The Dollar: Soon to Swoon?

The talk about the downfall of the Dollar might have been premature according to some economists. In mid August Warren Buffet, the CEO of Berkshire Hathaway warned the global economy of the dollar declining and turning the U.S. into a "Banana Republic Economy." A BRE means an economy that is dependent on mostly limited agriculture (bananas) and the country is run by a small, wealthy, self elected government. Many economists disagree both for hopes sake and for economic sense. For the hope part, many are hoping it does not because the Worlds back up/fall back currency is the Dollar. If that currency falls, those economies fall. As for the sense, Buffet is quoted saying that inflation is very plausible and will happen soon. But if you take a step back and think about how economy works you realize that it is not very plausible. Why? Because inflation takes place when money is pumped into the economic machine. The U.S. is recovering from a serious economic downturn where the country as a whole lost incredible amounts of money. Companies lost money so they laid people off, people lost money in stocks and investments. The recession left such a gap in the economy that it is going to take years for the economy to recover enough to actually be able to experience inflation. The only way we could experience inflation, would be if the government were to pump hundreds of millions of dollars artificially into the economy. Even if that were to happen, it might still take years before inflation kicks in because there is no equation to predict economy on a global basis. As of right now, the Euro has three different predictions of worth as of August 20th; $1.43, $1.12, $1.60.
So in reality, no matter what happens to the Dollar within the next couple of months, we wont feel the impact of it for a couple of years - minimum.

http://www.businessweek.com/investor/content/aug2009/pi20090820_935348.htm