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With a euro selling for over $1.33 yesterday, the dollar is the weakest it's been in years.
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The adjoining graph shows the price of the euro in dollars. The higher the price of the euro, the weaker the dollar is. As you can see, from this graph, the dollar has been falling (euro has been rising) fairly steadily for over two years, and the fall has become rapid since the presidential election, and has fallen further almost every day.
Most analysts hd been predicting that the dollar might fall to $1.40 or $1.50 per euro, but one analyst, Julian Jessop of Capital Economics, said on television Thursday that he's revised his opinion because of the rapid momentum of the fall, and that now he expects a price of $1.60 to $1.70 per euro, possibly by the end of the year.
The fall has been caused by the Fed's near-zero interest rate policy for the last few years. At near-zero interest rates, many more people borrow money, so the supply of money increases, and by the law of supply and demand, the value of the dollar goes down. If Greenspan and the Fed had not lowered interest rate, then the Nasdaq crash in 2000 would have resulted in massive bankruptcies and homelessness, like the 1930s Great Depression, but now we see that the low interest has had a different cost.
You would think that a weak dollar and a strong euro would be good news for Europe, but if you think that then you would be wrong. Euroland's economy has been very weak anyway, especially in market leaders France and Germany, but its one strength has been marketing products to America. But with the rapid rise of the euro, Europe's exports are becoming much more expensive in America, and that will reduce exports.
That's wy European Central Bank chief Jean-Claude Trichet said that the fall of the dollar has been "brutal."
Generational Dynamics predicts that we're entering a new 1930s style
Great Depression, and that stock prices will fall by at least 50% in
the next few years. There's no way to predict an exact time frame,
but history shows that these things always begin with an unexpected
downward cascade that catches even the experts by surprise.
(27-Nov-04)
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