antimatter
Banned Idiot
Even though the US dollar is floating, but US has the capility to lower and raise the dollar to the point it wants at anytime.
How does US do it?
How does US do it?
How does US lower and raise its currency anytime it wants?
- Thread starter antimatter
- Start date
Well from what i understand much of it revolves around the primary dealers, these are 18 of the biggest banks in the world, such as citigroup, goldman sachs, jp morgan, barclays and deutsche bank etc. These banks are the middle men between the US government and the american citizens and others around the world.
These primary dealers are also the 'market makers' for the global foreign exchange markets, meaing that if a large organisation such as a pension fund wish to buy dollars in order to buy a large amount of US stocks, they got to one of these primary dealers who sort it out for them
As currencies work on the principal of supply and demand, as long as more dollars are being bought than are being sold at any one time, the price of the dollar goes up
Anyway, hope this helps a bit, the economic system is very shady, and there are very few people who know exactly what is going in our world, i'm guessing maybe 5000 people worldwide
These primary dealers are also the 'market makers' for the global foreign exchange markets, meaing that if a large organisation such as a pension fund wish to buy dollars in order to buy a large amount of US stocks, they got to one of these primary dealers who sort it out for them
As currencies work on the principal of supply and demand, as long as more dollars are being bought than are being sold at any one time, the price of the dollar goes up
Anyway, hope this helps a bit, the economic system is very shady, and there are very few people who know exactly what is going in our world, i'm guessing maybe 5000 people worldwide
bladerunner
Banned Idiot
Interest rates for one.Which would then set the demand for U.S. Treasury bills, notes and bonds, which then establishes the value of the dollar.
I think A low dollar means the value of the US debt is less, which can be good, depending on which side of the fence you're on.
How did you arrive at that conclusion?
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antimatter
Banned Idiot
If US lowers the dollar, then the EUro would rise and hurting EU's exports. The question why can't the EUro devalue to match with the devalued dollar?
bladerunner
Banned Idiot
Because the Euro is free floating and its value is determined by the economys of the countries that are tied to the Euro.unlike the Yuan which is linked to a basket of curriences and rises and falls withem accordingly.
antimatter
Banned Idiot
Are you implying Dollar is not free floating?
We know the yuan is controlled. I am more interest to know the relationship between dollar and Euro.
If Dollar is lowered, what's EUro 's reaction? (going up or down or unkown because its free floating)
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Engineer
Major
By "asking" its trading partners to manipulate their currency in the direction that the US wants.
Nan US don't have to ask when they are the de facto scale where all currency in the world is based off.
When EU is doing better then US, EU currency goes up 1.6 to 1, when EU doing bad their currency goes down to 1.4 to 1. This so called 'floating' currency is basically 'breaks/gas' that US gets to apply in other major economies. So in away EU can only be as good/competitive as US allow it to be.
Because China is not giving US the control over its economy thought its fixed exchange rates, it gains the ability to say how good/competitive it should be in the world. As soon as china 'floats' the currency, it will lose that ability. The only way to regain it is to have lager money supply then the US. And the only way to do that is to have other currency peg to it. (US still have some 60+ country peg to it, and US even praised China when it peg to dollar Asian financial crises, when all other Asian currency is devaluing against dollar like there is no tomorrow.)
When EU is doing better then US, EU currency goes up 1.6 to 1, when EU doing bad their currency goes down to 1.4 to 1. This so called 'floating' currency is basically 'breaks/gas' that US gets to apply in other major economies. So in away EU can only be as good/competitive as US allow it to be.
Because China is not giving US the control over its economy thought its fixed exchange rates, it gains the ability to say how good/competitive it should be in the world. As soon as china 'floats' the currency, it will lose that ability. The only way to regain it is to have lager money supply then the US. And the only way to do that is to have other currency peg to it. (US still have some 60+ country peg to it, and US even praised China when it peg to dollar Asian financial crises, when all other Asian currency is devaluing against dollar like there is no tomorrow.)