrowing. There hasn't been enough time between Greenspan's cuts and the current cuts for the dollar to have had time to recover. We've gone from one bubble to the next. Remember also that higher interest rates make money more expensive which adds value and higher interest rates provide greater returns on interest baring accounts which makes those accounts more valuable. Lower interest rates to the opposite on both counts.

Will the Euro Overtake the Dollar as World's Reserve Currency?

What economic advantage does the dollar as the world's dominate reserve currency give to the United States? Other countries (mainly opec countries and rapidly growing countries like China and India) began holding dollars after WWII because the economies of Europe were crushed by the war. The dollar was the most stable currency and was appreciating. Lets face it, if it wasn't for US investment into Europe and Japan after WWII then those economies would have taken much longer to recover save mabe GB and France. If the dollar contiinues to lose value at an alarming rate then things will change, but lets remember that the GB Pound had been more valuable than the dollar for some time but you haven't seen a shift to that currency. I believe its more a political move than any to switch to the euro. America's role as a source of investment in the middle east is going to change drastically in the next 10 years. Mabe not in terms of $ but in terms of how and what will be invested in.

U.S. Dollar Paradigm Shift Underway

I believe that the US will be the recepient of large investments from trade partners especially the middle east. Dubai is the most recent example but will not be the last. They recognize that their oil is running out and that future economic growth and prosperity will demend on diversifying into industries like tourism and finance, which it is already doing. Dubai regards the US as its most important market. US petro dollars will come back to invest in our economy which will hopefully be used to develop and market the energy solutions for the world for the future. The US is largely responsible for the growth in many countries becuase of our companies investing in those markets. The next trend should come back to the US.