May 14, 2003
New York Times finally admits it has no idea where the dollar's heading.
An article on the rapidly declining dollar acknowledges that all of the previous predictions have been quite inadequate, with the Euro already exceeding levels it was not supposed to reach until the end of 2004.
How fow far will the dollar fall and the euro rise? A lot further than many forecasters thought just a few months ago, or even a few weeks ago.
The dollar's 8.7 percent plunge against the euro since March 21 has already made existing predictions for 12 months from now obsolete. Some forecasts see the possibility of the dollar's falling close to levels not seen since the mid-1990's, when the American currency dropped to record lows against European currencies like the German mark that at the time were strong.
Just a month ago, the average of the predictions gathered by Consensus Economics, a research firm in London, was that the euro would rise to a value of $1.0950 against the dollar by April 2004. But the euro moved above $1.10 before the end of April and was trading around $1.15 today. Even the highest euro forecast in that April survey Ð $1.23 Ð seems too low now.
"I'm not sure anything can stop the dollar fall for the foreseeable future," said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Conn. "I just don't see foreign investors stepping up to allocate growing amounts to the United States, so the dollar has to give."
This is rather surprising. The corporate economists NEVER admit that they simply don't know what's going to happen. At least I can't recall them doing so.
But I think they're still way too optimistic. Nowhere in this article do they acknowledge any resentment towards American arrogance and warring, or the fact that the major reason people are now reluctant to invest in America is because of the complete failure of the attempts to clean up the still very corrupt financial industry. Basically they're still saying that everything is A-OK, the war is over, there will be some minor adjustments but nothing major, and soon America will be a superpower again.
I think there's a possibility that the Euro will be worth double the dollar by the end of the year, and maybe even three times it by the end of 2004. Probably not, but the conditions for this to happen certainly do exist. I've lost my faith in America, at least in corporate economics, and it seems to me that most of the people in the world also have.
I'll be writing more on this I hope. I'm really interested in the Euro, the EU, and the other changes taking place in our world.
