07 Apr 2010
In today’s economy, you have probably heard about how our dollar is much weaker than before. What this means is that value of what one dollar can buy is much less right now than it was in years past. It’s going to take more than one dollar today to buy what one dollar used to be able to buy. While there are a number of disadvantages to a weak dollar, there are also some huge advantages when the dollar is in the state that it’s currently in.
For those who have debts, a weak dollar is to your advantage. If you owe $100,000 from a loan that you received 10 years ago, paying back that $100,000 today means that you will pay back less value than what you received. This is because you are paying back that loan with weaker dollars than the ones that you benefited from in the loan. Many times governments running massive deficits will weaken the currency to attempt to make the impact of all this extra debt be less by the time it’s managed or paid off.
Another advantage of a weak dollar is that goods are easier to sell to other nations. If we are selling $500 computers overseas and the dollar weakens, to another currency the weaker our dollars become the cheaper the computer is. This means that as this process continues, many people overseas will start buying American products. In our current economy, more sales could become more jobs. On the flip side, foreign goods do become more expensive such as oil.
Our weak dollar has also spurred foreign investments in business and even in housing. Compared to their currency, foreign investors are currently getting a good deal. While we might not have the capital to keep certain businesses going or buy vast amounts of residential and commercial properties, the foreign investors do. The weak dollar attracts capital which eventually we benefit from in the long run.