The US dollar is used in most international transactions, so it stands to reason that anything that happens with the US economy will affect international finances in a substantial way.
As the United States Federal Reserve raises interest rates, the foreign exchange value of the dollar usually goes up as well.
One of the biggest ways the US affects the world’s economy, though, is its buying power. With gas prices going up and the dollar not worth as much as it used to be, Americans are buying less.
Many countries that export goods to the US will have a reduction in demand for their products.
Nations with less than stable economies could suffer dramatically from this downturn in spending, which would cause them to be less capable of buying American exports, furthering the downward spiral.
The US government has tried to combat this vicious cycle by promoting free trade with foreign countries and a new economic stimulus package. The stimulus package gives free money to American citizens in hopes that they will spend the money on products instead of bills or investments, thereby stimulating the economy.
Some countries stand to lose a lot if the United States were to fall into recession; there are many people watching to see if the recent proposals of the US government will turn the financial situation around.
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