Iraq War and the value of the USD

[Cartesiantheater]

If anyone is good at ecnomics (I wish Perfectionist was still here), I have a question.

In what ways has the Iraq war contributed to the devaluing of the USD? There is obviously a corelation, so what's the connection?



I am looking for a slightly technical response if possible (i.e., not just political ranting against Bush. This is an acedemic interest on my part).



Thanks!

[olddragon]

Increased spending has caused inflation of prices like we see today in oil.
The government is spending money we don't actually have.
So it simply prints more to put into circulation causing the value of each new dollar to be worth less that the one before it. You divide a pie into 4 slices, each slice is a sizable portion.
Now divide that pie into a million pieces and convince your self each slice is the same as the one you sliced into 4.
Or you can also borrow money from other countries, which means that money you do not have is now owed to someone else.
Basically you can not spend more than you take in with taxes. To pay off the debt now it would take everything we make in taxes with no more spending for years.
I know this is not technical, but it is basic.

[Nu Kua]

CT, what is the obvious correlation between the devaluing of the dollar and the Iraq war?

[Freddy]

The Bush administration set out to devalue the dollar by 20%, or about .80 against the Euro to boost exports. It did not count on the oil crunch, sub-prime crisis and now the economy in a recession. Today the dollar is worth less than .65 of one Euro. Inflation( high oil), increasing unemployment, and a growing federal deficit(guns & butter) makes for a US economy in serious trouble.

[The Wicked Priest]

In a word, fear.

Check out this article from 2002:
http://www.independent.co.uk/news/business/news/iraq-war-fears-send-dollar-tumbling-to-new-low-612047.html

Some analysts also fear that a sustained attack on Iraq would destabilise the strategically crucial oil producing nations in the region, possibly sending the cost of the fuel so high that it triggers another recession in the US.

Minoru Shioiri, foreign exchange manager at Mitsubishi Securities in Tokyo, told Bloomberg news wire: "Nobody wants to buy the dollar. All anyone is talking about is what the US is going to do about Iraq and North Korea."

Article from 2006: http://www.alternet.org/waroniraq/38550/

Instead of paying for the war, George W. Bush and his Administration are laboring under the crackpot notion that the Lord will provide. Well, the Lord -- or the mechanics of business and finance -- is providing and what is being provided are dangerous dollops of inflation.

It would be worse if it weren't for foreign lenders picking up the debts the United States has run up pursuing the terrorist ghost riders. As the buying power of the dollar weakens, fewer of those obliging foreigners will lend us money. They don't want to be paid back with dollars that, ravaged by inflation, are worth less.

The government will have to pay higher interest rates to attract borrowers. There cannot be an adult left in America who hasn't learned what inflation does to one's personal finance.

[Cartesiantheater]

CT, what is the obvious correlation between the devaluing of the dollar and the Iraq war?

The correlation is that since we have entered Iraq the value of the USD has gone down.

I do believe we have borrowed a lot of money to fund this war, and I believe that might has something to do with it.



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Keep 'em coming people, and if anyone has any actual figures, that would be nice.

[Flynn]

War lowers unemployment and boosts GDP. However it also causes inflation. High inflation is usually matched by high interest rates. High inflation lowers our exports since less people outside the country can afford our goods. Since less people buy our exports, less people need USD, so the price of USD falls.

And just to comment, the amount of cash as percentage of total money supply has been relatively constant for the last 50 years. While the raw number of bills has gone up, the biggest gains in money supply are at the higher levels, which are the less liquid levels.

[Nu Kua]

The correlation is that since we have entered Iraq the value of the USD has gone down.

I do believe we have borrowed a lot of money to fund this war, and I believe that might has something to do with it.



Keep 'em coming people, and if anyone has any actual figures, that would be nice.

Ok I thought you already knew of something direct already but were looking for examples.
This person wrote a book about that theory- some of it is available for download and some charts on PDF; maybe there is something useful here; I see there is a link to a video to watch which sums up his position. (45 minutes)

Petrodollar Warfare & Collapse of U.S. Dollar Imperialism Special Report
(http://www.chuckcoppes.com/latest/petrodollar_warfare_collapse_of_u.s._dollar_imperi alism_report.html)
An excerpt from the introduction

"...In what is now being called the first oil currency war of the 21st century, the Iraqi War in 2003 was more about protecting US dollar imperialism and preventing a “petroeuro exchange system” than the alleged threat of WMDs or terrorist links to Osama bin Laden and his al-Qaeda network.
As William Clark is careful to point out, Saddam Hussein had begun to price Iraqi oil contracts in euros starting in November 2000 and the US government was determined to put a stop to this crude/euro currency peg, which they successfully did in the summer of 2003.
As Clark mentions: Not surprisingly, the US corporate media has not run a single news story on the reconversion of Iraq’s oil exports from petroeuros to petrodollars….This hidden fact [has] helped illuminate one of the crucial, yet over-looked macroeconomic rationales for the 2003 Iraqi War. Another goal of the neoconservatives was to use the “war on terror” as the publicly expressed premise in an attempt to dissolve OPEC’s decision-making process, thus ultimately frustrating the cartel’s inevitable switch to pricing oil in euros... (authors emphasis of quote)

The end of the article is a mile long list of source and a few links- maybe that will help your search as well.

[Justice]

If anyone is good at ecnomics (I wish
In what ways has the Iraq war contributed to the devaluing of the USD? There is obviously a corelation, so what's the connection?


This is easy

The war costs money and the goverment just prints the money to pay the bills but this devaules the $$$ in peoples pocket via inflation.

Flood the world with patotoes and the prices goes down !

Inflation forces down the value of a currency unless saving rates are high to make up for the loss of it's value.

When it comes to inflation all goverments are cooking the books to fool the sheeple.

See the youtube crash course on how inflation is being cooked , chapter 16 i thinks