Weakening the Dollar: A Band-Aid That Makes a Bullet Wound?


Both the President of the United States and the Treasury Secretary have advocated a financial strategy that involves weakening the American dollar.  Although weakening the dollar has historically resulted in short-term stock growth, this instant gratification strategy heavily contributed to both the 2000 and 2008 recessions.

Stocks that are most likely to see the biggest gains are stocks that rely heavily on foreign money, such as tech stocks and stocks from Asian indices.  Experts believe gold and silver stocks will also benefit from this strategy.  The price of gold and silver is typically inversely proportional to the strength of the dollar, so a weak dollar equates to strong gold and silver returns.  This is also true of oil.

The short-term market gains catalyzed by a weaker dollar often have long-term consequences.  Weakening the dollar has historically endangered the reserve currency status, which is the currency banks hold to pay international debts.  This strategy also makes investing in the United States a less attractive financial risk for potential foreign investors.  Unfortunately, decreasing the dollar’s strength has historically resulted in the ultimate loss of money and opportunity for the average, middle and upper-middle class investor, as well as damaging the economy.

-Allen A Garzone II, Garzone Real Estate, Inc, Boston Real Estate Agent

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