The Devaluation of the US Dollar

Paper Summary:

This paper explores the devaluation of the US dollar and its relationship to foreign currencies. The author presents two possible outcomes for this situation, one foreseeing dire consequences and the other seeing it as nothing alarming. The devaluation is considered in terms of developing nations linking their currency inflation rates to the US dollar. The role of the US Federal Reserve is analyzed in relation to this process as well.

Outline:
Abstract
Understanding the Current Crisis
The Current Situation and Potential Effects
Works Cited

From the Paper:

"In order to understand the current losses sustained by the US Dollar in what is otherwise considered a period of stable global economic growth, one must look at other periods of devaluation. During the Great Depression losses to bank deposits only amounted to 1.9% of the US GNP (Calamoris, 1993). Losses during other historical periods of economic crises, such as the 1830s, 1850s, and 1890s, are insignificant when compared to the losses that have occurred since 1982 (Calomoris, 1993). Calomoris does not feel that shocks such was wars, oil price hikes, or global downturns in demand have been to blame. Calomiris feels that government subsidies that encourage developing economies to take risks are to blame. These subsidies encourage spending and risk taking that the entities are not stable enough to handle. This places pressure on developed nations to foot the bill for the losses."

Sample of Sources Used:

• Prestowitz, C. 2005. The entire US economy is on life support from the People's Bank of China and the Bank of Japan. Financial Times 29(9).
• Bergsten, F. 2002. Let the dollar fall. Financial Times. July 17 2002
• Bildt, C. 2005. Growing, Growing, Growing. June 12, 2005. Retrieved August 27, 2006 from http://bildt.blogspot.com/2005/12/growing-growing-growing.html
• Calomiris, C. 1993The Imf's Imprudent Role As Lender Of Last Resort. The CATO Journal. 17 (3). Retrieved August 27, 2006 from Http://Www.Cato.Org/Pubs/Journal/Cj17n3-11.Html.
• Chalmers, L. 2005. US Dollar. Retrieved August 27, 2006 from http://www.internetional.se/usd.htm.

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