Decline of a Confident Dollar

Paper Summary:

The paper presents a thorough examination of the causes of the weak U.S. dollar and a discussion of both the pros and cons of the current Bush dollar policy. The paper questions what the dollar policy of the Bush Administration should be. After understanding the effects of the dollar policy, the paper shows that the administration should promote a stable dollar through increased fiscal discipline. This would show the world that the U.S. is not pushing its debt problems on them, eliminating the uncertainty of currency markets. With a stable dollar policy, the U.S. could improve the domestic economy, while no longer economically alienating the rest of the world.

From the Paper:

"Former presidents George Washington, Abraham Lincoln, and Andrew Jackson may not have had similar leadership strategies, but each were powerful figures of American history. Their contributions to the development of the United States helped it become the most powerful nation in the world, and today their involvement is acknowledged, as portraits of each grace a form of American currency. Their pictures symbolize American history and, more importantly, power. While the United States continues to hold a central role in global markets, its hegemony is increasingly threatened. The decline in value of the US dollar over the last three years may be symbolic of dwindling American dominance, thus the fall of the dollar is being closely examined. Many countries feel the US lives beyond its means. A weak US dollar helps boost US exports, in effect decreasing trade deficits by allowing the world to buy American debt. The current administration provides meaningless sound bites to the media, proclaiming publicly that it wants a strong currency while quietly allowing the dollar to decline. Other domestic policies seem to promote the idea that America is doing little to promote a strong dollar, such as an expanding defense budget and calls for social security reform. If the US continues to show such disregard for foreign opinion, the results may be devastating."

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