Posted on 12/03/2007 3:02:39 PM PST by shrinkermd
The plunge in the dollar has turned normally calm voices strident and fearful. A weak currency, they say, spells catastrophe for the U.S. economy.
But like much conventional wisdom, this isn’t true. Nor is it true that the dollar, to use one favorite recent word, has “collapsed.”
You wouldn’t know it, however, from recent headlines. This week’s Economist magazine, known for its cool-headed discussion of economic events, has this on its cover: “The Panic About the Dollar.”
Others see in the dollar’s slump a metaphor for America’s future — one of decline and waning influence in the world.
To be sure, the dollar is down almost 40% against the euro since 2001. Against the pound, it’s off almost 44%. It’s even down against the yen, by nearly 13%.
But put in perspective, these declines are neither dangerous nor even undesirable. Over the long-term, the dollar is well within normal bounds. After years of rallying due to massive flows of investment into the U.S., the dollar has simply come down to Earth.
To say it has “collapsed” or “plunged” is simply wrong — as the chart above shows.
Look at the dollar weighted against all its trading partners, not just a cherry-picked few, and you see the dollar hasn’t plunged at all. It’s about where it was 10 years ago — during the Internet boom.
(Excerpt) Read more at epaper.investors.com ...
Good post!
Hmmm......ok......so why is the price of gold at about $800 / oz?
Why is the price of oil at about $90?
Where’s M3?
Me thinks they doth protest a bit too much.
Weak Dollar = Higher exports.........Our company has suddenly gotten loads of inquiries from overseas companies for quotes on new equipment...........Coincidence?......I think not!............
They are at record highs in every currency. These things go through cycles. One observer has speculated that the Chinese are speculating in commodities, by building up huge long positions. It kinda makes sense - for a while they tried short positions and lost a bunch of money. Maybe they figure they'll do better on the long side.
Good article. It seems that the sky isn’t falling thanks to the weaker dollar. Manufacturing is coming back too, which is good for national security.
IMHO, there’s no question that floating exchange rates are a necessity in a global economy. In that sense, a lower dollar is “better” than one pegged at an artificially high level.
However, don’t be lulled into thinking that a lower dollar is any sort of panacea. It isn’t. For one thing, a lower dollar leads to less capital investment (because labour is now cheaper) — which, in turn leads to lower productivity — and lower productivity leads to a lower dollar. It’s too easy to be sucked into a vortex of decline.
“of a lower Canadian economy” = “of a lower Canadian dollar”
(Why can’t I see these things until they’re posted?)
Ping for later.
Good post, that weaker dollar is one of the reasons that the local news has been reporting on all of the foreigners shopping here.
I would also bet dollars to donuts, that it is American Businessmen, that are buying up the Euros, driving up the price of them, and making it easier for them to sell their products overseas. Win-Win situation, as long as we can keep the dollar strong against good and services here.
Well, sure, some importers and merchants will need to tighten their belts and adjust their service economy talents toward serving newer domestic technological companies. Some changes in progress aren’t going to reverse without terrible consequences. Speaking of consequences, the lower dollar and higher oil are consequences of our business leaders’ movement to put their manufacturing in foreign countries. The currency and commodity trends can’t be reversed now without instigating big wars. We’ll have to live with the trend toward being less anti-American and toward manufacturing more here, in the USA.
Oh! Hey! Wow! That sounds just like CA under celebrity Republican Goobernator Schwartzenaygur!!!
You must hit the top of the graph for the time period.
The tide comes in, the tide goes out ... and still you catch fish.
“er,uh yea that’s what we are running with O.K.?”
Yes the weak dollar is doing somebody some good. But the average Joe is still putting up with a loss of buying power greater than 3%. The fact that Vincente Fox let it slip on CNN’s Larry King that the “plan” is to have a single currency between Canada, Mexico and the USA doesn’t seem to register with too many folks who are too busy just trying to keep up. But the dollar’s days are numbered. Things are not permanent.
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