As this is my first topic, I thought I would start with something broad. I just finished writing a 10 page research paper on central banking in the United States for my friend (yea...) so I understand how currencies are valued, such as specie-backed currency or fiat currency. However, while watching videos by Ron Paul and other such advocates of Austrian economics (and actually pretty much anyone on the news these days) they seem to throw around the terms "weak dollar" or "strong dollar" as if everyone knows what that means.
As far as I am concerned, the dollar is always weak because... well, because it is "legal tender" and has no real value. But I know that this is not what "weak dollar" or "declining dollar" refers to. I am guessing it has something to do with the foreign exchange rate, but after that I draw a blank. Can someone please enlighten me as to 1) what is the difference between a strong and weak dollar and 2) what factors contribute to such increases and decreases in the value of the dollar?
Thanks
Usually on/in the news they are referring to a dollar vs. other currencies. So when the dollar is trading at say $1.00 to €1.10, it is "strong" and when it is trading at $1.00 to €0.65 it is "weak". Within the context of what they're saying, it vaguely makes sense. And you are right, one of the main reasons currencies fluctuate in value with regards to eachother is central bank monetary expansion.
It's easy to understand why. If there is €100 trn in circulation, and $100 trn, and then an extra $100 trn is printed, but with no extra production in the US, double as much cash is chasing the same amount of goods; a dollar is worth half as much (in total, but depending on your preferences, and your position in the distribution, the actual purchasing power effect on you will be different) and a Euro is (in this scenario) worth the same. Thus, the Euro appreciates with regards to the dollar.
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