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. 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. In fact, some have suggested that the current U.S. policy is a smug contentment that the decline of the dollar has boosted US exports by about 15%, since our exports are now cheaper for foreigners.
Which leaves all of us to wonder aloud