Why Dollars Make Sense


Modern American paper money, including the trusty greenback dollar, is just a piece of paper that happens to be backed by the Federal Reserve until it is exchanged for goods and services. Although the purchasing power of the U.S. dollar has been significantly eroded over the past century, you can still get plenty of great things for a buck. A dollar will buy you a box of crayons, a cup of coffee, a daily newspaper and even a lottery ticket to give you the chance to win more dollars. Many restaurants feature special dollar menu items, and dollar sales at grocery and retail stores are favorite events for thrifty shoppers. When it comes to agricultural products and other commodities, however, a dollar seems less impressive. A greenback will only purchase .43 gallons of crude oil and one-third of a gallon of heating oil. A dollar compared to an ounce of gold is almost non-existent, purchasing less than .001 troy ounce of the precious metal.

It is interesting to see how far the dollar will go in other countries. The purchasing power of the American dollar overseas varies from nation to nation based upon many factors, including the value and purchasing power of each nation’s currency and the level of economic activity of the nation. According to recent exchange rates, a single dollar could purchase three cans of beans in Belgium, three kilograms of potatoes in Croatia and eight cups of milk in Kenya.

An additional factor to consider that may be even more important than the price of beans in Belgium is that since World War II, the U.S. dollar has been the currency standard used by nations around the world as the exchange medium of choice when conducting business. The level of government debt that has been incurred by the U.S. government, combined with other factors, has led to cracks in the foundation of the American dollar, and some nations have elected to transact international financial business using other currencies. It remains to be seen how these recent developments will influence the real value of a buck, both in America and abroad.

Only a Dollar
Source: Master-of-Finance.org

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