Country currencies, weak and strong

Why do some countries currencies become strong and others weak? I believe when government policies punish producers and reward non producers it weakens that country's economy and a weak currency follows. The United States has been providing more socialists policies domestically, and trying to borrow and print money for its foreign programs. All attempts at empire building have eventually weakened the empire's currency.

The following text was written by Vlad Signorelli. I pasted in the charts from Yahoo Finance.

Charles Tolleson
----------------------------------

By, Vlad Signorelli- In 2001 Putin instituted a 13% flat tax rate on personal income along with a 9% rate applied to dividends. And capital gains, which are taxed as ordinary income, enjoy today a slightly better treatment in Russia than in the United States. What's more, according to PricewaterhouseCoopers (PWC) there is a full capital gains tax exemption on the sale of a primary residence that is held for more than three years. The American exemption is good only up to $500,000 for a married couple for the same term. In 2006, Russia effectively eliminated its inheritance tax and taxing estates between 5–40%. Additionally, according to PWC, Russia's corporate tax rate was also reduced during Putin's tenure. It now ranges between 24% and 20% in most Russian regions.

Venezuela's tax system, on the other hand, is rife with obstacles to capital formation. It boasts a 34% top marginal rate on income over $93,000; a 34% tax on dividend income; and capital gains are taxed as part of ordinary income. Taxes on estates and inheritances run from 1% to 55%. The corporate tax rate is 34%; while for some industries, such as oil, the rate is as high as 50%.

Monetarily, the differences between Russia and Venezuela are even more apparent. At around 24.5 rubles per dollar today, the ruble is now stronger against the greenback than it was when Putin became president in 1999. What's more, monetary officials are correctly recognizing an anti-inflationary benefit in allowing the ruble to strengthen against the globally weak dollar. The Venezuelan bolivar, by contrast, suffered orchestrated devaluations in 2004 and 2005. On December 31, 1999 the Venezuelan bolivar-dollar exchange rate was 648.5. Today, it is nearly three times that number at 2,147 bolivars per dollar. It is on the back of these positive fiscal and monetary developments that Russia's capital formation has really outshined other oil producers. While the Caracas stock exchange under Chavez's redistributionist policies has still managed to gain 108% in U.S. dollar terms since January 1, 2002, Putin's supply-side revolution has catapulted the Russian Trading System Index, which is up more than 645% over the same period!

(U. S. Dollar Vs Venezulean Bolivar)

Vlad Signorelli [send him mail] covers international markets and is the executive editor of Bretton Woods Research, LLC, a supply-side macroeconomic forecasting firm.