The U.S. dollar has been getting hammered against the euro this year.
Some people say this has to do with rising oil prices… which I don’t get, since oil isn’t moving on any kind of demand fundamentals.
Smarter people say it has to be with the growth story… which I don’t get, either, since the real growth story is in emerging markets, not in the U.S. or Europe.
Even smarter people say this has to do with America’s out-of-control debt… which I also don’t get… at least measuring external debt as a percentage of GDP… here’s the pertinent Top 20 rankings in the world:
External Debt As A Percentage of GDP:
#20: U.S. at 94%
#14: Germany at 178%
#10: Hong Kong at 206% (Not a euro country but a lot of Chinese business gets transacted there)
#8: France at 236%
#3: U.K. at 408% (Not a euro country but in the thick of Europe nonetheless)
#1: Ireland at 1,267%
So… why should the euro be stronger than the dollar?
It shouldn’t be.
Well argued. But one factor that\’s driving sentiment is the velocity. As I recall, it wasn\’t so long ago that US external debt was a relatively small 40-50%. So, the market might be projecting further into the future.Having said that, just returning from Italy, I can attest to the fact that goods and services seem about 30% overvalued!
I think that\’s what makes our situation scary (!). But, I\’m not sure it applies to the value of the dollar vs. the euro: I believe the euro countries\’ velocity has increased as well… i.e., things are still relative… and relatively (and generally) speaking, we\’re running a more responsible country vs. the euro nations.
[...] Back in December, 2009, I published a post entitled, “The Stronger Euro Doesn’t Makes Cents.“ [...]