Predicting the future of the Dollar

10-01-2008 11:32

The United States is undoubtedly one of the most competitive and developed economies in the world. The long-term demographic conditions as well as its fiscal situations are healthier than those of its major universal competitors. Yet the value of the Dollar seems to be tumbling. The main reasons behind the decline in Dollar value are both short term as well as long-term aspects. Some of the main factors for the US slow motion plunge include:

• Being a recession economy
• Domestic political, geopolitical as well as economic uncertainties
• Reducing attractiveness of the nation being the most lucrative place to invest in

More reasons for the Dollar being weak

Although a powerful Dollar is the ultimate aim for the long run, unfortunately the deteriorating financial situations in US are the major factors behind the dollar being less in value. Few additional factors responsible for affecting the world exchange rate is basically based on the country’s conditions like:

• Government stability
• Population rate
• Tariff policy
• Government regulations
• Inflation rates
• Interest rates
• GDP rate
• Labor productivity

The Dollar is a currency that is more extensively held and the available resources in order to fight off the bear run are considerable. In any situation, the real difficulty for the Dollar is that whether the policy responses and market factors will allow the currency to depreciate as much as the authorities in United States would really want.

How the Dollar can become strong again

A strong dollar value has always been the token of United States economic vitality and strength. There are few steps that need to be followed in order to make the future of the Dollar a bright one. They are:

• A program to create social security without any extended tax increases
• A set limit in the development of non defense, spending to the current inflation rate, minus a percent
• Elimination of the investment taxes for people of middle class and also a 50 percent reduction for the wealthier lot
• A total ban on ear marks
• Creation of various government funded prices to contribute meeting the nation’s great scientific challenges
• A reduction in the overall corporate tax rate up to 25 percent
• Linking the federal higher educational system to the schools’ capability to provide more skilled engineers and scientists

Last but not the least, another thing that needs to be improved is the increasing US national debt against other countries.