The Amazing Economic Strength of the American Dollar.

The value of the dollar is determined by the manufacturing and economic strength of America.

The U.S. manufactures trillions of dollar bills (IOUs) and exports them all over the world in exchange for the goods we buy from foreign countries. The amazing thing about the dollar is that no matter on how many dollars the Fed. "prints" their value remains relatively stable. It is the world's currency and it remains valuable because it can buy things. Its value is determined by the manufacturing and economic strength of America.

The foreign countries such as China, Japan, etc. sell much more goods and services to the U.S. then they buy from us so they take the surplus dollars (IOUs) and they just pile them into their banks. The banks cannot just leave them lying around so they invest them in American treasuries or (Wall Street) corporate stocks and bonds so they can earn some interest. The foreign banks have so many American IOUs to invest compared to the treasury bonds available that they drive down the interest rates on these bonds to very low levels. (When the sub primes went bust in 2008 there was a run on treasuries that drove the interest rates down to near zero.) This makes the interest burden for America comparitively cheap even though there are trillions of these American IOUs spread out all over the world.

Right now (August 2011) There is a determination of the conservatives to restrain The foreign countries are in a dilemma. What can they do with all this American debt that they own? Well they can buy American treasuries or goods, or corporate stocks and bonds or real estate or they can sit back and collect the interest on the treasuries (which is now very low) or they can redeem the bonds. If they turn their treasury bonds in, our government will be forced to give them our dollars back so now they will again have their banks full of these non-interest paying American IOU dollars again.

What a dilemma for the foreigners! The foreigners lost their shirts in real estate market in the 1980s and now Wall Street wiped out trillions dollars of foreign debt in the latest stock market crash and subprime real estate bond fiasco. (Iceland lost so much money the country nearly went bankrupt.) Maybe the best thing the foreigners could do is just buy American goods. At least they will get something tangible for their money.

The best thing, we in America can do is to buy as many foreign goods as we can and pay for them with dollars. By doing this we can keep the demand for our treasury bonds (exchanging dollars for treasury bonds) high as possible thereby keeping the rates extremely low. This keeps the whole world busy manufacturing and selling their goods to America and it also keeps America busy making goods and selling to the "dollar rich" foreign countries. (When America stops buying the whole world goes into a depression!) This is happening right now, there is alot of world wide unrest due to American slow down in purchasing foreign goods. The main thing for America to do, as I see it, is to try to limit the amount of bonds available compared to the foreign demand for them. This keeps the treasury interest rates as low as possible.

Donald Hamilton

Don Hamilton is author of - "The MIND of Mankind" - A challenging book that explores the incredible creative powers of Mankind and the mysterious nature of the Universe. Everything humanity has achieved is a result of its "Human Imagination". It created the MIND of Mankind.

Mankind's Incredible Power!

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