Quote:
Originally Posted by Lanny_MacDonald
I think that if you look at the Canadian buck you will see that it is the poor performance of the American buck that has caused the gains, not the positive performance of the Canadian buck itself. The US buck will rebound and reverse the slide it took against other currencies, and when it does, the Canadian buck will tumble. Take a look at the charts of the performance of the two currencies versus others. In 2003, the American buck was worth close to $1.07 in Euro dollars, and now it's worth 70 cents. Conversely, in 2003 the Canadian buck was worth ~67 cents in Euro dollars, and today its worth ~70 cents. The gains are because of the poor performance of the US buck. When it rebounds against the Euro, the Canadian buck will slide backwards again.
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The problem is, there are fundamental reasons behind the slide of the American dollar. Mainly the huge trade and budget deficits. Until those fundamentals are corrected, the American dollar will continue to slide.
It is my belief that they let the dollar slide intentionally to finance the Iraq war. Which may not have been a terrible strategy, as the dollar was overvalued at the time, and some correction would help the American Economy anyway. What better way to finance a marginally popular war than to have the people pay for it by taking away 30% of their wealth without them realizing!
The problem is the war lasted too long, and the effects snowballed, and they had to keep interest rates high to fight off inflation caused by the slipping dollar. And now that the relatively steep advance of interest rates has started to cause a collapse in the financial markets, they realized they had to scale back interest rates a bit, and further let the dollar slide. That whole snowball could continue for a bit.
Electing a president that would get out of the money pit of Iraq would be a great start to turning the fundamentals around and is probably what is needed to get the dollar going up again.