ShmoopTube

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

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Like if you waved dollar bill at a hotel owner

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in russia in the early nineteen nineties just after gorbachev

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tore down that wall Well that dollar would have bought

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you a whole night in the fanciest hotel in moscow

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hugely strong dollar relative to the russian ruble Back then

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a dollar that took an average worker in the u

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s like five minutes to earn Fought an entire night

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at a swanky hotel in russia Why Well at the

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

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

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be devalued like more less made worthless the next morning

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

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said that that when old ruble is now worth a

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one thousand of a new russian ruble or with government

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print a whole forest worth of just newpaper diluting the

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value of any one unit of its own rubles could

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happen has happened with other countries in the past by

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

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u s Well pretty much know least not in the

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modern era people trust you ask currency which is like

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saying that they trust the u s to not screw

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over people who rely on its banking system in its

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currency and that reliance and trust is worth a fortune

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to this country because we attract the assets of foreigners

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who feel safe giving our banks their money All right

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well what does that trust actually do or mean to

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us It makes for ah highly prized or strong u

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s dollar meaning that people will pay a lot of

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

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certainty or reliability of our own awesome currency And a

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big part of this has to do with relative inflation

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rates and relative interest in printing mohr paper by the

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

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the u s will actually be responsibly controlled with various

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monetary and fiscal policy Things that work versus the situation

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in l say venezuela where the country is going bankrupt

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under massive amounts of dead on their oil and they

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have to print currency night and day just to pay

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

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venezuela like they do the us anyway This dynamic makes

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u s goods relatively mohr expensive and foreign goods cheaper

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in the u s Think about it like us goods

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to be bought with russian rubles takes a whole lot

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of rubles to buy us made chair where as us

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dollars go very far in russia and a really nice

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chair here with the massage thing all that three bucks

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

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it inexpensive for those holding highly prized u s dollars

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to pay for hotel rooms in france when the euro

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is weak against the dollar and of course somalia because

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we always beat up on you somalia Sorry so yeah

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at least for now the u s dollars pretty strong

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

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