Ben Bernake has just done that. He has printed new money at a record pace and slashed interest rates. That resulted in severe dollar deterioration. The more money you print the less value it will have. The U.S. Dollar is not really worth the paper it is printed on and it is the most oversupplied currency right now. The problems will only get worse the more money is printed.

Inflation would get even worse if you print more money and soon you can go and buy a loaf of bread with a bucket full of worthless paper (I know, this is not the best example).

Think of it as a pie. If you cut the pie in more pieces will you have more pie?

No, you won't. The total 'value' will be the same. Unfortunately we have a complete idiot heading the Fed who is pretty far down the evolution line and he just prints money like a maniac and to make things a lot worse cuts interest rates as if he would win a free meal the faster he cuts while he ignores any longer-term impact of his short-term actions. Maybe he wants to leave the next guy with a lot of mess to clean up. He has done a poor job from day one and the longer he heads the Fed the worse he does.

well hermes, i agree with u.
Thnx

Thanks Hermes for that informative insight. Is the strength of ones currency is based on its gold reserve? Or due to import/export ratio?

import/export i would think.

Dollar bills are a commodity, just like apples, gold, or oil. There is a rule we seem to have forgotten called "supply and demand". The fewer there are, the more value they have, but we must also remember that it is simply a piece of paper that "represents" an agreed upon value. This agreement comes from the trading of currencies on the international market, and has not represented a gold standard in a very many years.

Yes, what Dru said.

The value of the U.S. Dollar has nothing to do with gold reserves (the two have enjoyed an inverse relationship for a long time). It comes down to supply and demand and of course interest rate decisions will influence the value of currencies (which comes back to supply and demand).

Money is a supply / demand issue. If the country prints more money, its currency devalue.

The US Dollar is based on nothing more than faith and the backing of the US Government. It's now crashing because people realizing we're just printing more and more with nothing to back it up.

Agreed on the Bernanke comments.