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Finance: What is a strong dollar? 3 Views


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Description:

A strong dollar is one that has earned trust on an international scale. It reflects a reliable currency...at least, more reliable than that of other nations.

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English Language

Transcript

00:00

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

00:08

Like if you waved dollar bill at a hotel owner

00:11

in russia in the early nineteen nineties just after gorbachev

00:14

tore down that wall Well that dollar would have bought

00:17

you a whole night in the fanciest hotel in moscow

00:20

hugely strong dollar relative to the russian ruble Back then

00:25

a dollar that took an average worker in the u

00:27

s like five minutes to earn Fought an entire night

00:31

at a swanky hotel in russia Why Well at the

00:34

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

00:39

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

00:43

be devalued like more less made worthless the next morning

00:46

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

00:49

said that that when old ruble is now worth a

00:52

one thousand of a new russian ruble or with government

00:55

print a whole forest worth of just newpaper diluting the

00:59

value of any one unit of its own rubles could

01:02

happen has happened with other countries in the past by

01:04

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

01:07

u s Well pretty much know least not in the

01:09

modern era people trust you ask currency which is like

01:13

saying that they trust the u s to not screw

01:16

over people who rely on its banking system in its

01:19

currency and that reliance and trust is worth a fortune

01:22

to this country because we attract the assets of foreigners

01:25

who feel safe giving our banks their money All right

01:28

well what does that trust actually do or mean to

01:31

us It makes for ah highly prized or strong u

01:35

s dollar meaning that people will pay a lot of

01:37

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

01:41

certainty or reliability of our own awesome currency And a

01:45

big part of this has to do with relative inflation

01:48

rates and relative interest in printing mohr paper by the

01:51

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

01:54

the u s will actually be responsibly controlled with various

01:58

monetary and fiscal policy Things that work versus the situation

02:02

in l say venezuela where the country is going bankrupt

02:05

under massive amounts of dead on their oil and they

02:08

have to print currency night and day just to pay

02:11

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

02:14

venezuela like they do the us anyway This dynamic makes

02:17

u s goods relatively mohr expensive and foreign goods cheaper

02:22

in the u s Think about it like us goods

02:25

to be bought with russian rubles takes a whole lot

02:27

of rubles to buy us made chair where as us

02:31

dollars go very far in russia and a really nice

02:35

chair here with the massage thing all that three bucks

02:37

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

02:40

it inexpensive for those holding highly prized u s dollars

02:43

to pay for hotel rooms in france when the euro

02:46

is weak against the dollar and of course somalia because

02:49

we always beat up on you somalia Sorry so yeah

02:52

at least for now the u s dollars pretty strong

02:54

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

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