$ < €
It is apparent that people know that the future value of dollar-denominated debt will be diluted by inflation, and accordingly the dollar is losing quite a bit of its prestige.
In the past year, the value of euro notes in circulation exceeded the value of dollar bills. The euro has also overtaken the dollar as the main denomination of international debt issues.
At present, the dollar’s declining value is jeopardizing its position as the world’s reserve currency and standard of value. For the American government, this creates a number of problems.
Countries like Saudi Arabia are being urged to drop their peg to the greenback, and if they want to avoid importing U.S. inflation, they’d be wise to do so. Lack of financial clout also takes away one of the weapons with which the United States continually assaults the rest of the developing world — “by limiting [foreign] banks’ access to dollar financing … the US can damage such countries’ financial systems and make financing more expensive to obtain.”
The simplest way to prevent any further decline (25% vs. the Euro over the past 4-5 years) of the dollar against other currencies is to stop printing more dollars. This method is guaranteed to work, unless other countries begin contracting their respective money supplies. What’s more, is that so long as the Fed ceases to create more dollars, the value of the dollar should actually rise versus other currencies, assuming that they are inflating expanding their base.
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I wish your suggestion that the dollar had only lost 25% against the euro in the last five years was accurate. But it’s not.
I just checked my bank records and on May 7, 2002 I withdrew 100 euros at an ATM in Paris and it cost me $92.61 USD. Last month I withdrew 200 euro at an ATM in Vienna and it cost me $306.18 USD.
By my math, that well over FIFTY PERCENT in five and one half years.
It’s worse than you thought.
[...] commenter pointed out that I was wrong in my assertion (I think an erroneous citation) that the dollar fell 25% versus the Euro in the [...]