discussion post 116

Respond to students discussion posts. You can look at my post to compare it to other students post. Some students hold a different view than I. Leave 100-150 words response to others’ posts (each, 3 in total). You agree, disagree, talk about your point of view along with theirs. Show that you get what they are talking about and provide details. Use causal tone. For example, I have a differing viewpoint from yours, but I appreciate your use of the definition in order to make your point…and so on.

My post:

A) Quantitative easing
It is an exercise undertaken by the central bank to expand open market operations. The central bank increases credit of the reserves of member banks in exchange for the securities of those banks. Quantitative easing increases the supply of money in the economy which triggers inflation in the country. This will make the value of the currency to continue falling leading to devaluation of the currency. The state of dollar being the reserve currency of the world will also be jeopardized.
B) Impact on sale of goods and services
Devaluation of the currency of a nation has an impact on its exports as well as imports. Quantitative easing will result to devaluation of the US currency and this has an impact on the exports of the nation. The exports of the country will be cheap. Therefore, the companies in the US may not be able to cover the costs incurred in producing the goods. This will therefore decrease the ability of a firm to sell its product and services abroad. For instance, the ability of the automotive industry to sell their products to other countries will decrease.

My post hold different views than some of these students:

Respond to the following students posts.

Student One:

1. Given the quantitative easing measures put into place by the Federal Reserve, what do you believe will be the impact on the value of the US dollar? The quantitative easing measures is the monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply.So if they were to put that in place the value of the US dollar will increase.

2.How do you believe this will increase or decrease a U.S. company’s ability to sell their goods or services abroad? Will if companies don’t sell there goods abroad no one will make money. Everyone would be without a job. So that would be a decrease. However there are both sides to it. If they are selling goods then we are headed in the right track.

Student two:

1.Given the quantity easing measures put into place by the Federal Reserve, what do you believe will be the impact on the value of the U.S. dollar?

I believe that there will be a positive impact on the value of the U.S. dollar. By keeping interest rates low, the U.S. dollar will be worth more. It not only makes the U.S. dollar worth more, but it also increases the circulation of money. Low interest rates create for more money in the U.S. The low interest rates will create more loans, creating more money. People will be able to spend more on high priced items because of a lower interest rate. When an interest rate is high, markets begin to crash. People realize that they may not be able to afford something when they have to pay a large amount in interest each month. When they see there is a low interest rate offer, they forget about the extra costs because suddenly they feel as if the purchase they have been wanting to make is indeed workable into their lifestyle and their salaries.

2.How do you believe this will increase or decrease a U.S. company’s ability to sell their goods or services abroad?

I believe this could both increase and decrease a U.S. company’s ability to sell their goods or services abroad. This will increase a U.S. company’s ability because it will make a company appear to be more reputable. If the U.S. is doing business with a company who’s monetary value is less than the United States, that company may feel as if they are receiving quality items. It could decrease a U.S. company’s ability because other countries may have a hard time paying a U.S. company for their goods or services because their monetary value is not equal. It may make sales more difficult because the goods or services are worth more here than they would be in another country for resale.

Student three:

1) After reading and reviewing the articles provided, I believe quantitative easing by the Federal Reserve will ultimately weaken the value of the US Dollar. After reviewing the concept of quantitative easing, it seems that the effort of having a lower value in the Dollar only makes it more difficult for the overall value to increase. The idea of doing so makes it difficult for consumers to purchase goods and services. If the effectiveness of the Dollar is low, but prices on goods and services are still increasing, people have less money to buy these things and thus the economy has less to work with in the long run. So by using quantitative easing, we weaken the value of the dollar, but end up putting our economy in a hole it can’t dig itself out of, so long as consumers struggle to spend their money.

2) Lowering the value of the US Dollar is met by a lot of scrutiny from other countries/trade partners. Considering that lowering the value is considered as the US trying to gain a competitive economic advantage over other countries, I believe this will also impact company’s negatively overseas. The lower value of the dollar means to sell for less. When selling for less, you get that lesser amount in return. However, in the United States, companies are trying to sell higher to compensate for the financial lost. Because consumers cannot buy nearly as much with a lower dollar value, companies have to consider selling for a lot less, both overseas and nationally.

 

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