Home Obama’s Stimulus Bad For Dollar, Good For Economy

Obama’s Stimulus Bad For Dollar, Good For Economy

The stimulus package delivered by Obama spills a lot of money into the US economy. Printing of money devalues the currency, but I do believe that this pro active and extreme measures will get America out of the crisis quite fast.

I’ve written in the past that the stimulus package will weaken the dollar, due to printing money and spilling it into the market. The more money there is, the less it’s worth. At that time, January 26th, gold was on the rise.

When the stimulus plan was approved in both houses of congress, the details were brightly seen: $787 billion US dollars that included  also direct actions that spill money, or print it if you wish. 400 dollar tax cuts for workers, and a 250 check for old age pensioners.

And where will this money come from?  Well, America will continue to borrow it’s way out of the crisis, practically print dollars. And too many dollars mean that it’s worth less”¦

I revisited the issue of the stimulus package and the dollar a month ago, on February 14th.

Following many searches that reached these posts, and lots of criticism about the stimulus being a waste of money, causing debt, etc. I want to emphasize that I believe that the plan will help America in the long term.

The main motive of the plan is to create more jobs. February’s Non Farm Payrolls showed yet another loss of jobs and especially showed another jump in unemployment rate.  

Americans have already changed their spending habits. Those who are jobless, just don’t have any moeny to spend. The American economy, based on consumerism, is contracting quickly due to this change.

If the plan works out, there will be more jobs, and then more money spent by consumers. This is good for the economy.  

The US drove the world to recession with the real estate bubble, the sub prime crisis and the failing banking system. I truly believe that America will also be the first country to get out of recession.  

Getting first out of recession is first and foremost due to the fact that the US is biggest economy in the world, and the “locomotive” of the world economy.

But this isn’t the only reason: Barack Obama’s stimulus package WILL stimulate the US economy, and get it out of recession faster than without the plan. His leadership on the economy, and the very active approach also give hope to Americans. Hope is also necessary in moving the economy.

I believe that in the coming months, the worsening conditions in America and the money printed for the stimulus package will devalue the US dollar. The “safe haven currency” effect will weaken, and movements in currencies will depend on the strength and weakness of the economies.

Some economies, such as the Australian one are strong and they will gain against the dollar. Weaker economies, such as the British, will weaken against the dollar (GBP/USD Parity?).

And when the stimulus plan starts getting people back on payrolls, the American economy will rise, and the dollar will rise with it.

When will this happen? When will the American economy get out of recession? End of 2009? Beginning of 2010? Tough question. Everybody’s waiting.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.