Chapter 6 Blog - USD On the Decline

http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20090522.wcurrencies0522/business/Business/businessBN/ctv-business

Summary
In this chapter, we learned about various assets as well as recognizing gains and losses. As it says in the article, the United States dollar is on the decline and is reaching new lows in 2009. The United States is perhaps the country that was hit the hardest by the recession. This meant that the government would have to undergo a process of inflation, which would cause the value of their dollar to go down because there is more money flowing through the country. When a country that big is running out of money, there is going to be a big problem. The value of money – their biggest asset – is going down. With that being said, we can look forward to more financial woes, as the US government will have to continue to borrow money and assets. The question is how will they repay their future debts and current debts at the same time?

Connections
The connections in the article come from the lowering value of the United States dollar. With the value lowering, the government will have to recognize the losses as well as reassess the actual value of their assets. The value of a currency will undergo change on the market every single day. Once the influx of cash pours in from inflation, the value of the dollar will go down. It will also cause the price of everything to increase. Also, the sources that the US is getting this money from will have to valuate the US government and figure out if they are good for the money, and maybe even use the direct write-off method just to make sure that this powerful nation receives the money that it needs, or even the allowance method if things go too far.

Reflections
It’s hard to come up with a solution for this huge problem that the US is facing. The superpower nation will have to continue to borrow money (which it can’t pay back), and will also need to print more money, which will hurt the economy too. You have to wonder why the US is continuing to use the same void solution to the same problem. Printing more money will not help because it is lowering the value of all US currency in circulation, and borrowing money will only put them in further debt. If this keeps up, then lenders will be wondering whether or not they will get their money back not just in the future but at all. Do you think that receivables from the world’s most powerful nation will not be able to be collected?

C. Tut
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