Where were people while the dollar was going south? Right here.
It’s interesting to read Paul Krugman’s economic analyses and I follow him closely, but I have to say I did a double take yesterday when I saw this in his New York Times column entitled “Who Debased the Dollar?”
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“Right now we have all these people hysterical about the debasement of the dollar, but where were they when the real devaluation was taking place?”
“Funny how we didn’t hear all this hysteria between 2001 and 2007. For the record: while I had plenty of complaints about the Bush economy, the declining dollar was never among them.”
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Well, for the record, I had plenty of complaints, too — and the declining dollar was definitely among them. Here’s what I wrote about that on July 16, 2007, when the stock market was setting new record highs. I was skeptical of the market and pointed out that over the previous half dozen years – from 2001 to mid-2007 — the return on the S&P was pretty darn poor (less than 7 percent total return, exclusive of dividends.) And then I said this about U.S. currency over the period:
“If you happened to trade U.S. dollars for Euros as Bush was being inaugurated and stashed them in a safe deposit box, your idle Euro currency is worth about 35 percent more today. If you purchased Canadian dollars instead, your loonies and toonies would be doing even better, with a 41 percent gain. Just pull it out, dust it off and claim your winnings. Congratulations. You picked the right time to bet against the U.S. dollar.”
It’s nice to see that others are noticing this, but the answer to the question of where people were when the real devaluation was taking place is a simple one for me. And for all the current hype about the stock market rallying, buying Euros has still been a better bet since the beginning of 2001 or mid-July of 2007, in comparison to the S&P 500.