What would the Effects of a Weakened Dollar Be?
Incoming U.S. President Donald J. Trump has made the statement that the U.S. dollar is too strong. Some observers think that indicates Donald wants to weaken the dollar in an attempt to increase U.S. trade and stimulate economic activity.
We now need to ask the question, what would happen if Trump actually weakened the dollar? Some obvious effects would be:
- Inflation. A weaker dollar would mean more money in circulation which would lead to inflation. The rate of inflation a weak dollar would create is impossible to determine.
- Lower interest rates. The Federal Reserve might lower interest rates in an effort to control inflation. This might lead to more economic growth, but it might drive more inflation by increasing the money supply further.
- A lower savings rate. One reason why Americans are saving more is the strong dollar. The corporate savings rate is very high, Facebook (NASDAQ: FB) reported $26.14 billion in cash and short-term investments for third quarter 2016, Alphabet (NASDAQ: GOOG) reported $83.06 billion for the same period. Higher inflation and a weak dollar would give companies and individuals more incentive to spend. That might drive more inflation.
- More foreign investment in the U.S. because investors would get more bang for their buck.
- Higher stock and real estate prices because investors would have a stronger incentive to buy non-cash investments, particularly those with a high return.
- Depress the bond market because returns on securities would be lowered.
- Average Americans would have less buying power which might dampen economic activity. This might limit the appeal of Trump’s jobs policy by effectively cutting salaries.
- Increased demand for bitcoin and other cryptocurrencies; particularly ethereum. Financially sophisticated Americans seeing a need for a hedge against a weak dollar would turn to cryptocoins and bitcoin mining. This would mean higher bitcoin and ethereum prices. Note: a Trump demonetization attempt or proposal would drive bitcoin prices through the roof.
- Increased gold prices because many people view gold as an effective hedge. An interesting result might be a boom in the gold coin and jewelry market as average people fearing demonetization rush to cash out.
- Increase the value of other currencies particularly; the Euro, the Pound, the Yen, the Swiss Franc, the Australian Dollar and the Yuan, all of which might be seen as effective alternatives to the dollar.
We need to pay attention to Trump’s weak dollar proposal because it might have catastrophic results. Investors that pay close attention might find themselves in a position to cash in, in a big way.https://geekcrunch.reviews/effects-weakened-dollar/https://i1.wp.com/geekcrunch.reviews/wp-content/uploads/2017/01/scarydollar1.jpg?fit=800%2C600&ssl=1https://i1.wp.com/geekcrunch.reviews/wp-content/uploads/2017/01/scarydollar1.jpg?resize=150%2C150&ssl=1Investmentsdollar is too strong,Donald J. Trump,higher bitcoin and ethereum prices,Higher stock and real estate prices,Increase the value of other currencies,Increased demand for bitcoin,Increased gold prices,Inflation,More foreign investment,Trump’s weak dollar proposal,Weakened Dollar,weaker dollarIncoming U.S. President Donald J. Trump has made the statement that the U.S. dollar is too strong. Some observers think that indicates Donald wants to weaken the dollar in an attempt to increase U.S. trade and stimulate economic activity. We now need to ask the question, what would happen if...Daniel JenningsDaniel Jenningsjdangjenn@gmail.comAuthorGeek Crunch Reviews