What Makes a Strong Currency?

What makes a strong currency?

For all of us in the United States, I do not think that question comes up too often as people gather during their day to share a few thoughts about life and the weather. Paying for goods and services with our money is just part of everyday life. We do not think about picking up a fork when we eat, we just use it. For most of us, using our U.S. dollars is just like using a fork, even though the fork keeps getting smaller and picks up less food with each bite.

We all know that the government prints our money. If you look at your paper money closely, you will see that it says for all debts public and private. Anyone else thinking about getting into the printing business of making U.S. paper money is usually very quickly put in prison. Our government has the exclusive rights to print our money and no one else is suppose to give them any competition.

If everyone that wanted to print paper money could print paper money, paper money would become worthless. Money must represent value. We have numbers on our paper money that tells us how much money we hold, and without the numbers 1, 5, 10, 20, 50, and 100, we would be unable to figure out just what we had in our wallet. Could you imagine just for a moment that as you hold your money in your wallet the numbers on the paper money change. It actually is happening every day, you just do not notice it, but the numbers are declining in value.

Unfortunately, the value of money can be changed by government policy. How does the government do that? By printing more and more money, by borrowing more and more money, the government can create an abundance of money in circulation. In fact, the government can create an abundance of U.S. dollars around the world.

Many other countries can not borrow and print money and expect the rest of the world to still regard their money favorably. The United States can borrow and print a lot of money and the world will still accept U.S. dollars as payment. There are other than economic reasons for the U.S. dollar’s wide acceptance around the world. The U.S. government besides having a strong economy, has a very stable political system and has a strong military.

It has been over a 140 years since the United States was engaged in a civil war. The president is not elected for life, but even has a two term limit. The commander-in-chief of the military is the president, a civilian, and the generals from all branches of service report to him. The military of the United States is one of the strongest in the world and there is little chance that our government will be toppled. All of these reasons are factored into why investors and governments outside the United States are willing to hold U.S. dollars despite our government's policies that are detrimental to the dollar.

And yet, with all these factors in our favor, our currency, the U.S. dollar, would not be as widely accepted as it is without the holders of U.S. dollars having confidence in our system. The question is: how much can the U.S. government borrow and print before others, outside the country, stop holding U.S. dollars or simply lose confidence in our ability to manage our own economy. Can we continue to borrow and spend without end?

As I said at the beginning, most of us do not think about the value of the dollar except for our purchases every day. However, perhaps for the first time, the rapid and steep rise in the price of gas and diesel has caused many Americans to think about the value of their dollar and the government policies that have lead to the decline in the purchasing power of the dollar.

There will be a day of reckoning. The world is watching how we manage our money, our government and our priorities. Change will take place, the question is whether it will be forced upon us from the outside, or, whether we will recognize the problem in time to make the changes from within. Stay tuned.