Than what happens? All that money that was magically made does nothing? They are adding more money than there is revenue, which must lead to some form of inflation. Did you know that the US Dollar is equal with the Canadian Dollar right now? I remember the US Dollar having more worth yet a few years ago.
The thing is, with inflation also comes a drop in value. I'm sure you know that. Whenever mass amounts of more money is printed, people are losing money because their money is worth less now. That's part of the reason that people are becoming so poor; the savings rate is actually negative in the United States - a rate of -0.2%, I think? Even France has a higher savings rate than that
(actually has the highest savings rate, I think, which perhaps is the reason I thought of it). Part of this may not even be blamed on the state but on the people, as well. I could well attest that most US citizens hate saving money. Of course, most US 'poor' US citizens tend to be rich in the eyes of other countries, in the form of living, of course. Some people are further in debt than they could possibly pay off.
The government always adds money into the market, even when there isn't a crisis; yet in normal times the value doesn't fluctuate drastically. The basic facts are there. With a low economic growth, general price levels (GPL) will remain low mathematically; real value won't be erode as much. I can't post a diagram on my phone, but searching an AD/AS diagram will help.
I would pin the depreciation NOT on Obama's policies. The dollar has always been depreciating; it's not a magical shift that happened only since "last year". In fact, as an example of this trend, the year of 2004 was the third consecutive year since 2000 for the depreciation of US dollar against the Euro-dollar. In fact, the US dollar has always been on a downhill slope since 1971 when Nixon took the dollar off the fixed exchange rate of 35 dollars to an ounce of gold, leading to the Nixon Shock.
The depreciation in theory is the bitter medicine that America has to swallow. As you rightfully pointed out, America has an extremely low savings rate; most money is spent. 70% of the American economy is fueled by consumption (C) one of the Components of Aggregate Demand apart from Investment (I), Government Expenditure (G) and Net Imports (X-M). America has been importing far far more than exporting, this trade deficit ( different from a budget deficit) if is prolonged like Americas case since it has recorded almost annual deficits since the 1970s, leads to a steady depreciation. A depreciation will in theory make America's exports more competitive since domestic produced goods are cheaper in foreign currency, and imports will be more expensive. This net effect is supposed to cancel the trade deficit over time; yet America's lack of competitiveness in many areas, such as it's inefficient steel industry, and it's high marginal propensity to import and consume means this trend does not buckle.
However, on that chart, did you know that if you're 19 and you put $2,000 dollars in a mutual fund (8% interest) a year for the next eight years, when you're 65 you'll have over $2,000,000 dollars? But, if you wait until you're 27 and save $2,000 dollars a year until you're 65 in the same mutual fund, you'll have around $700,000 less? One person saves $16,000 and earns over two million... Another person saves $78,000 and earns just over one and a half million dollars. Of course, if you count inflation over 46 years, it will probably be worth a bit less than it even does now, but considering, that's still a decent difference.
... Funny thing, I actually have to explain that to two different people as a school assignment in my financial class this week... I don't suppose you want to fill in for one person? :P
Also, I can't help but wonder if going to a gold-back system would be better. Then you actually know that your money is worth something, and depends on the market, not how much the government decided to put in circulation that year. Just a thought.
Inflation is not a new thing. We've seen that for decades, Singapore's compulsory savings scheme has been plagued by real value eroding since it was implemented in the 1960s. It is not something you can cure on the spot, unless drastic structuring of the economy is done which will take a long time; to ensure that productivity increases at an appropriate pace, and the long run aggregate supply moves at an appropriate rate, allowing the US the ability to compete, keep real, not nominal wages up.
A fixed exchange rate system is a horrible idea in the best of times and a gravestone in the wort of times, I.e where the US is now. There's a reason why moat nations use a managed or dirty float instead of free floating or fixed exchange rates.
A floating or dirty float exchange rate would deal with a disequilibrium in the balance of payments without government interference, and with no effect on the domestic economy. If there is a deficit then the currency falls making you competitive again. However, with a fixed rate, the problem would have to be solved by a reduction in the level of aggregate demand. As demand drops people consume less imports and also the price level falls making you more competitive.
Fixed exchange rates require a government to hold large scale reserves of foreign currency to maintain the fixed rate, because in the real world the value of currency always fluctuates - such reserves have an opportunity cost. Nor does the American government even have much reserves, at the last count they have even less than Apple. Unless it borrows to finance this fixed value, which is disastrous too because of the high debt levels already.
The needs of the exchange rate can dominate policy and this may not be best for the economy at that point. Interest rates and other policies may be set for the value of the exchange rate rather than the more important macro objectives of inflation and unemployment. This means the government can't use monetary policy as an economic tool, a shot in the foot due to the Economic Trilemma.
Fixed rates are inherently unstable - Countries within a fixed rate mechanism often follow different economic policies, the result of which tends to be differing rates of inflation. What this means is that some countries will have low inflation and be very competitive and others will have high inflation and not be very competitive. The uncompetitive countries will be under severe pressure continually and may, ultimately, have to devalue. Speculators will know this and thus creates further pressure on that currency and, in turn, government.
The US is particularly uncompetitive now; fixed exchange rate will be awful for it.
I would call friendly burning our flag. I realize that may not be of the wish of the entire country, but they definitely look like they were looking for a nice little apology that insults the honor of the US. It's a bit unpatriotic, and he's THE leader of the United States, the person in charge of it - and he pretty much slapped in the face anyone who had any hope in restoring honor in our nation. It does show that his foreign policy is a bit weak.
Did you know that because of his apology, there were actually attacks on other embassies in other nations as well? Just putting that out there.
It's called being diplomatic. Did you know that Bush's belligerence has almost single handedly inflamed the entire Muslim world, and is one of the major causes of why terrorists avow daily to attack the US? Did you know that the Grand Mosque attack in 1977 was caused by US insistence on deploying Troops in SA?
What's with Americans, "Patriotism" and not stepping down for once? And people wonder why they have such an ugly rap worldwide, and why we constantly parody "patriotic" Americans.
I do agree that a little face saving is sometimes needed to placate the public; yet if it means antagonizing an already tense situation worldwide, what with the recent Koran burnings, soldier urinating, anti Islam film, and Moderate Islamist governments coming into power everywhere, a bit of a loss of "dignity" seems the wisest way of preserving your nation.
