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Saturday 5 November 2011

The "Yankee" Dollar

Its a sign of the strange times that we live in, that the US dollar is still weak against the crumbling Euro.

"Half A Dollar" in slang terms
"Half A Dollar" in slang terms

I only remark on this because when I was kid, we used to think of the British "Pound" as worth four US dollars. and we even used the term a "half dollar" for a 'half crown' and the crown was sometimes called a "dollar" ... this was obviously pre-decimal days in the UK, when there were 20 Shillings to the Pound, a Crown was 5 Shillings, and therefore a Half Crown was 'Half a Dollar' .....
 
So why does this even matter, well it means that countries such as Japan and the UK are finding that the cost of their exports to the US are going up, relative to the cost of US imports, despite their poor economies, and they are all having to 'sell money' (or buy dollars) to try and push their currencies down again. 
 
This raises the threat of inflation not just in the United States, but also elsewhere in the world, and with most of the world's major commodities still priced in dollars, it is noticeable that any major decline in the value of the US currency has usually coincided with sky-rocketing commodity prices.

Dollar and Yuan's
Dollar and Yuan's

The US wants China to allow its currency the Yuan to rise to allow US exports to China to be relatively cheaper, but while the Chinese won't do this (for their own economic reasons), then the US believes that letting the US Dollar slide, boosts their exports abroad and lowers imports at home. So until it finally starts to believe that having 'cheap money' is starting to hurt its own economy, then it appears that we are all stuck with the problem.

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