New Dollar Coin to Rise with Inflation
The Bailout Bill has been seen as negative for the almighty dollar. The US government simply does not have the financial strength to spend $700bn on its troubled asset relief program without significant impact on its currency.
Some speculate that US government debt might be downgraded, thus sparking a run on the dollar. Soon the answer to how many dollars to the pound will be a scary one.
The bailout is not likely to go smoothly, and that will depress the greenback. Investors may step up purchases in emerging markets which will continue to slide.
The fact of the matter is that the US government is going to have to issue more bonds to pay for the bailout bill, and is going to have to persuade foreign central bank reserve managers to continue buying them to artificially prop up the currency. The new dollar coin is going to totally replace the dollar bill as inflation grips.
On the other hand, some analysts suggest that the crisis is exaggerated, and that the US is better equipped to emerge more quickly from the crisis than Europe.
Only as the troubled asset relief program is implemented will we know, but it seems certain that with inflation the new dollar coin will totally replace the dollar bill.
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