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  • macroeconomicmike macroeconomicmike Dec 16, 2003 8:43 AM Flag

    U.S. dollar crashing versus the euro

    the euro moved today to a record high against the dollar at $1.2361. The 42% drop in the dollar versus the euro can be attributed to republican economic and political policies. As John McCain has pointed out the bush administration is spending like drunken sailors. Lack of fiscal discipline and a disastrous foreign policy is fueling the almost daily drop in the dollar. Not surprising foreign capital is leaving the U.S. capital markets since a 40% gain is required just to break even from the currency losses which have occurred over the last three years.

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    • Let's see. I'm an idiot for believing that a politician would attempt to time a major event to benefit his re-election. Sorry, don't buy it.

    • gee thanks, infidelforaday.

    • I have a different view from yours on the Dollar valuation. Based on past history, the USA have consistently used and played with the currency exchange rates to counterbalance the economic ups and downs.

      Before the Euro existed, the play was against the DM, the FF, ... now it is against the Euro.

      During hard economic times (like the one we have been going thru for the past two years) when the trade deficit is growing huge, the FED monetary policy is geared toward letting the US $ value going down.

      It basically makes foreign goods more expensive and it slows imports. On the other hand, the domestic production gets a boost as US goods are cheaper and export of US goods goes up.

      Also important is the fact that the US debts level on the international markets is reduced as the value of the dollar goes down. Basically, the Fed is cleverly making foreigners pay for a part of the US debt.

      The US $ value going down isn't a bad thing for the USA as long as it doesn't last too long (2-3 years). It might be a temporary problem for tourists going on trips to Europe, but again, the goal here is to make US citizens stay home and spend money at home ... hopefully on US made goods !

      Also good is the fact the interest rates are so low ! It makes "savings and Bonds" less attractive. People are forced to invest their money in "productive" and "innovative" enterprises, instead of keeping the money in a medium term saving accounts earning close to nothing.

      Looking at the growth rates you guys have been acheiving for the past few months, it looks like the FED is being successful in its plans.