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Tipsheet

Why Americans Should Worry About the Dollar Losing Its Value

AP Photo/Mark Lennihan

The U.S. dollar has been declining for several months, causing it to lose value and igniting fears that the country is heading for a recession. 

According to Charles Schwab, the dollar has fallen by about 8 percent to 10 percent in both real and nominal terms since late last year.

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Speculation that the dollar could lose its status as the world’s primary reserve currency comes from rumors that Communist China may move to use the yuan in commodity trades with several trading partners. Brazil and Argentina are also mulling over being a common currency worldwide. 

Greenback has fallen 7.4 percent since November, according to the nominal broad U.S. dollar index. The Washington Post noted two notable reasons why the dollar is facing extinction. 

After a series of hostile rate hikes, the U.S. is heading into a different phase of monetary policy as inflation remains steady. 

“The Fed is now talking about pausing; the markets think that they’re going to be cutting interest rates. So we’re in a different stage of the interest rate cycle,” Desmond Lachman, a senior fellow at the American Enterprise Institute, told the Washington Examiner.

Another reason the U.S. dollar may be looking down the barrel is because of recent layoffs and jobless claims. But, again, this is a sign that rate hikes are beginning to dissolve.

Additionally, the central issue of the debt ceiling poses a risk for the U.S. currency as the Treasury Department has resorted to using “extraordinary measures” to prevent the nation from defaulting on its obligations after the country hit its debt limit at the beginning of the year. 

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Republicans are trying to negotiate the situation with President Joe Biden and Democrats, which will determine how affected the dollar will be. 

Last month, the Brazilian government announced that China and Brazil have agreed to trade using their currencies, bypassing the need for the U.S. dollar as a mediator. Another warning is that the dollar is beginning to deteriorate. 

China has been slowly attempting to destroy the U.S. dollar, suggesting that the country wants to create a world economy that is less reliant on the dollar and expand its communist influence internationally. 

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