10/14/2009

New Fox News piece: LOTT'S NUMBERS: Happy Days Aren't Quite Here Again

My new piece at Fox News starts this way:

With the Dow Jones Industrial Average reaching 10,000, Americans are feeling wealthier.

Unfortunately, roughly a third of the increase simply reflects the falling dollar, that American goods and assets are becoming cheaper to the rest of the world. About a third of the increase in stock prices has occurred simply because the value of the dollar has fallen so much. Just as a lower dollar makes it more attractive for foreigners to buy American goods, it also makes it a better deal for foreigners to buy stock in American companies.

Over the course of this year, as the value of the dollar rose until the beginning of March, the stock market fell. As the dollar fell during the rest of the year, the stock market rose. While the stock market has risen by about 49 percent since its low in March, the dollar has fallen by about 20 percent against the Canadian dollar, 17 percent against the Euro, 15 percent against the Mexican Peso, and 11 percent against the Japanese Yen. For each of these currencies the dollar peaked right when the stock market hit its lowest value. . . .


Labels: ,

1 Comments:

Blogger AnonymousDoe said...

As this chart makes clear, the U.S. Dollar has been losing value steadily against the Euro since early 2002:

http://www.ecb.int/stats/exchange/eurofxref/html/eurofxref-graph-usd.en.html

Early 2002 is when the Fed dropped the Fed Funds Rate to almost a record low setting off a number of different credit-driven bubbles (housing, commercial real estate, and private equity acquisitions.)

The dollar only gained strength after the financial meltdown in 2008. Or perhaps a strong dollar helped along the meltdown.

Given the morbid state of the car market for the entire world, its hard to see how Japanese car makers will be able to increase the prices of their cars in the US. They'll have to find other ways to deal with the increased costs. The weak dollar is certainly not a new problem for them, nor U.S. consumers.

10/15/2009 12:21 PM  

Post a Comment

Links to this post:

Create a Link

<< Home