And a strong dollar good for the poor? My logic: Since 40% of S&P earnings are overseas, a weaker dollar buoys stocks. Stocks are overwhelmingly owned by the top %. While a strong dollar makes it easier for the poor to get by on low wages, it makes investing for the rich less lucrative. Real estate investments and stocks tend not to perform as well.
Is a weak dollar good for the rich?
- Thread starter kxvid
- Start date
A weakening dollar is very good for the rich because they use leverage/credit in their transactions.
Weak currency is bad for everyone whose assets/income are denominated in that currency.
REAL wealth is a function of "Assets/Income X Currency value".
That is... If you have $100,000 in assets... and their nominal value increases 20%* because of a weak dollar... but the value of the Dollar declines by 20%... you then have
$100,000 x 1.2 x .8 = $96,000. Your "nominal assets" have increased by 20%, but your REAL buying power has DECLINED by 4%... not to mention the income tax you owe on your "nominal $20,000" gain.
A "weak dollar policy" is a ruse.. APPEARS to help some in the short run... hurts almost EVERYBODY whose assets are denominated in dollars in the long run.
Currency devaluation is the rude cousin of "inflationary price increases"... Politicians like to "talk weak Dollar"... because it's EASY... like money printing.. and its effects are like "frog in the pot".. we-the-people don't understand what's happening to us so we don't bitch until the water gets really hot.
*What if your assets increase by only 5%? Then you have $100,000 x 1.05 x .8 = $84,000 in real buying power... minus the taxes you owe on the 5% nominal gain.
REAL wealth is a function of "Assets/Income X Currency value".
That is... If you have $100,000 in assets... and their nominal value increases 20%* because of a weak dollar... but the value of the Dollar declines by 20%... you then have
$100,000 x 1.2 x .8 = $96,000. Your "nominal assets" have increased by 20%, but your REAL buying power has DECLINED by 4%... not to mention the income tax you owe on your "nominal $20,000" gain.
A "weak dollar policy" is a ruse.. APPEARS to help some in the short run... hurts almost EVERYBODY whose assets are denominated in dollars in the long run.
Currency devaluation is the rude cousin of "inflationary price increases"... Politicians like to "talk weak Dollar"... because it's EASY... like money printing.. and its effects are like "frog in the pot".. we-the-people don't understand what's happening to us so we don't bitch until the water gets really hot.
*What if your assets increase by only 5%? Then you have $100,000 x 1.05 x .8 = $84,000 in real buying power... minus the taxes you owe on the 5% nominal gain.
Due https://secure.wikimedia.org/wikipedia/en/wiki/Nixon_Shock weak dollar is good for oil importing nations