Dollar up against a basket of currencies. But down against real assets. real estate, gold, crude oil, food, movie tickets. All it takes to take your blindfold off, is to look at the real goods that you need every day. Since 1970, the dollar has lost a huge fucking amount of purchasing power. And, I would say in 10 years, it will lose a shitload more. That's the way the system works. Real estate may be down this year, but in 10 years from now, you will be paying 600 k for a shitbox in downtown. But then again, you will be making minimum wage at 20 per hour. It's all relative.
The title clearly was way to misleading which could be explained with words but why botter when a single chart can do the job just fine. After world war II 1$ bought you 500 Yen. How much is that today? Bulls and bears can make their case on everything depending on the timeframe chosen. Imagine buying gold in 1980..:eek:
When people talk about weak dollar they usually mean the fx purchasing power of the dollar, a trade weighted basket of currencies is the most fair way to measure the degree of dollar weakness as compared to hand picking currencies
Fair enough. Daal, could you share your vision on to what extent the strength or weakness of a currency actually reflects the economic reality of the underlying country?
I'm sure there is some correlation, specially at the extremes. But as I understand the FX value of the currency will depend on things like the trade sector(leading to things like the dutch disease), investment opportunities(inflows/outflows through the capital account), purchasing power parity(which affect trade) Over the really long-run maybe the central bank policy is more important than these, I don't know
Or in 1970... (hint: much better investment than the Dow) Or in 2001... I love how the mainstream (stock/bond) guys always select the worst possible gold entry date but don't talk about entering the stock market in 1998 (lost decade+) or October 2007.