The hand-wringing about the US dollar is rather late to the party.

Where were all you concerned dollar bulls earlier in the decade? It strikes me that like the late-to-discover inflation, you folks cannot spot a trend until it bites you in your collective asses.

While the WSJ is upset that the dollar has been range bound between 72-87 the past 3 years, I strongly urge them to look at the 7 years before that.

Consider the following charts: The one at right was in today’s WSJ, and shows the US currency off by less than 20% over the past few years.

That’s not a dollar collapse; A fall from 121.02 in July 2001 to 70.69 in March 2008 — Now THATS a dollar collapse:

Source: Barchart.com

Category: Currency

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

51 Responses to “Dollar’s Biggest Decline? 2001-08”

  1. foosion says:

    The 2001-2008 decline was under a Republican president, so it doesn’t count. Just ask the WSJ.

  2. Global Eyes says:

    Even cab drivers understand the dynamics of central bank dollar printing making it difficult for policy makers to achieve their goals.

    I think a lot of speculation is based on the dollars printed and not the dollars in circulation.

  3. robert d says:

    The USA is just another country.
    It is time to get a grip and admit it. We are not the best at everything.
    Even Japan is better at running up their national debt.
    And we are not the worst at anything either. At least Washington and its
    politicians are no worse than Harare or Tripoli.

  4. cognos says:

    BR-

    “I strongly urge” you to look at the 7 yrs BEFORE 2001. This was a period of enormous USD strength.

    So on 15 yrs it’s pretty flat… Slightly decline. Kinda like commodities.

  5. rktbrkr says:

    Whats the easiest way out of the current economic mess for the US? Simply continue printing money and allow a hugely devalued dollar and major inflation to solve 3 problems simultaneously:
    1) the further devalued dollar will allow the US to pay foreign creditors with cheap money
    2) expanding the current freeze on Soc Sec COLA to all entitlements doesn’t require any political courage and allows US to meet it’s commitments with ever cheaper dollars
    3)Wage inflation thanks to progressive tax rates walks everybody into higher tax collections, no new taxes are necessary. PROBLEM SOLVED by just staying the course.

    Reversing the present course would be extremely difficult if not impossible for the FED, their timing needs to be nearly perfect and somebody must step in and keep buying T paper when the FED stops being 80%+ of the market. Interest rates don’t have to go up very much to offset the savings they are battling over in Congress.

    By the time you realize there’s a problem it’s probably too late. That applied to GM and I think it applies to US

  6. Moss says:

    Who owns the WSJ?
    Who was President 01-08?

    All about politics. A deficit is a deficit the source does not matter.

  7. Bill Wilson says:

    There is a legitimate concern that the FED has an agenda to lower the value of the dollar. The concern isn’t where the dollar is now, which is stronger than it was in 2008, it’s where the dollar is headed. Combine that with the fact that commodity prices seem to be rising because of QE2, and the U.S. government seems to have no willingness to get it’s fiscal house in order. I can understand why people are worried about the dollar.

    I’m actually a believer that there is still too much debt in the system, and the dollar will still be the best of many bad choices when deflation returns. I’m not smart enough to know when that happens.

  8. Chief Tomahawk says:

    Eric Janzen over at The http://www.ITULIP.com loaded up on gold and treasuries around 2000 and hasn’t made a trade since. As to the future, well, he hasn’t written anything since “Next Bubble or Last Hurrah?”, in February.

    http://www.itulip.com/forums/showthread.php/18529-Next-Bubble-or-Last-Hurrah-Part-I-Stocks-and-houses-Eric-Janszen?p=189867

  9. VennData says:

    Every worker just needs to work an extra eight hour shift per week.

    We can keep tax rates the same on the so-called “rich,” the truly important people in our economy, the successes, the winners, the “job creators.” They will benefit from the higher output and won’t move out of the country to a low tax regime… in other words, they can relax, more supply – Supply Side Economics! – means more revenues, and more profits!

    Forget more taxes, we’ll compromise, you just need to work harder for the man.

  10. Sechel says:

    In this regard Obama is a continuation of Bush. Both have embraced a weak dollar policy.
    Question is when do we wake up and realize a strong dollar contributes to lower inflation?

  11. nofoulsontheplayground says:

    I believe the RMB gets added to the basket of currencies in 2014, so that may help that index better reflect what the consumer is feeling.

    The USD slide may magically reverse in the middle of June in the 68-72 area when QE2 is finished.

    Some technicians may look at that USD chart and see a bearish pennant that targets around the 54 USD area. However, to read this as a bearish pennant would be unorthodox in technical analysis as the pole does not really fit as a definitive and continuous formation.

    Kevin Depew of Minyanville commented recently on a DeMark monthly buy set-up on the USD having completed. When I saw that and looked over the historic monthly charts it suggested a turn up in the USD anywhere from June 2011 to June 2012, although the 68 area ought to hold regardless of when the USD bottoms according to previous patterns.

  12. LLouis says:

    Interesting interview with James West (publisher and editor of The Midas Letter) in The Gold Report, stating that there’s no gold bubble (in very frank words):

    ” … With the United States trapped in a cycle of fabricating vast electronic sums of debt with the virtual printing press, the mantle of legitimacy and cloak of secrecy proffered by the government’s favorite off-balance sheet entity, the U.S. Federal Reserve, guarantees the inability of the will of the people to manifest itself and break free from this pattern. The Federal Reserve has become the slave master who ensures the bondage of humanity to the foul and putrid U.S. dollar. It is now, more than ever, the enemy of the American people, and by extension, the rest of humanity. ” …

    ” … I think that the higher the monetary metals go, the greater their demand is in terms of capital preservation strategies. That’s because the higher they go, the stronger the correlation to and proof of an increasingly unviable dollar, thereby spurring demand. ” …

    ” … Governments with U.S. dollar holdings are increasingly embracing the wisdom of dumping dollars in favor of better value stores, and gold and silver certainly fit that bill. When the U.S. dollar is finally decommissioned, which it definitely will be, the replacement global trade standard must, in some way, be moderated by an official peg to the prices of gold and silver. ” …

    ” … I am personally of the opinion that, contrary to conventional conspiracy theory suggesting that the United States has no gold, the government is using a portion of its fabricated ersatz capital to accumulate gold and silver surreptitiously, fully cognizant of the fact that the U.S. dollar is doomed. ” …

    Interview by Sally Lowder of The Gold Report 04/22/2011

    http://www.theaureport.com/pub/na/9350
    http://www.midasletter.com/

  13. Now you did it!! Krugman just linked to you!! ;-)

  14. manhattanguy says:

    An empire that is in decline. 2001 was the top for us.

  15. manhattanguy says:

    Bush administration singlehandedly accelerated the decline of U.S empire.

  16. socaljoe says:

    One of the reasons we experienced the greatest decline during the last decade may be because we experienced the greatest strength in the dollar in the decade preceding it. What goes up must come down. Picking the highest and lowest point on a chart to make a point is called data mining and is statistically flawed.

    ~~~

    BR: The 10 year chart above shows peak to trough trend drop.

    Wanna see cherry picking? In 1989, the Dollar Index was 106. In 2001 it was 121. Thats cherry picking — but the chart above? Not remotely close.

    I would have assumed any idiot could look at that chart and recognize a downtrend. I guess I assumed wrong.

  17. dougc says:

    they vehemently stated they wanted a strong dollar all the way down.

  18. Joe Friday says:

    BR: “The hand-wringing about the US dollar is rather late to the party. Where were all you concerned dollar bulls earlier in the decade? It strikes me that like the late-to-discover inflation, you folks cannot spot a trend until it bites you in your collective asses.”

    This is the same crowd that just somehow didn’t notice that the vast majority of the job losses and run-up of the federal deficits and debt occurred in that same time period as well.

  19. Desi Erasmus says:

    After picking up some gold and silver insurance in 1998 and 2004, I’ve been watching with interest while clearing all debts to brace for the coming blowout. The only surprise is that it didn’t come sooner, and that when it came, the perpetrators were able to “socialize” their losses with the full connivance of Executive and Legislative branches. When it came, the impact was far more severe than I had anticipated, but the ‘shock absorber’ has been adequate (so far). It’s time to consider an ‘increase in coverage’, however since the current occupant of Hotel 1600 and his friends are even more profligate and reckless than the prior resident, and just as much in the pocket of the inflationista banksters. The important transition in the next few years is not who occupies the WH doublewide, but who replaces the Fed chairman. If’ it’s someone like a younger version of Paul Volcker, there may still be some hope. Like the dismal field of choices aspiring to challenge BO, however, the field of possible Bernanke replacements does not look very promising.

  20. BDW says:

    The Bush Administration were very public about their intent to have a weak dollar policy to increase demand for exports. Cheap credit was just a bonus in their minds.

  21. [...] Barry Ritholtz makes an obvious but strangely unnoticed point: right now we have all these people hysterical about [...]

  22. RW says:

    “The Bush Administration were very public about their intent to have a weak dollar policy to increase demand for exports.”

    Need some references for that: The strong dollar policy has been the official position of the US Government, virtually unbroken, beginning with Clinton.

    I never understood the policy mind you — on its face it made no sense but since its progenitor was Bob Rubin I assumed crony capitalism and international power back scratching were at work — but IAC the official policy did not change under Dubya AFAIK so where was this “weak dollar” policy articulated? Where’s the paper trail?

  23. bulfinch says:

    Is it possible that the dollar losing value was less readily perceptible to the average consumer because of the abundance of cheap credit during the last decade?

    And really…is it that different now? When it comes to the value of the dollar, I think it’s a set of collective nuts being scratched by most Americans. I don’t sense any kind of worry or dismay among…anyone.

    I just read a NY Times article here:

    http://www.nytimes.com/2011/04/23/business/23prices.html?_r=1&scp=1&sq=raising%20price%20tags&st=cse

    Which essentially shows that even though retailers are raising prices, shoppers don’t seem to notice. In fact, retail analysts cite the lack of backlash from consumers as being surprising.

  24. smedleyb says:

    Amazing the dollar can’t gain any traction against the Euro with PIGS swaps blowing out.

    Perhaps a slight undercut of the low (70.69) sometime over the next 12 months triggers a reversal back to the upper end of the range?

  25. LLouis says:

    Here we go again, another classic Canadiens vs Bruins playoff overtime about to begin …

    Yesterday, for my mother, I bought premium green tea with some cute japanese candies on a japanese site (Hibiki-An) and I had a little surprise, the price was $57 USD, and then on paypal the price was ” translated “, as I am canadian, to $55.81 CAD. I hadn’t checked the value of CAD against USD for a few weeks.

    Not sure if the difference will increase in favor of CAD, that would not be good for the manufacturing sector, which has been taking quite a blow in the last years in Canada.

  26. N says:

    The decline of the US dollar is an inevitable consequence of the fact that the rest of the world is catching up with USA on productivity. Take a Chinese worker who can produce a gadget in, say, 10 hours and a US worker who can make the same gadget in 10 hours. If both of them get paid the same amount for their work, say 10 currency units per hour, the American will get 100 dollars and the Chinese 100 yuan. Therefore, the fair currency exchange rate is 1:1. Since the Chinese are on their way to become as productive as the Americans, then the exchange rate should not be the current 6:1. It should be 1:1 and no matter what the governments and their central banks do to prevent the inevitable from happening, the economic logic brought upon us by the globalization will prevail. Americans can’t expect to be paid more for the same work and the Chinese won’t accept to be paid less for the same work. The real wages in America will go down and the real wages in China will go up. The currency exchange rate will simply reflect the change in the equilibrium.

  27. BDW says:

    You can google “bush weak dollar policy” as easy as I can. And bush himself did in fact yap about a strong dollar…….but his policies and minions did the opposite, and he often followed the “strong dollar” bs by “but we need to increase exports”.

    http://www.businessweek.com/magazine/content/05_11/b3924034_mz007.htm

    http://www.businessweek.com/bwdaily/dnflash/nov2004/nf20041112_3507_db039.htm

    Is that direct statements…..no…but our policy was clear and every talking monkey on CNBC were saying as much.

  28. N says:

    By the way, the American stock market was flat during the same period when the dollar went down by 40%. Since the value of the assets on the American stock market is expressed in a declining currency (the dollar), this means that in real terms these assets are 40% cheaper today than what they were 10 years ago. America’s big fire sale.

  29. CIGA Monitor says:

    Better yet, look at the 30 year chart to see that the dollar declined by 51% in just 4 years after the Plaza Accord in 1985.

    http://1.bp.blogspot.com/-Yxc8XXWDc0Y/TbELZ72sYLI/AAAAAAAAQi0/MCSaYBtwxTw/s1600/DXVeryLongTerm311.PNG

  30. curbyourrisk says:

    I really hate it when economic posts turn to political trashing.

    Stay on topic…… Keep the politics out of it.

  31. [...] is everyone so worked up about the drop in the US dollar now?  (Big Picture also [...]

  32. grumpyoldvet says:

    Er curb……all economics as practiced today is political……..wake up and smell the coffee

  33. louiswi says:

    I can’t believe anyone is reading the WSJ anymore. There are much better sources of economic data available and nothing to be gained from their highly slanted editorial content you couldn’t glean from Faux News or any one of the other OFTAA channels. (One Fu$king Thing After Another).

  34. constantnormal says:

    While this shows the partisan duplicity of the WSJ, using the USD index as a measure of the “strength” of the USD is a tad misleading to begin with. All that the USD index does is show the strength of the USD relative to a selection of foreign currencies, all of which have been engaging in a rush to the bottom for quite some time now.

    A better view might be obtained by examining the purchasing power of the USD … and a longer term view than any of the ones shown in these USD index charts. I’ll offer up this chart, but please ignore all the gold-bug stuff, I’m merely referencing the US dollar purchasing power here and would rather not get embroiled in the gold mania …

    http://img11.imageshack.us/img11/3519/sauploadpurchasingpower.png

  35. [...] Barry Ritholtz has a chart that well illustrates this [...]

  36. BDW says:

    grumpy, what curb is saying is this: “you disagree about my policy views, hence you are hyper partisan and un-american….if you agree, you’re being sensible”. It’s the standard righty response of the last decade. All of his posts are hyper-partisan and he finds pointing out who caused the mess as anti- american. There is no responsible way of finding out the why/how of the decline in the dollar without also understanding the who and the ideologies of those people.

  37. Dividist says:

    You cannot look at a chart like this without putting it in the context of …

    1) Dot-com bubble bust and crash
    2) Post 9/11 equity and asset crash
    3) Real Estate bubble bust and crash

    …all of which transpired in this timeframe. In all cases the political knee-jerk reaction to these dislocations from the executive, congress, treasury and the fed is to devalue the dollar to provide liquidity and in the hope of seeing Keynesian deficit stimulus in the economy. Whether you agree with Keynesian dogma or not, it is undeniable that our leadership does.

    Even if virtually identical policies fueled the burst bubbles that created the pain, we use those same policies in bigger doses to feel better as we careen from one crisis to the next. The drug addiction analogy is apt.

    Like with any addiction, it takes bigger and bigger doses to get the same high. And like any addiction, the process is self-correcting – one way or the other.

  38. clipb says:

    br, please don’t do what seems to be “the new normal”, that is just show the period on a chart that makes your point. as cognos put it near the top of this pile, the $ was a giant king in the ’80′s, had another runup into 2000+ and then a giant selloff with the evolution of the euro.
    http://www.chartsrus.com/chart.php?image=http://www.sharelynx.com/chartstemp/free/chartind1CRUvoi.php?ticker=FUTDX

  39. andrewp111 says:

    Look at the same graph over 25 years. the 2000-2001 period was a peak. The long term mean is about 90 over 25 years. So, we are lower than the trend line right now, and the 2000-2001 peak was probably connected to the tech bubble.

    If one looks earlier, the previous peak was around 160 in 1984. So yes, the long term trend is down.

  40. rktbrkr says:

    NYT article about ineffectiveness of QEII. US borrowing outran FED printing operation. The FED will have to call QEIII something else, but they can’t stop or everything goes to smithereens.

    They can blame the unfolding double dip and need for (not called) QEIII on $4-5 gas & commodities which are a result of QEII.

    http://www.nytimes.com/2011/04/24/business/economy/24fed.html?nl=todaysheadlines&adxnnl=1&emc=tha2&adxnnlx=1303682305-gYKpAOn25yODwg1aEUEwyQ

  41. whatever says:

    BR, The one thing I like about your blog, is that you do not shy away from calling out the idiots, ideologues or trolls. Most blogs rely on other commenters to refute the trolls, ideologues, the stupid or the illiterate.

  42. takloo says:

    BR, do you think we are going down to 72 (-2.8% from here) or 70.69 (-4.6%) ? At the current rate of decline of about 1.2%/month, the dollar might find support at 72 to just coincide with the end of QE in June?

  43. [...] Barry Ritholtz has been noting, the dollar’s big decline came not after the financial crisis started but in the previous [...]

  44. [...] the value of the dollar against a fixed basket of foreign currencies [the "dollar index"]. To quote Ritholtz, “A fall from 121.02 in July 2001 to 70.69 in March 2008 — Now THATS a dollar [...]

  45. [...] need to put the recent dollar weakness into some broader context. So last weekend, I showed this simple 15 year chart of the dollar, showing the huge 41.5% coolapse from 2001-08, versus the current 15+% [...]

  46. [...] they never happened before.  It seems again Obama can do nothing right.  HOWEVER… check out Barry Ritholtz and his history of the decline of the dollar.  Under Reagan/Bush I, from 1985 to 1992, the dollar [...]

  47. [...] posted a few items about the dollar recently (See this and [...]

  48. nisiprius says:

    Even increasing the chart to 25 years doesn’t really put things in perspective. You really should include the period before and after the Plaza Accord of 1986. Then even the runup from 1996 to 2002 and the fall from 2002-2008 don’t look all that huge. I wish I could find a chart that goes even further back.

    But displaying 2008-2011 in isolation is just bizarre. Or, perhaps, dishonest.

    http://i51.tinypic.com/2ja235.jpg

    ~~~

    BR: Perhaps you might check out a company called Google, which with a modicum of intelligence and a scintilla of effort will allow you to be more informed.

  49. nisiprius says:

    Oh, never mind. I see you did exactly that about a week later.