Much has been written about the eschatological symbolism of the dollar's fall and the financial problems that have accompanied it. The apparent consensus among commentators here in America and especially in Europe is that the US has become a kind of Third World country, awash in debt and sinking fast because of a collapsing housing market and a banking system in meltdown. And all this is supposed to reflect in turn a seismic shift in the balance of global economic power away from the US and towards Mighty Europe and Emerging Asia.
We read this kind of stuff everyday about the US economy, but as Baker points out, we've been here before:
For the historically short-sighted, let's remember we have been here before. Between 1985 and 1995, the dollar declined by 43 per cent against the world's big currencies — somewhat more than it has in the past six years. That period was also marked by dire proclamations of the end of US economic power. But it turned out that in those years the foundations were laid for the strongest period of US economic growth in the past 35 years.
And asks an obvious if little asked question:
If you're still sceptical, ask yourself this: is it probable that the shift in the relative value of the dollar and the euro represents a bet by the world's investors that Europe — strike-torn, productivity-challenged, demographically doomed Europe — is the world's economic future, rather than the US, or, let's say, China?
The sentiment about the US economy is as negative as I've seen in my entire career and there are some good reasons to be pessimistic. However, I've been hearing about the impending collapse of the US economy my entire adult life and amazingly, it hasn't happened. I doubt it is about to happen this time either. It often pays handsomely to ignore the crowd and those who are willing to see the good things about the US economy will likely be rewarded again.