Foreign exchange Essay

As mentioned above, there was a significantly high supply of money in the join States, which characteristically led to depreciation of the United States dollar. In addition, the period was characterized by a high rate of pomposity, implying that considerably larger sums of money would be used in buying commodities that would have been bought inexpensively in the earlier period (Atkinson and Hutto).On the international scale, the high cost of United States commodities meant that importers had to pay rafts of money to acquire the goods, which ultimately lowered the level of international trade between the United States and other countries (Table 3). Consequently, the United States dollar fluctuated against other world currencies such(prenominal) as the Japanese yen, the Sterling Pound, Chinese yuan and the Australian dollar (Atkinson and Hutto). For instance, the Sterling Pound exchanged at between $1. 9548 and $2. 0442 in 2007 (Table 3), which was a actually large variation. perio d Australia (dollar)Canada (dollar) China, P. R.(yuan) EMU Members (euro) Japan (yen) Mexico (peso) South Korea (won) Sweden (krona) Switzerland (franc) United Kingdom (pound) 2000. .5815 1. 4855 8. 2784 . 9232 107. 80 9. 459 1,130. 90 9. 1735 1. 6904 1. 5156 2001 . 5169 1. 5487 8. 2770 . 8952 121. 57 9. 337 1,292. 02 10. 3425 1. 6891 1. 4396 2002 . 5437 1. 5704 8. 2771 . 9454 125. 22 9. 663 1,250. 31 9. 7233 1. 5567 1. 5025 2003 . 6524 1. 4008 8. 2772 1. 1321 115. 94 10. 793 1,192. 08 8. 0787 1. 3450 1. 6347 2004 . 7365 1. 3017 8. 2768 1. 2438 108. 15 11. 290 1,145. 24 7. 3480 1. 2428 1. 8330 2005 . 7627 1. 2115 8. 1936 1. 2449 110. 11 10. 894 1,023. 75 7. 4710 1. 2459 1.8204 2006 . 7535 1. 1340 7. 9723 1. 2563 116. 31 10. 906 954. 32 7. 3718 1. 2532 1. 8434 2007 . 8391 1. 0734 7. 6058 1. 3711 117. 76 10. 928 928. 97 6. 7550 1. 1999 2. 0020 2007 I. .7865 1. 1718 7. 7582 1. 3109 119. 33 11. 024 938. 98 7. 0089 1. 2330 1. 9548 II. .8316 1. 0983 7. 6784 1. 3484 120. 80 10. 878 928. 69 6. 8641 1. 2221 1. 9862 III. .8471 1. 0456 7. 5578 1. 3748 117. 74 10. 965 927. 27 6. 7402 1. 1986 2. 0213 IV. .8898 . 9811 7. 4336 1. 4482 113. 23 10. 849 921. 26 6. 4148 1. 1468 2. 0442 2008 I. .9058 1. 0039 7. 1590 1. 5007 105. 17 10. 803 956. 12 6. 2668 1. 0670 1. 9790 II. .9435 1. 0099 6. 9578 1. 5625 104. 62 10.428 1,017. 02 5. 9862 1. 0316 1. 9712 III . 8879 1. 0411 6. 8375 1. 5030 107. 58 10. 328 1,064. 56 6. 3175 1. 0734 1. 8924 Table 3 Foreign exchange order between 2000 and 2008 Source Modified from GPO feeler The infrangible dollar against the yen between 2001 and 2002, which was the beginning of the Bush garbage disposal, discouraged importation by Japan from the United States (Atkinson and Hutto). At the same time, citizens of the United States opted to import of import items such as automobiles at the expense of the locally manufactured ones, thence putting the United States automobile industry in the quagmire in which it is instantly (OECD).The consequence of this is that major competitors such as the Japanese automakers have adversely affected local automakers such as Ford, and the whole industry has been earmarked for revival in the Economic Stimulus Package (OECD). Interest rates Government bond yields and interest rates generally declined between 2000 and 2008. For instance, the value of bills at auction declined steadily from $ 5. 85 to $1. 01 in 2003, but steadily rose from $1. 38 to $4. 73 in 2006 (GPO Access).The low price of bonds meant that banks were in a position to purchase much government bonds, thus diverting their attention from other financial service users such as borrowers (Crutsinger and Aversa). Ultimately, banks were forced to impose high interest rates on the loans they offered to the public, implying that most small business holders and individuals were crippled by a massive credit crunch (Crutsinger and Aversa). The ensuing credit crunch adversely affected the United States economy particularly towards the end s of the end of the Bush administration (Crutsinger and Aversa).Banks were most affected by the financial woes and this necessitated the Bush administration to consider taking ownership of variant banks in a bid to protect them from collapsing (Crutsinger and Aversa). This move was however also ill planned, as it would result in unnecessary government expenditure, resulting into higher inflation in the United States (Hanke). In addition, there was no assurance that with the governments acquisition of the banks, their performance would improve (Hanke). Conclusion.Even though the world witnessed a massive economic recession, the woes in the United States stemmed from the fact that the Bush administration spent excessively on the war in Iraq and Afghanistan, which generally weakened the performance of most local institutions. The underperformance in various sectors was shown in high rates of unemployment, high inflation, fluctuating levels of money supply and foreign exchange rates a s well as high bank interest rates. The combined effect of the various phenomena led to a crisis in the entire United States economy, thus making the Bush administration one of the worst leaderships of the United States.References Atkinson Robert D and Julie Hutto 18October 2004. Bush vs. Clinton An Economic Performance Index. 10 March 2009. http//www. ppionline. org/ppi_ci. cfm? knlgAreaID=107&subsecID=295&contentID=252964 Crutsinger, Martin and Aversa, Jeannine 8 October 2008. 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