Control of valuation and devaluation, or what money is worth, ultimately resides in the lap of the national government. In the United States, that authority rests with the Federal Reserve. Because of the current U.S. national debt, business debt and individual debt, concerns about the economy lead the headlines.
The federal government possesses two ways to value or devalue currency: official moves to state what money is worth and allowing currency to float on the open market. More often than not, the latter strategy is used. Issuance of money can cause the devaluation of money; so can reduced interest rates, which create an influx of "cheap" money.
You can get devaluation advice in the following ways:
1. Compare the U.S. dollar to other currencies.
2. Learn the advantages to currency devaluation.
3. Get information from a devaluation expert about possible outcomes.
Watch how devaluation affects the dollar compared to other currenciesA currency's value is based on what it can purchase. Because of foreign trade, tracking foreign currency often determines the price of goods. You can find devaluation information from the Treasury Department to learn how the U.S. dollar stacks up against other international currencies.
Take advantage of currency devaluationDevaluation offers the advantages of reducing imports from outside countries and boosting exports. Imports become more expensive as exchange rates shift, while exports become more attractive to foreign buyers. This economic theory creates a J-curve effect: more items are purchased domestically, which in turn creates domestic jobs and could help correct a trade deficit.
Watch out for the devaluation of currencyThe possibility of currency devaluation creates some concerns about the U.S. national debt and the economy. Side effects of devaluation include inflation, or the rapid rising of prices. This can lead to hyperinflation, or an out-of-control spiral of constantly higher prices consuming the economy.
TreasuryDirect website displays the gross national debt and tells who the debt belongs to (domestic and foreign). The Institute for the Study of Long-Term Economic Trends (ISLET) website shows graphs and charts from economic experts to show the relationship between debt and deflation.
- The national debt, which is roughly $50,000 per adult in the United States, contributes to the devaluation of the currency.