Perhaps the US Dollar may decline as demand for US dollars drops after “quantitative easing”. This is speculation on my part.
That said, I am a proponent of speculative economic analysis because it can reveal which paths are better ones to take in order to beat the markets. The simple concept behind what I am suggesting is, in the very near future the Federal Reserve may begin to tighten its monetary policy in a way that may dramatically decrease the dollar value of the US dollar. This will cause speculators to fear that the Fed will cause a decline in the value of the dollar, even though the amount of US dollars in circulation will remain the same.
The basic flaw in financial reporting is that most of the financial reporting information available to the public is available via third parties who are merely reporting the reporting of the entities that they represent. Thus, a decline in the dollar value of the US dollar is unlikely to be reported by the large institutions that report the figures in the first place.
The Fed has large direct influence over the money markets because the Federal Reserve is the central bank for most of the money markets. In this regard, the Fed has total control over the US monetary policy, so there is certainly some confirmation of the possibility that there may be a decline in the value of the US dollar.
But why should a decline in the dollar be a concern? Well, one important reason is that the quantity of dollars that can be made available in the banking system will increase. In other words, there will be more dollars in circulation to cover bank liabilities, and there is no reason why the amount of dollars available for public use will not increase.
In addition, large banks may be willing to allow their customers to transfer funds through the banking system in exchange for zero interest, rather than pay interests on deposits that they hold at their own accounts. In other words, the banks are more willing to allow their customers to make deposits at their banks in exchange for holding assets that the banks have, and at the same time, they are providing the services that customers desire in return.
That said, the banks will still be able to make the same amount of money as they were making before the crisis began, and will only lose a fraction of the cash that they lost from retail consumers. Indeed, if you consider the fact that most retail customers are now using checks rather than debit cards, the banks can actually earn more money by doing transactions that they had been making in the past, as well as allowing customers to move money with them at zero rates of interest.
Therefore, it is likely that the banks are making up for their losses, as well as being able to cover their assets with the money that retail consumers are withdrawing from their checking accounts. This, by the way, is a major reason why the banking system has been so successful during the crisis.
The implication is that if consumers start to withdraw their money from their checking accounts, the banks can stop charging for their services and instead, will encourage the transfer of their customers’ money to their accounts. In addition, it is likely that they will pass on this price increase to their retail customers.
The obvious implication is that the banks will be able to continue their consumer payments, while also charging a very low interest rate on the balances that they currently hold with them. It is not inconceivable that they will begin to offer new products to their retail customers in order to bring in new business, and with increased sales volume the bank will begin to make a profit as well.
So the question is, will the dollar rise? Of course, it is true that our currency is used as a global reserve currency in some of the largest financial institutions in the world.
But for a currency to appreciate in value, it must be accepted as a store of value by consumers. thus, a decline in the dollar is less damaging to the consumer confidence. a decline in the dollar means of exchange.