Dollar Decline essays

Dollar Decline essays The current official US view of the dollar is that its decline has been orderly, constructive, and not worrisome. This view has allowed the dollar to depreciate against other major currencies in the world has various implications for the US national economy as well as the international economy which can be analyzed from a liberal and mercantilist perspective. The idea of a weak dollar needs to be clarified at first. A weak dollar is basically worth less relative to other currencies around the global market. Hence, a weak international dollar compared to other currencies say the pound means that English goods will cost more to purchase in the United States and it will harm English exports to us. By the same token, if the US dollar is weak, compared to the pound, then the English will find that American goods are cheaper for the English citizens to buy, and American exports will benefit. Mercantilism believe in the need to protect their security and independence as they assume that the nation-state is the primary actor in this anarchic international system where relative gains matter since power is a zero-sum game and human nature is riddled with conflict. These assumptions allow the mercantilist to support the idea of a weak dollar as it helps countries create wealth and power in order to preserve and protect their national security and independence. Mercantilism pursues this idea of a devalued or weak currency via a Beggar Thy Neighbor Policy as it has beneficial implications for increasing a countries relative without increased interdependence onto other countries in the global markets. Beggar Thy Neighbor is a policy where by a country artificially deflates its exchange rate by keeping its real interest rate low and it does not do anything to raise the strength of devalued currency. This devalued/weak currency has various positive implications from the mercantil ist view point. Mercantilist indicate that a devalued currency wi...