“This decline in the value of the dollar is simple to explain. The dollar loses value as the direct result of the Federal Reserve and U.S. Treasury increasing the money supply….
Federal Reserve Chairman Ben Bernanke faces two basic ongoing choices: raise interest rates to prop up the dollar, but risk pushing the economy into a recession; or lower interest rates to stimulate the economy, but risk further declines in the dollar. This unfortunate dilemma is inherent with a fiat currency, however.
…The Federal Reserve did two things to artificially expand the economy during the Greenspan era. First, it relentlessly lowered interest rates whenever growth slowed. Interest rates should be set by the free market, with the availability of savings determining the cost of borrowing money. …
Second, the Fed steadily increased the monetary supply throughout the 1990s by printing money….
The precipitous drop in the dollar shows how investors around the globe are very concerned about American deficits and debt…”
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