US Dollar Sinks Against Euro, Metals Prices

Welcome to Subprime Nation, dear reader.

That’s how Stephen Roach put it. The Morgan Stanley (NYSE:MS) economist is in today’s paper, explaining why the fall of the dollar is bad news. In its simplest form, a weaker dollar means it takes more dollars to buy things on the open market. This year, for example, Americans will probably buy about US$2.5 trillion worth of goods from overseas. They would get a lot more for their money if the dollar were stronger. Specifically, if the dollar were still worth what it was in 2002, they’d get 20% more. In other words, the dollar has lost 20% of its value – against most foreign currencies – in the last five years.

Against other things, also imported from overseas, the dollar has lost even more value. Zinc has gone up 60% in the last year alone. Nickel is up 125%. Over the last five years, oil has risen 158%. Wheat is 126% more expensive. And the aforementioned nickel has zoomed up 415%.

The dollar fell again yesterday – to another record low against the euro. You now have to pony up US$1.41 to buy a single euro.

Americans who think Bernanke’s easy money policy is going to save the economy need to think harder. Lower interest rates are supposed to make credit more abundant. But more credit, we argue, is just what the US economy doesn’t need.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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