Strong Dollar

Categories: Econ, International

Everything’s relative. Like…if you waved a dollar bill at a hotel owner in Russia in the early 1990s, just after Gorbachev tore down that wall, that dollar would have bought you a night in the fanciest hotel in Moscow. Hugely strong dollar relative to the Russian ruble back then.

A dollar that took an average worker in the U.S. five minutes to earn...bought an entire night at a swanky hotel. Why?

Well, at the time, Russia’s entire political system was shaky. Unstable. Its population didn’t trust its own very soft currency. Would it be devalued? Like…more or less made worthless the next morning by the government as it issued a new currency? Or would the government print a whole forest worth of paper, diluting the value of any one unit of its own ruble? Could happen. Has happened with other countries in the past. Brazil, we’re looking at you.

Could that happen in the U.S.? Well, pretty much…no. The world trusts U.S. currency, which is like saying that they trust the U.S. to not screw over people who rely on its banking system and its currency. So what does that trust...do? Well, it makes for a highly prized, or strong, U.S. dollar. Meaning that people will pay a lot of their own country’s mistrusted currency in order to buy the certainty, or reliability, of our awesome currency. This dynamic makes U.S. goods relatively more expensive and foreign goods cheaper in the U.S.

And yes, it also makes it inexpensive for those holding highly prized US dollars to pay for hotel rooms in France, and of course…Somalia.

At least for now, the U.S. dollar is relatively strong. To keep going with the Russia metaphor, it’s, uh, Rocky-versus-Ivan-Drago strong.

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Finance: What is a strong dollar?3 Views

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Finance allah shmoop what is a strong dollar everything's relative

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Like if you waved dollar bill at a hotel owner

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in russia in the early nineteen nineties just after gorbachev

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tore down that wall Well that dollar would have bought

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you a whole night in the fanciest hotel in moscow

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hugely strong dollar relative to the russian ruble Back then

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a dollar that took an average worker in the u

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s like five minutes to earn Fought an entire night

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at a swanky hotel in russia Why Well at the

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time russia's entire political system was a shaky unstable Its

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population didn't trust its own very soft currency Would it

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be devalued like more less made worthless the next morning

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by the government as it's issued a new currency Or

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said that that when old ruble is now worth a

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one thousand of a new russian ruble or with government

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print a whole forest worth of just newpaper diluting the

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value of any one unit of its own rubles could

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happen has happened with other countries in the past by

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brazil We're looking at you Could that happen in the

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u s Well pretty much know least not in the

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modern era people trust you ask currency which is like

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saying that they trust the u s to not screw

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over people who rely on its banking system in its

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currency and that reliance and trust is worth a fortune

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to this country because we attract the assets of foreigners

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who feel safe giving our banks their money All right

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well what does that trust actually do or mean to

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us It makes for ah highly prized or strong u

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s dollar meaning that people will pay a lot of

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their own country's mistrusted currency in order to buy the

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certainty or reliability of our own awesome currency And a

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big part of this has to do with relative inflation

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rates and relative interest in printing mohr paper by the

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government like they're making bets that the inflation rate in

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the u s will actually be responsibly controlled with various

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monetary and fiscal policy Things that work versus the situation

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in l say venezuela where the country is going bankrupt

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under massive amounts of dead on their oil and they

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have to print currency night and day just to pay

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the bills people from starving yeah so people don't trust

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venezuela like they do the us anyway This dynamic makes

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u s goods relatively mohr expensive and foreign goods cheaper

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in the u s Think about it like us goods

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to be bought with russian rubles takes a whole lot

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of rubles to buy us made chair where as us

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dollars go very far in russia and a really nice

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chair here with the massage thing all that three bucks

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leased It wasn't nineties anyway And yes it also makes

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it inexpensive for those holding highly prized u s dollars

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to pay for hotel rooms in france when the euro

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is weak against the dollar and of course somalia because

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we always beat up on you somalia Sorry so yeah

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at least for now the u s dollars pretty strong

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Keep going with the russian metaphor It's rocky versus ivan 00:02:58.11 --> [endTime] drago strong

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