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Originally Posted by mr merlin  I saw a report that the dollar is at its lowest point in 12 years, hmmm,I wonder why it was so low during the clinton administration? Was it because he trashed the economy and ruined america? Or maybe its because these things run in cycles? |
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Originally Posted by mr merlin Check the dollar vs. the yen and other major currencies mboy. |
When did the Clinton administration trash the economy and ruin America;are you projecting the Bush admisitration's pushing America into the abyss on Clinton?
You answer your own question with speculation not facts.
There's a reason the dollar was low vs the yen 12 years ago,and it had to do with interest rate differentials which effected the "carry trade"[borrowing at low rates in Japan to invest in higher interest vehicles in the US].
The current 2008 dollar devaluation is different,than what happened in 1996,and much more ominous.
Here's the back story,originally published June 29th,1998
source:
http://www.geocities.com/Eureka/Conc...b/epn-ib01.htm The U.S. real interest rate and the real yen-dollar exchange rate are closely correlated (see figure).2 As the figure shows, the dollar tends to rise when real U.S. interest rates are high and fall when real interest rates are low. This relationship results because high interest rates attract speculative capital into the U.S. from Japan and elsewhere, while low interest rates reduce or eliminate these capital inflows. Thus, a reduction in the U.S. interest rate should lead to a decline in the value of the dollar relative to other currencies, including the yen. An increase in the yen, relative to the dollar, will help Japan stabilize its economy and restore confidence in its financial system. A higher yen and lower dollar will also help the United States reduce the job losses likely to result from increased trade deficits in the next 12 to 18 months. The correlation between exchange rates and interest rates is not perfect, since many other factors influence exchange rates. In particular, the yen-dollar exchange rate tends to "overshoot," and it also responds to changes in real interest rates with a lag of up to two years. The turning points have often been marked by intervention, most recently in 1995 when the U.S. and Japan intervened to prop up the dollar after it failed to respond to a sharp rise in U.S. interest rates in 1994. One important aspect of this successful intervention is that it occurred after a fundamental change in economic policies (interest rates were increased). Thus, successful intervention complemented a shift in monetary policy. 
The rise in the real U.S. interest rate since 1996 has been caused by falling inflation rates, not by any explicit change in Fed policy. The nominal federal funds rate has essentially been held constant, but the rate of inflation has fallen from 3.0% in 1996 to 1.7% in May 1998 (on an annual basis). As a result, real short-term interest rates have increased by almost 1.5 percentage points. This increase has contributed to the yen’s slide by making U.S. financial assets more attractive to investors from Japan and other countries and stimulating demand for the dollar. Thus, the U.S. must share part of the blame for the decline of the yen.