| The Perfect Storm in the Economy--What the Dollar's Decline Really Means to Your Pocketbook The Incredible Shrinking Dollar |
Brother, Can You Spare a Euro?
By Steve Greenfield, Featured Columnist, CollectiveWizdom.com
Since its creation in 2002, the “euro” ----a Frankenstein
creation that replaced the former currencies of 12 European
countries like France, Germany and Italy--- has beaten the
socks off the American greenback. Back then, the euro limped
out of the gate at a parity with the greenback. It quickly
dropped to around 86 cents for every dollar.
That was then. As of November 11, 2007, Veteran’s Day here
in the U.S., the euro is worth 1.46 American dollars. A single
euro now buys 46% more than its American peer.
We’ve scratched our heads in this column about the decline of
the dollar. (See “The Incredible Shrinking Dollar”,But what's
happening now is unprecedented.
The dollar has fallen to a 26-year low against the British pound.
It has fallen to a 33-year low against the Canadian dollar.
What has happened to put the dollar in a free fall ? Throughout
the last century, every American President and every American
Treasury Secretary has repeated the mantra that “a strong
dollar is American policy”. As recently as October 10, two
weeks before the G-7 Summit, both the current President and
the current Treasury Secretary recited the mantra by heart.
“ I feel very strongly that a strong dollar is in our nation’s
interest,” stated Treasury Secretary Henry Paulson, formerly
Chairman of Goldman Sachs.
What’s missing is the “and therefore”. In the past, severe drops
in dollar values have brought strong corrective actions, a buy
back of the dollar in effect to prop up the value. No such cavalry
charge is coming in the current climate.
Which leaves all of us to wonder aloud—what happens if the
dollar’s free fall continues? Is there any safety net down there?
Don’t bet on it. Secretary Paulson ha started adding a caveat to
that ol’ strong-dollar mantra. “and we believe that currency
values should be set in a competitive marketplace based on
underlying economic fundamentals.”
Those underlying fundamentals are weak now in the U.S. A
mortgage market meltdown, coupled with an economy strained
by the $576 billion cost of war have all but tapped out the U.S.
economy for the time being. We are now in hock. We are the
largest debtor nation on earth.
And what happens when we take out some of our retirement in
the form of those weakened dollars? A hidden costs of letting
the dollar sink is that the buying power of those retirement
savings ---once they are converted to dollars –is getting pretty
pitiful. Worsening the situation is that, unlike savers in other
countries such as Japan, few US-based banks offer Americans
the option of holding their deposits in the form of other
currencies. Only recently, a few German banks (Deutsche Bank)
and on-line banks (everbank.com) have begun letting
Americans open accounts in non-dollar currencies.
Brother, can you spare a euro?
By Steve Greenfield, Featured Columnist, CollectiveWizdom.com
Since its creation in 2002, the “euro” ----a Frankenstein
creation that replaced the former currencies of 12 European
countries like France, Germany and Italy--- has beaten the
socks off the American greenback. Back then, the euro limped
out of the gate at a parity with the greenback. It quickly
dropped to around 86 cents for every dollar.
That was then. As of November 11, 2007, Veteran’s Day here
in the U.S., the euro is worth 1.46 American dollars. A single
euro now buys 46% more than its American peer.
We’ve scratched our heads in this column about the decline of
the dollar. (See “The Incredible Shrinking Dollar”,But what's
happening now is unprecedented.
The dollar has fallen to a 26-year low against the British pound.
It has fallen to a 33-year low against the Canadian dollar.
What has happened to put the dollar in a free fall ? Throughout
the last century, every American President and every American
Treasury Secretary has repeated the mantra that “a strong
dollar is American policy”. As recently as October 10, two
weeks before the G-7 Summit, both the current President and
the current Treasury Secretary recited the mantra by heart.
“ I feel very strongly that a strong dollar is in our nation’s
interest,” stated Treasury Secretary Henry Paulson, formerly
Chairman of Goldman Sachs.
What’s missing is the “and therefore”. In the past, severe drops
in dollar values have brought strong corrective actions, a buy
back of the dollar in effect to prop up the value. No such cavalry
charge is coming in the current climate.
Which leaves all of us to wonder aloud—what happens if the
dollar’s free fall continues? Is there any safety net down there?
Don’t bet on it. Secretary Paulson ha started adding a caveat to
that ol’ strong-dollar mantra. “and we believe that currency
values should be set in a competitive marketplace based on
underlying economic fundamentals.”
Those underlying fundamentals are weak now in the U.S. A
mortgage market meltdown, coupled with an economy strained
by the $576 billion cost of war have all but tapped out the U.S.
economy for the time being. We are now in hock. We are the
largest debtor nation on earth.
And what happens when we take out some of our retirement in
the form of those weakened dollars? A hidden costs of letting
the dollar sink is that the buying power of those retirement
savings ---once they are converted to dollars –is getting pretty
pitiful. Worsening the situation is that, unlike savers in other
countries such as Japan, few US-based banks offer Americans
the option of holding their deposits in the form of other
currencies. Only recently, a few German banks (Deutsche Bank)
and on-line banks (everbank.com) have begun letting
Americans open accounts in non-dollar currencies.
Brother, can you spare a euro?
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