posted on Mar, 3 2011 @ 06:10 AM
Interesting post. I been thinking and doing some reading about all this and it raises more questions than it answers at times.
Okay so increased capital = inflation = weaker USD against other currencies.
1) It encourages US exports and facilitates increased economic activity, which should result in lower unemployment, more income and more spending and
more business activity and so on.
2) Conversely it strengthens other world currencies and discourages exports and has the effect of impeding economic activity.
Good for US not so good for other countries. Fellow Australians would be aware of this as we recently had some of our own retailers (Harvey Norman
etc) complaining about customer base increasingly shopping overseas now with the AUD at approx parity with USD and a resulting reduction in business
The effect the QE would have on other countries less fortunate would be much more profound and this is perhaps why we see revolts throughout the
Effects of unrest aside, if the USD is devaluing, why aren't we seeing much more USD paid for oil? Or is this a case where oil suppliers are just
receiving a lot less back for each barrel?
If the latter is the case, then is it plausible to suggest that oil supplying countries may get tired of their reduced profit from the USD and begin
seeking alternative currencies to sell their oil?
If the reserve currency devalues further over time, does this decrease the value of those who own US debt? For example, if China owns 1 trillion US
debt, is it now losing out on gains it would otherwise make due to depreciation of the USD? Could this become a risk to the US if China decides it no
longer wants to hold onto that debt?
Are investors perceiving more risk in the USD? I understand that US treasuries bonds are increasing even though yields are decreasing because people
are seeing risk in the financial markets, so ironically investors are parking their money in these bonds? That indicates confidence in the USD does it
Are the current QE measures sustainable or is this going to come back and hit hard on the US? Zimbabwe have a heavily inflated currency and it hasn't
helped them at all, but perhaps that is because they have no industry and noone buys anything from the country, whereas with the US, people all around
the world buy stuff from there.
I'm just trying to figure all this out because there is a lot of conflicting information, and a lot of 'the sky is falling' hyperbole. I find it
very interesting, though I would rather be informed than run with emotion.
I cannot expect all these questions answered, I'm asking even for my own self discovery. I need to research further.