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
FAC12
Block A
Subscribe to:
Post Comments (Atom)
6 comments:
The United States is one of the world’s largest exporting countries; to Canada, they are the largest trading partner. If the U.S. dollar is declining, it affects everyone. Currently the Canadian dollar is worth more than the U.S. dollar. If inflation is making the value of the American dollar go down, the Canadians are getting a better deal. Before the meltdown, we were going down into the United States. If the U.S. keeps on printing more money and borrowing money from other counties when their dollar is down, I believe they will not be able to pay back their debt plus the interest they owe.
- J. Low
The decline of the US dollar can be very problematic, not only to the United States itself, but also to many other nations around the globe. If it simply keeps on printing more money, inflation is likely to result. This would be a terrible situation for the American people, even though it may trigger more trade with other nations since the exchange rate is so low. However, the increased trade can't hide the fact that the US has to borrow more money from other nations since it's running out. This, of course, will increase American debt even more and it will seem almost impossible for its government to ever pay it all back. The US government will have to work out a strategy carefully for everything to work out.
Yichu Zhou
FAC 12
Block B
Cameron, I totally agree with your reflection on what is happening. I think if the receivables aren’t collected, we may be due for economic troubles that will affect us for a long time. It isn’t fair to the other nations that the US could just borrow money and not return it. When the US dollar goes down, it not only affects them, but it also affects all these other nations throughout the world. I believe they are hurting the economy even more by borrowing money that they can’t return and over-printing money too. They also owe interest on the money they borrowed, and by predicting on how the future will look, I think the US dug themselves a hole this time that is to big to get out of.
Mandeep Dhami
Financial Accounting 12
Block A
I find your article interesting but seems that it is nothing new as The United States continue to put themselves deeper and deeper into debt. It is getting to the point of "no return." The recession alone cannot be the only factor in the U.S. dollar decline but it appears that is the only way the U.S. looks at it. Now, with the lack of money out there for all of their projects, they continue to print more and more but do not stop to think exactly what they are doing. More money is great, but more money also means more problems. There is no more time to be wasting money, they need a sure plan that will at least help them improve their current situation because we all know that it could take almost forever for them to get out of it all. The United States is one of the biggest countries that creates jobs and money and this affects everyone they trade with, most of us. Canada heavily relies on U.S. for help along with others but if this continues, everyone is going to be on their own.
Jason K.
Block A
After reading your article, Cameron, I tend to agree with your insight on this issue. The current state of the American economy, and the future prospects of improvement look somewhat cloudy. The volatility of the American monetary unit (dollar) proves that their economy is very unstable, but on the other hand this kind of scenario is also very hard to predict. One only has to remember about a year ago, that the Canadian dollar had risen to $1.10 and just as quickly fell to $0.78. Unlike what you have stated about the U.S. paying back these debts, Personally, I believe that, because the American economy has historically rebounded in the past, the U.S. will have no problem paying back all debts; even if they are unsecured.
- K. Jagpal
Post a Comment