Why Didn't the Dollar Crash?

Brett Dobbs at The Big Think asked me to submit a question for Paul Krugman. I asked, "Many people thought the crash of the dollar would lead the economic downturn. Why didn't that happened?"

The complete interview is here (and he answers much more interesting questions than the one I asked!). The topics and questions are:

• The Return of Depression Economics
• Changed Economics, Shadow Banks
• The Fed's Response to the Crisis
• Revamping the Credit Markets
• Paul Krugman Responds to Tyler Cowen
• The Bailout for the Big Three
• The Post-Consumer Society
• Gordon Gecko and the Recession Spending 
• Spending
• Paul Krugman Answers Mark Thoma
• Meeting President Bush and Going into Government
• Becoming a New York Times Columnist
• Will future generations hate us?
• Is there a bigger economic crisis looming?
• How will this age be remembered?
• Can the US stay competitive with China?
• What is the legacy of the Iraq war?
• Iraq and the Media
• Untangling Iraq
• Should we raise the retirement age?
• When is a hand up a handout?
• Are we approaching a healthcare crisis?
• Do Unions still matter?
• Is the American political system broken?
• How do we fix the education system?
• Is the income gap growing?
• Are we in a recession?
• What does the rash of bankruptcies mean for the economy?
• Have we seen the worst of the housing crisis?
• Is American capitalism inherently wasteful?
• How has America changed in your lifetime?
• What forces have shaped America?
• How do you find your economic philosophy?
• What challenges does economics face?
• Academia Today
• What has been the impact of international trade?
• What will be the legacy of the Bush administration?
• Celebrity Life
• Has America taken self-interest too far?
• What do our mistakes say about us?
• Do economics explain everything?
• Who Are You?

Comments

[anne]

http://www.measuringworth.org/datasets/exchangeglobal/result.php?year_source=1913&year_result=2008&countryE%5B%5D=Switzerland

December 18, 2008

Dollar Exchange Rate, 1950-2007

Prices of an American Dollar in Swiss Francs

1950 ( 4.32) Francs
1951 ( 4.34) High *
1952 ( 4.32)
1953 ( 4.29) Eisenhower
1954 ( 4.29)

1955 ( 4.29)
1956 ( 4.29)
1957 ( 4.29)
1958 ( 4.29)
1959 ( 4.32)

1960 ( 4.32)
1961 ( 4.32) Kennedy
1962 ( 4.32)
1963 ( 4.32) Johnson
1964 ( 4.32)

1965 ( 4.33)
1966 ( 4.33)
1967 ( 4.33)
1968 ( 4.32)
1969 ( 4.31) Nixon

1970 ( 4.31)
1971 ( 4.11) Bretton Woods ends
1972 ( 3.82)
1973 ( 3.15)
1974 ( 2.97) Ford

1975 ( 2.58)
1976 ( 2.50)
1977 ( 2.40) Carter
1978 ( 1.78)
1979 ( 1.66) Low

1980 ( 1.68)
1981 ( 1.97)
1982 ( 2.03)
1983 ( 2.10) Reagan
1984 ( 2.35)

1985 ( 2.46) High
1986 ( 1.80)
1987 ( 1.49)
1988 ( 1.46)
1989 ( 1.64) Bush
1990 ( 1.39)
1991 ( 1.44)
1992 ( 1.41)
1993 ( 1.48) Clinton
1994 ( 1.37)

1995 ( 1.18) Low *
1996 ( 1.24)
1997 ( 1.45)
1998 ( 1.45)
1999 ( 1.50)
2000 ( 1.69) High
2001 ( 1.69) Bush
2002 ( 1.56)
2003 ( 1.35)
2004 ( 1.24)

2005 ( 1.25)
2006 ( 1.25)
2007 ( 1.20) Low

December

2008 ( 1.05) *

* Current

[JeffF]

That is an extremely annoying website. They cut the interview into a few dozen pieces (each prefaced with their intro sound, of course) and they don't read the questions aloud. Awkwardness abounds.

Interesting questions and answers, however. I guess I think it is worth the hassle, as I seem to be on track to listening to all of them.

[RN]

JeffF says...

"That is an extremely annoying website."

Boy, I'll second that. I couldn't get one video (Tyler Cohen's), what with the questions flashing for less than a second so you have to go back and read them, all the do-whackies all over the page, and the annoying music.

[RN]

"I couldn't get THROUGH one video..."

[Too Much Fed]

The dollar is still the reserve currency.

Deflation in the amount of debt leads to a lower money supply based on dollars.

The debt is denominated in dollars along with some repayment attempts.

Deflation in the amount of debt leads to less price inflation thru demand destruction.

Deflation in the amount of debt leads to the trade deficit being somewhat lower thru demand destruction.

[Noni Mausa]

I agree with the annoyance factor, especially the fact that the volume of the music was quite a lot louder than the speaker's voice (Paul's, anyway -- haven't listened to any of the other presenters.)

I'd be pleased if one could look at the questions and check the answers you'd like to hear, then hear them one after another.

Despite these niggles, I do like the idea.

[robertdfeinman]

Now that Krugman is "famous" he gets interviewed on TV more often. Unfortunately he comes across as hesitant and indecisive as opposed to his witty persona in print.

Not everyone should try to think and talk at the same time. Either he should decline such invitations or he should get himself a coach to help with his presentation skills.

I find that written arguments are usually better formulated and take less time to read than the fumbling and mumbling that is the norm on TV, but I guess I'm in the minority given the increasing popularity of such shows.

[mmckinl]

"Many people thought the crash of the dollar would lead the economic downturn. Why didn't that happened?"

Because the dollar is the reserve currency of the world. So actually the lower the dollar the easier to pay down dollar denominated loans. The loans denominated in dollars are much more important than commodities or any other traded good. Commodities and goods can be traded straight across different currencies using the dollar as a scale, but never needing dollars. Dollar denominated debt must be paid in dollars. Most countries use the dollar for trade because it is an agreed upon exchange mechanism for all the parties that might be involved.

So with de-leveraging dollars became scarce and actually went up in value as dollar denominated loans needed to be paid.... This is of course changing now as de-leveraging pauses, the dollar is weakening. My belief, yes belief, because the markets are too opaque, the public is ready to stampede in any direction and government sending out different signals every day, is that de-leveraging will begin again after the first of the year causing another squeeze on the dollar.

As more and more countries get around the dollar they will recover ... But with the sheer size of toxic debt on banks balance sheets the U.S. will be de-leveraging for years unless the banks are nationalized, audited and re-capitalized by what is called the Swedish Plan or an FDR Bank Holiday.

At the point of nationalization I believe they should be converted into public utilities whereby the benefits accrue to the tax payers. Since the public is the ultimate underwriter of debt issued by banks then the public should be the benefactor of the extended credit.

[anne]

http://krugman.blogs.nytimes.com/2008/11/17/after-the-stimulus/

November 17, 2008

After the Stimulus
By Paul Krugman

For the coming year, and probably well beyond, the economy will be on life support — sustained by massive fiscal stimulus. (Either that, or we'll be in a very deep slump.) But eventually the economy will have to come off life support. What will take the place of the stimulus?

I don't really know the answer, but one thing that may be useful is to compare the sources of demand in 2007 with those over a longer period. Here's a table showing C (consumer spending), N (nonresidential investment), R (residential investment), G (government purchases), and NX (net exports) as percentages of GDP in 2007 and on average over the period 1979-2007.

Sources of Demand

(Year 2007) (Yearly 1979-2007)

C (70.3) (66.7)
N (10.9) (11.3)
R ( 4.6) ( 4.5)
G (19.4) (19.4)
NX ( -5.1) ( -2.4)

What stands out is the combination of high consumption and a large trade deficit. By 2007 residential investment had already fallen to normal levels, and nonresidential investment was also fairly normal.

Consumption probably isn't going back to a 2007 share of GDP — savings are back. So what will fill the gap, once the stimulus is gone? Housing? Not for a long time. Business investment? Hard to see why. The natural thing would be to trade lower consumption for a smaller trade deficit.

But that's going to be hard if the rest of the world is also in a slump, and in particular if emerging markets are facing currency crises.

What all this suggests — and it's a very rough cut — is that our emergence from the era when massive fiscal stimulus is needed may hinge crucially on getting the world financial situation, not just our own, under control.

[anne]

Essentially Krugman and DeLong are arguing that a weaker dollar will sustain what demand there is beyond a fiscal stimulus in terms of exports if there is reasonable soundness beyond America. Notice also that using the Swiss Franc as a gauge, the dollar has been losing value since the end of Bretton Woods in 1971, the limits to the losses always being the value of American production and assets which are ample.

http://www.measuringworth.org/datasets/exchangeglobal/result.php?year_source=1913&year_result=2008&countryE%5B%5D=Switzerland

Dollar Exchange Rate, 1970-2007

Prices of an American Dollar in Swiss Francs

1970 ( 4.31)
1971 ( 4.11) Bretton Woods ends
1972 ( 3.82)
1973 ( 3.15)
1974 ( 2.97) Ford

1975 ( 2.58)
1976 ( 2.50)
1977 ( 2.40) Carter
1978 ( 1.78)
1979 ( 1.66) Low

1980 ( 1.68)
1981 ( 1.97)
1982 ( 2.03)
1983 ( 2.10) Reagan
1984 ( 2.35)

1985 ( 2.46) High
1986 ( 1.80)
1987 ( 1.49)
1988 ( 1.46)
1989 ( 1.64) Bush
1990 ( 1.39)
1991 ( 1.44)
1992 ( 1.41)
1993 ( 1.48) Clinton
1994 ( 1.37)

1995 ( 1.18) Low *
1996 ( 1.24)
1997 ( 1.45)
1998 ( 1.45)
1999 ( 1.50)
2000 ( 1.69) High
2001 ( 1.69) Bush
2002 ( 1.56)
2003 ( 1.35)
2004 ( 1.24)

2005 ( 1.25)
2006 ( 1.25)
2007 ( 1.20) Low

December 18

2008 ( 1.05)

[Denis Drew]

Re: Do Unions Still Matter (got the right links this time)

As much as I thought I was aware of the poor state of unions in the USA I was surprised to read in the last chapter of Thomas Geoghegan's book, Which Side Are You On, that blocking unionization is a simple, standardized process, performed by hired hands who get away with breaking the law (the core of the blocking process) -- automatically.

At any whisper of a certification campaign by employees and management simply fires the leaders (never more than 1, or at most 2, out of 20). Said leaders then automatically file for reinstatement which is automatically granted them -- 4 years later! -- with back pay which is automatically granted -- minus any wages they earned anywhere else! -- after which 80% are fired again -- for "legal" reasons this time! -- within a year.

IOW, there is no effective right to organize labor under US law -- only the right to ask for your employer's permission to organize.

I would argue that the current legally prescribed labor organizing process violates the First Amendment right to assembly.

This is tricky. Commercial speech is protected but less so than political speech (e.g., advertising)? I can see the right to organize for the purpose of wage bargaining as as being recognized as protected commercial assembly (would be a new concept) which is protected even if less so than political assembly.

This gets trickier. The current legally prescribed organizing process does not directly prohibit organizing -- but steers all organizing activity into a narrow channel which is impossible to navigate against simple, standardized technique practiced by the opposite commercial interest.

It is not as if labor has any other forum or venue in which to pursue organzing. The law prescribes ONE path and one path only -- and it is IMPOSSIBLE to negotiate said path if the opposite interest desires not.

[calmo]

Didn't I already hit this thread?
Confirming RN's displeasure...but not yet rdf's, I see.
Ok, rdf, I'm not sure this scorecard duzzit:Now that Krugman is "famous" he gets interviewed on TV more often. Unfortunately he comes across as hesitant and indecisive as opposed to his witty persona in print. I like the unrehearsed, nervously casual projection (compare Jon Stewart's polished theatricality...I'm already adjudicating that declining performance...unlike PK, who remains gargoylish...yes, not witty there, nor in print. Not really.
Bright, honest, considerate, thoughtful, candid...I forget that he bears the Nobel now and should command my respect instead...you know?

I feel I have not shot both barrels:Not everyone should try to think and talk at the same time. Either he should decline such invitations or he should get himself a coach to help with his presentation skills.anso like Cheney's big shot lawyer, I hesitate to indulge in this bird hunt (do you realize, rdf, that this clown Sachs got me in trouble again with otherwise norbel bob?). Did you have a presentation coach in mind, robertd? (calmo squeezes into Deep Sea Diving Bell)
[Through one end of the airhose connecting calmo to rdf: Do you think that PK might trust you to teach him this multi-tasking: thinking and talking at the same time?
Over.]

[Patricia Shannon]

I didn't have any problem reading the questions from beside the video, but I agree that variances in the sound level were very annoying.

http://www.bigthink.com/business-economics/1765

Bright students, as measured by tests in 8th grade, from poor families are less likely to get thru college than not very bright, bottom quartile, students from high-income families.

[mmckinl]

"Essentially Krugman and DeLong are arguing that a weaker dollar will sustain what demand there is beyond a fiscal stimulus in terms of exports if there is reasonable soundness beyond America."

The numbers don't bare out their argument ... The U.S. has had a deficit every year since 1970 save the payment for the Gulf War. During that time the dollar has been both very weak and very strong ... yet the deficit just keeps getting worse ... We are "free traders" , the other industrial countries are mercantilists. They are cleaning our clock. Without a strong defensive trade policy more service and production economy activities go off shore generating even higher trade deficits.

[anne]

"We are 'free traders,' the other industrial countries are mercantilists. They are cleaning our clock."

I have little idea what this means, so please explain.

[mmckinl]

"We are 'free traders,' the other industrial countries are mercantilists. They are cleaning our clock."

I have little idea what this means, so please explain.

~~~~~

Other countries subsidize their manufacturing through lower energy costs, export quotas, currency manipulation, "sacrosanct" or unbuyable companies, import regs and other barriers to commerce to our companies.

We on the other hand have no industrial trade policy. Most of our subsidies are for the access of financial institutions and pharmaceuticals to other countries with the inherent WTO capital rules and patent guarantees. We have no real industrial policy for tangible goods. Other countries do.

We started this subsidization as a bulwark against communism in Germany and Japan in the 1940's with the Marshall Plan and allowing the Yen to be constantly depreciated against the dollar. We extended it to S.Korea and South East Asia ...

Now we are stuck with a broken economic model of 70% consumption and 30% production.

[anne]

"We have no real industrial policy for tangible goods. Other countries do."

This makes little sense, since we have every manner of subsidy possible for exports and all sorts of protections limiting imports in addition. The Yen, by the way, has been appreciating against the dollar since 1982 having risen from 249 to 118 in 2007 and is in the 90s currently. *

http://www.measuringworth.org/datasets/exchangeglobal/result.php?year_source=1980&year_result=2008&countryE%5B%5D=Japan

[anne]

December 18, 2008

The price of a dollar is 89.38 Japanese yen. I have always considered the appreciation of the Yen especially from 1985 as a partial but significant reason for the Japanese asset bubble and resulting growth slump.

[anne]

Possibly the most important of subsidies that traders could long ago have received is single payer health care, but that is still considered too problematic politically and has long been fought by companies that would have most benefited. Look to the way in which labor has fared Germany and here, and wonder why German exports are so competitive everywhere.

[mmckinl]

LOL ...

Ever notice how around the spring, when the traditional Japanese earnings are reported the Yen takes a nose dive ?

Sorry Anne, but you haven't a clue ...

[mmckinl]

Anne a video for you ...

Take This Job and Ship It: Senator Dorgan on The Colbert Report ...

http://crooksandliars.com/node/9998

I suggest you edumacate yourself...

[anne]

I do not watch videos, if you have something to say then say it, but I could care less about a comics nonsense. This idea of playing, poor little beat up America is annoying to say the least.

[anne]

We were wildly competitive through the Clinton years, why not now and again?

[elvis]

Wow, big neck-ties are back!

Oh, and what Anne said about the yen. No Japanese export company can function at these levels.

[mmckinl]

anne says...
I do not watch videos

~~~~

So, you didn't see the video at the top of this post ?

[mmckinl]

anne says...
We were wildly competitive through the Clinton years, why not now and again?

~~~~

The facts contradict you ........ again ...

http://www.epi.org/content.cfm/webfeatures_econindicators_tradepict20040813

The trade deficit soared under Clinton and continued unabated under Bush II ...

[oc bear]

Past is not prologue. Perhaps the country that actually manufacture something instead of brokering it will become the new safe place.

[The King of England]

Anne Says:

"I have little idea what this means, so please explain."

Anne, baby, you have little idea what ANYTHING means.

[elvis]

K of E,
Are you trying to ape Quentin Tarantino's writing style by adding "babe" parenthetically?

It came off a little lame, dude.

[anne]

"----, baby, you have little idea what ANYTHING means."

Vile sexist lying bully.

[BJ Feng]

mmckinl, why not look at the deficit from the other side? We have a capital account surplus because our assets are so in demand that countries are willing to give us all sorts of products just to be able to hold our valuable dollars. They cannot create dollars, only we can, it's like we have a monopoly on oil or food or some magic elixir that gives eternal life.

As long as the dollar remains the world's reserve currency, and the global economy expands, we can maintain a trade deficit. US Dollars represent the only real money in the world, everything else is just fiat paper. As the global economy grows, more money is needed for transactions. That's why there is such a demand for US Dollars and why we can just ship dollars out and get TV's and cars in exchange. But we can't expand money supply faster than economic growth or else the dollar will lose value and purchasing power (inflated away).

[BJ Feng]

By the way, I share Anne's optimism. Should the dollar one day lose its status as reserve currency, we will return to producing goods and services in return for other goods and services just like any other nation. But not until then.

[reason]

BJF
US Dollars represent the only real money in the world, everything else is just fiat paper.

Sounds like you think about "real" money like some people do about "real men". Sorry a "real" man is an adult male homo sapiens and fiat paper is fiat paper.

[reason]

BJF
Some of the things you say are quite sensible, why do you mix it up with such nonsense?

[anne]

"US Dollars represent the only real money in the world, everything else is just fiat paper."

The wish for imperialism forever leads to such idiocy, not to mention the immorality of the wish.

[anne]

We were wildly competitive through the Clinton years, why not now and again?

Being wildly competitive through the Clinton Presidency meant creating an average of 240,300 jobs a month for 96 months as opposed to creating an average of 38,800 jobs a month through the 95 months of the Bush Presidency. Being wildly competitive meant an economy in which after losing ground in average earnings from the Reagan Presidency on, there was a gain through the Clinton Presidency. *

* http://www.cbpp.org/8-9-05bud.htm

We grew strongly overall, net wroth grew strongly, non-residential investment grew strongly, corporate profits grew strongly.

[anne]

MMcKinl:

Thanks for the Economic Policy Institute link. I appreciate EPI, but on trade they are always suspect.

[mmckinl]

BJ Feng says...

"As long as the dollar remains the world's reserve currency, and the global economy expands, we can maintain a trade deficit."
~~~~

If the US were running a surplus budget this wouldn't be a problem. But we are not and cannot without crashing the economy at this point. If we could owe it to ourselves the interest would stay in our system, but it doesn't, we have to borrow the difference and pay interest. The amount of debt we now owe is unsustainable without default or inflation, but unfortunately we are in deflation, compounding the crisis.

Thhe aggregate debt of the U.S. is now $50 trillion. This amount is unpayable and will have be reduced, most likely through defaults as we are seeing in the mortgage market. Maybe you can talk other countries into holding dollars instead of Treasuries !

[anne]

"The aggregate debt of the U.S. is now $50 trillion. This amount is unpayable and will have be reduced, most likely through defaults as we are seeing in the mortgage market."

Huh???

[BJ Feng]

Reason, I was in the mood to cause controversy, but beyond that, the Dollar is a global money while the Ruble and other currencies are not. No one wants to hold on to those other currencies other than their own central banks because they are no good in international trade. A Venezuela can use dollars to buy food from Argentina, South Africa can use dollars for steel, that's what makes the Dollar real money versus the paper monopoly money of other countries.

Yes the budget deficit has to be trimmed, and the best way to accomplish that goal is to cut government services when the time comes. A huge cut is necessary as soon as we get into better economic shape.

Anne, using the same liberal technique of repeating falsehoods won't work here. Clinton created nothing. The private sector was responsible for the gains in employment, which is why we must do everything possible to allow the private sector to continue working for the benefit of us all. It is our vibrant private sector that has endowed this nation with so much wealth, thank God for businesses. We should have a Capitalist Day in addition to Labor Day to properly thank all the owners of capital for doing so much for us all. Clinton's biggest contribution was to clear the way for businesses to do what they do, create jobs. He didn't pass unnecessary regulations and got rid of a lot of regulatory crap. But he certainly cannot be given the lion's share of the credit that belongs to private enterprise. Nothing you say can change that fact. A cheerleader on the sidelines doesn't deserve the accolades reserved for players in the game.

[Lafayette]

Talking Heads

JF: That is an extremely annoying website.

Any video interview is annoying, but Americans are hooked on the media. If it's worth saying, it's worth writing. Then we can debate it openly, as here in a forum.

Ever try to debate with a TV interview? It's a closed-circuit communication process in which we are spectators and not participants. It makes TV celebrities out of Talking Heads who render complex matters simple, for people either to busy or to dim to follow complexity.

Talking Heads, in their televised over-simplification, are an integral part of the dumbing down of America. We have built an increasingly complex world, and Talking Head sound-bites will not suffice in assimilating that complexity.

And, certainly not as policy options to deal with it.

En passant

Want a real challenge in communication? When before a public audience, try explaining the Gini Coefficient to non-economists. How it is calculated and the results it shows.

It's a real challenge, because most can't typically get further than the name Gini, to wrap their minds around the statistical explanations, which can be baffling. (Corrado Gini, btw, was an Italian statistician and sociologist -- not a spirit in a bottle.)

And yet, nothing shows more simply the why and wherefore of economic policy. What is the importance of generating huge amounts of wealth, if those riches cannot be shared equitably within a national economy?

When we are able to translate the answer to that question into National Policy, we shall have made America a better place to live in.

[Lafayette]

The Feel-Good-Factor

Krugman: Here's a table showing C (consumer spending), N (nonresidential investment), R (residential investment), G (government purchases), and NX (net exports) as percentages of GDP in 2007 and on average over the period 1979-2007.

Yes, a consideration of National Accounts is well worth it.

Let’s see … we have Consumption. Fine, we should all know that Consumption is a consumer dependent variable (called the Propensity to Consume).

Then there’s Investment, broken down into two categories, Residential and Non-residential. Fair enough, Residential Investment depends upon … guess who? Yep, us Consumers. Non-residential, that must be office buildings, warehouses, manufacturing plants, etc., etc., etc. Nope, not consumer dependent, except indirectly.

Government purchases? OK, definitely NON-CONSUMER related . This entails Public Services by means of the maintenance of both State and Federal governments. In the case at hand, exploding Government Expenditures will be employed to spark GDP expansion. Meaning what?

Meaning financing projects that put people to work, furnishing them with Income, the disposable part of which becomes expenditure and adds itself to the economic cycle. We stabilize employment by doing so. Most importantly, we stop the rise in unemployment.

Exports minus Imports? Basically not important, since they are a minor percentage of our GDP. FDI is more important, but that's nowhere to be seen for the moment since it is not justifiable in business terms. Exports, that put people to work, depend upon World Demand … which won’t be there this time around. [Because our SubPrime Mess (another innovative American Finance Service) has contributed to the suppression of not only Domestic Demand but Worldwide Demand.]

That leaves us with what, after the Government Expenditure Impetus becomes history? You got it in one: Consumer Demand all on its own.

So, we are back to where we started. We consumers are the Alpha and the Omega of the economic cycle and GNP. Meaning what?

Meaning that it is more our psychological state-of-mind that must change in order for American Consumers to start spending willy-nilly once again than any other relevant factor. How does that change-of-mind happen?

The most important element provoking the curtailment of Demand is “fear of the future”. Meaning that, like our neighbour, maybe we are next to loose our job? So, the government’s first objective is to staunch the bleeding of employment, that is, to support Demand – which is why it bumps-it-with-a-trumpet. It makes a huge ballyhoo of Public Expenditure and tries its utmost to convince us that life-as-we-know-it-on-earth is not about to end. We need and demand reassurance.

We are sensate creatures. We feel the emotions of fear and hope. With time and much ballyhoo, but also a modicum of real results in the downward trend of unemployment figures, finally hope begins to substitute for fear . We thus begin to prime the economic pump with our own discretionary spending.

That’s the way we get out of this mess. The economic diagrams and the well-intended arguments of economists are fine, but they don’t get to the heart of the matter – which is Consumer Psychological Mindset and its partner the Feel-Good-Factor.

It’s dead simple: The objective is to change Consumer Psychology by, yes, manipulation to bring back the Feel Good Factor. From which, people will resume their normal pattern of expenditure. This will have the knock-on effect of creating jobs, spark both Domestic (Non-residential) Investment and FDI creating further jobs.

Is the above a Fairy Tale? Let’s not forget: Unemployment at 6% means that 94% of the population (or thereabouts) is at work. Is the glass more than half full? You betcha!

[Lafayette]

His Royal Anus, The King of Farts: Anne, baby, you have little idea what ANYTHING means.

Go away. These mindless ad hominens just clutter the forum with supercilious commentary.

If you have no value-added to contribute, it is better that you do not comment at all.

[Barkley Rosser]

"Why did the dollar not crash"?

Well, it went from about a euro worth 80 cents in Sept. 2000 to less than half that earlier this year. Then it managed to rise, moving up sharply after Sept. 17 to reach 1.27 about ten days ago. Since then it has slid 1.44 euros. It may have stabilized, and maybe that is not a crash, but in the midst of that was the largest one day drop of the dollar ever recorded.

Just what is this thread supposed to be about?

[Lafayette]

Article: "Why did the dollar not crash"?

Silly question. The dollar DID crash. (Against the euro, at least.) But, it did so a long while ago. How does anyone think American exports have been able to keep apace?

With a debt overhang in the trillions, who wants to keep dollars? Good question. The only viable answer is: Well, what's the alternative? Swiss Francs? Not enough to go around as a reserve currency. Chinese yen? Yeah, if you live on Mars. Pounds sterling? Uh, uh. Too dangerous and heading south.

There is no other currency which is backed by a solid economic potential. For the moment, that potential is compromised. But, it has not evaporated like the morning dew. It went into hibernation. So, everybody holding dollars figures, now's the moment to stay put rather than run (with another currency).

Spring will come again. It always does. Just a terribly long, freezing cold economic winter to get behind us.

[Lafayette]

Article: "Why did the dollar not crash"?

Silly question. The dollar DID crash. (Against the euro, at least.) But, it did so a long while ago. How does anyone think American exports have been able to keep apace?

With a debt overhang in the trillions, who wants to keep dollars? Good question. The only viable answer is: Well, what's the alternative? Swiss Francs? Not enough to go around as a reserve currency. Chinese yen? Yeah, if you live on Mars. Pounds sterling? Uh, uh. Too dangerous and heading south.

There is no other currency which is backed by a solid economic potential. For the moment, that potential is compromised. But, it has not evaporated like the morning dew. It went into hibernation. So, everybody holding dollars figures, now's the moment to stay put rather than run (with another currency).

Spring will come again. It always does. Just a terribly long, freezing cold economic winter to get behind us.