Posted by
Always To The Right on Saturday, December 01, 2007 2:42:58 AM
All the talk about the dollar being weak, etc., read this and see.
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.
It rose sharply in the late 1990s, thanks to the outsized returns
offered in the U.S. markets compared with elsewhere. Today, after the
Nasdaq meltdown in 1999 and 2000, a recession and 9/11, the flood of
investment isn't as great.
True, the dollar has weakened against specific currencies — the euro
and yen are recent standouts — but that weakness must also be put into
context.
The dollar strengthened in the late 1990s due to Mexico's peso
crisis, the Asian financial crisis and Russia's market meltdown and
ruble collapse. All of these sent capital fleeing to the U.S.
Meanwhile, U.S. stock markets were roaring. Anyone anywhere with surplus cash protected it by investing in America.
Those who think a strong dollar means a strong economy have to
explain why, from 1997 to 2002, a time of record dollar strength, the
U.S. economy experienced a number of problems — including a stock
collapse and recession. Those conditions no longer prevail today.