On Tuesday 11 July 2006 12:42, Timothy Miller wrote: > On 7/11/06, Hamish Marson <[EMAIL PROTECTED]> wrote: > > Just my usual objections to the stability of the US$. Opinion on > > this side of the pond at least is that long term the US$ will fall. > > It would grate me to have money depreciating in a US bank account > > because the $ was going down. > > What if it went up? These fluctuations happen all the time, right?
Normally, yes. But you currently have a federal government that is spending an incredible amount of money, much much more than it has. The national debt, deficit and trade deficit of the US are truly out of this world. Especially the latter will eventually cause the value of the dollar to drop relative to other currencies (if I remember my Adam Smith correctly). The problem with that is that it would make products from those other countries more expensive in the US, so their revenues would drop, which they don't want. So, to prevent that from happening, for example the national bank of China has been buying up dollars, keeping the course artificially high. Also, the international monetary markets are largely based on trust and right now, despite everything, investors still trust the US dollar. If a number of them lose that trust and sell their dollars, the course will drop, which induces others to sell, and you have a chain reaction going the consequences of which are hard to oversee. Of course, if the US dollar really crashes then we'll probably have a worldwide economic depression on our hands, and the finances of a foundation will be the least of our problems. Here are some links: http://www.iht.com/articles/2006/07/02/opinion/eddebt.php http://www.ctj.org/html/debt0603.htm > Of the USD keeps falling, can we just hold onto money in euros or > whatever until we need to convert at the last minute? Well, the question is what that money is going to be spent on, and what currency is needed for that. If you have a contract with a chip fab that says that they'll produce your masks for a million US dollars, then you need a million US dollars. The value of that 1m US$ in another currency is entirely irrelevant (to you, if they pay their employees in euros then they'll be in trouble if the dollar drops, because that 1m suddenly isn't worth as much as it used to). On the other hand, if the dollar drops a lot, prices of components (produced outside of the US) will probably rise a lot, and your money in the bank won't rise along if it's in US dollars. What is wisdom? I don't know I'm afraid. I'm not an economist or an MBa... Lourens
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