Close relationship between the price level and the supply of money is one of the oldest findings that determine the macroeconomic behaviour. However, the US policies have an extraordinary effect to the global markets and economy state of other countries.
The US has an exceptional position as dollars are dominating in the international trade and any changes in the US economy state or currency stability highly impact on the commodity prices. According to this, the ongoing US difficulties to recover economy are harmful to the global economy. The dollar’s devaluation stimulates global inflation as prices of food, energetic resources and other raw materials increase sharply.
Considering a negative influence of the US policies to the global markets, the additional supply of dollars by implementing QE2 will hardly obey to the US politicians’ economy stimulation desires. The further deterioration of the credibility of the currency most likely will lead to the dollars' withdrawal from international trade and its usage as the world’s reserve currency. So, will the Americans become wealthier with a huge amount of dollars that have not purchasing power?
About Me
- Asta Pravilonytė
- Every manager can call him or herself a good strategist if he or she only works within an environment that is favorable; however, it is only in times of stress that one truly learns what one's capabilities are!
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