The rise in the value of the euro against the U.S. dollar since 2002 represents a global movement to diversify away from the dollar as the international currency as much as it represents the rise of the Euro zone as a global economic powerhouse. The great irony of the last few months is that the dollar has become the "safe haven" currency of the global financial crisis--a crisis that we originated.
The chart above shows the number of dollars that 1 euro could buy for each day from the inception of the euro in 1999 as a circulating currency. The value of the Euro has dropped steadily during the financial crisis, from 1.5978 dollars/euro in April to 1.2657 dollars/euro last Friday. The dollar has also appreciated against most other major currencies.
In addition to dollar appreciation, demand for other dollar-denominated assets--such as short-term Treasury bills--has pushed their prices up and yields down. I can't imagine that the November 15 international economic summit hosted by President Bush will be a cooperative, happy, and constructive meeting. I think that a lot of government heads will be pretty angry to see how this U.S.-made crisis has worked to our benefit over the short run. That does not bode well for hopes that any results of the summit will work in our favor.
In addition to dollar appreciation, demand for other dollar-denominated assets--such as short-term Treasury bills--has pushed their prices up and yields down. I can't imagine that the November 15 international economic summit hosted by President Bush will be a cooperative, happy, and constructive meeting. I think that a lot of government heads will be pretty angry to see how this U.S.-made crisis has worked to our benefit over the short run. That does not bode well for hopes that any results of the summit will work in our favor.
Yes, but the Morrisette exchange rate has remained constant throughout the period: 10,000 spoons = 1 knife.