What would the Effects of a Weakened Dollar Be?
Moving toward U.S. President Donald J. Trump has incited the statement that the U.S. dollar is too solid. Two or three onlookers interpret that shows Donald needs to weaken the dollar attempting to make U.S. exchange and stimulate economic progress.
We now need to ask the question, what may happen if Trump genuinely weakened the dollar? Some verifiable impacts would be:
- Inflation. A weaker dollar would mean more cash open for use which would lead to inflation. The rate of inflation a weak dollar would make is impossible to determine.
- Lower interest rates. The Federal Reserve might lower interest rates in an effort to control inflation. This may induce more economic growth, yet it may drive more inflation by working up the cash supply progress.
- A lower savings rate. One reason why Americans are sparing more is the solid dollar. The corporate hold stores rate is 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 a nearby period. Higher inflation and a sensitive dollar would give companies and people more help to spend. That may drive more inflation.
- More foreign investment for the U.S. since investors would get more bang for their buck.
- Higher stock and real estate prices since 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 getting sway which might dampen economic activity. This might limit the appeal of Trump’s jobs policy by effectively cutting salaries.
- Made intensity for bitcoin and other cryptocurrencies; especially ethereum. Financially refined Americans seeing a basic for a hedge against a weak dollar would swing to cryptocoins and bitcoin mining. This would mean higher bitcoin and ethereum costs. Watch: a Trump demonetization attempt or proposal would drive bitcoin costs through the roof.
- Increased gold costs because many people view gold as an effective hedge. An interesting result might be a boom in the gold coin and jewellery market as average people fearing demonetization rush to cash out.
- Increase the estimation of 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 have to focus on Trump’s weak dollar proposal since it might have catastrophic results. Investors that pay close attention might find themselves in a position to cash in, in a big way.