The story behind recent dollar rot?
Thursday, October 9th, 2003
As California’s new governor likes to say, “where there’s smoke, there’s fire.” The dollar has dropped more than 5% in recent days for no apparent reason. In fact, the economic reports have hinted at US strength and European weakness — both are usually good for the dollar.
So what gives? Although rumors that Russia is considering pricing oil in euros rather than dollars have now been denied, it is worth reflecting on the double-whammy that could be cast by our spiralling budget deficit and the de-dollarization of the world’s reserves.
But hey, Europe’s problems — geriatric populations, sclerotic businesses, paralytic bureaucracies — are even worse than ours. Perhaps the rupee or yuan shoud be the next reserve currency?