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The Issues Of Weak Currency And Inflation

posted 2 Oct 2010, 06:38 by Sam Mbale   [ updated 2 Oct 2010, 06:40 ]

There are different economic points of view when it comes to
weak currency and inflation. Sometimes a weaker currency is
a positive aspect. Sometimes it is a negative one. What
matters most is how long a currency weakens for and its
impact on world wide economic stability.

Weak currency can often be good for the job market. When the
dollar is weaker it opens up a greater flow for money and
thus encourages more businesses to hire. However, this has
to be a short term situation. Otherwise the weakened dollar
starts to impact the economic stability around the world.

Inflation, of course, means that the item you purchased last
year is now going to cost more than it did. The perpetual
rise of particular items like gas, food, housing, and
electronics is referred to as inflation. Inflation is one of
the most difficult financial aspects to deal with, especially
when you're talking about bringing the household budget under
control.

Inflation that is unbalanced against a weaker currency means
that while things cost more, most people are making about the
same amount of money. Thus, the family budget is then thrown
off balance because the rise in price regarding food and gas
has to entail the inability to provide the same dollar
assignment to another area like personal care or
entertainment.

There is a significant tie in between a weak currency and
inflation. When the currency weakens it usually means that
the international community is concerned about investing.
When international investors pull back, the power of a
currency is then muddled. It takes an obvious sign of a
strengthening economy in order for the power of the currency
to return.

This is part of why a balanced budget from the White House
is so important. When international investors are fearful of
the potential for interest rates to rise too much, they don't
want their assets to be in the form of a weakened currency.
When the federal deficit is too high, the international
community looks to find the strongest currency to buy and
back up so that they have stronger assets.

Inflation is often a marked ticket. It means that the goods
that are typically imported are costing more, and therefore
producing a higher overhead. In order to import the goods
that are necessary, the cost is higher. This is passed onto
the average consumer and is usually regarded as a bad sign
of the power of a currency. The answer is often to raise
taxes, which then leaves workers with less for their family.
When trying to balance a weak currency and inflation, the
entire international market has to be confident in the
potential for the currency power to grow.

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