the u s dollar quo vadis n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
The U. S. Dollar – Quo Vadis? PowerPoint Presentation
Download Presentation
The U. S. Dollar – Quo Vadis?

Loading in 2 Seconds...

play fullscreen
1 / 56

The U. S. Dollar – Quo Vadis? - PowerPoint PPT Presentation


  • 169 Views
  • Uploaded on

The U. S. Dollar – Quo Vadis?. Dr. Robert T. LeClair John Cabot University Rome, Italy. Headlines. “Dollar faltering after seven years as leading currency” - USA Today May 30, 2002

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'The U. S. Dollar – Quo Vadis?' - calliope-petros


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
the u s dollar quo vadis

The U. S. Dollar – Quo Vadis?

Dr. Robert T. LeClair

John Cabot University

Rome, Italy

headlines
Headlines
  • “Dollar faltering after seven years as leading currency” -USA Today May 30, 2002
  • “Dollar’s Drop Shows Loss of Faith in U. S. Economy” -Wall Street Journal (Europe) June 3, 2002
headlines1
Headlines
  • “Dollar hits 14-month low versus Euro” -FinancialTimes May 28, 2002
  • “There are signs that the U. S. primacy as an investment location is now under threat” -Financial Times May 31, 2002
history of european monetary union
History of European Monetary Union
  • Maastricht Treaty (2 Feb. 1992)
  • Single Central Bank: (1 June 1998)
    • European Central Bank (ECB)
    • Frankfurt, Germany
    • www.ecb.int/home/
  • Single European currency (“Euro”)
history of european monetary union1
History of European Monetary Union
  • Qualification standards:
    • inflation
    • interest rates
    • fiscal deficit
    • national debt
emu convergence criteria
EMU Convergence Criteria
  • Inflation: no more than 1.5% above avg. of three members with lowest rate
  • L-T interest rate: no more than 2% above avg. of three members with lowest rate
  • Fiscal deficit: no more than 3% of GDP
  • Govt. debt: no more than 60% of GDP
history of the euro
History of the Euro (€)
  • Officially introduced: 1 Jan 1999
  • Currency and coins introduced: 1 Jan 2002
  • “Legacy” currencies (Franc, Mark, Lira, etc.) no longer legal tender after 28 Feb 2002
value of the euro
$ Value of the Euro (€)
  • Quick Quiz:
  • What would you have paid to buy one Euro (€) on January 1, 1999?
    • A. more than $1.00
    • B. exactly $1.00
    • C. less than $1.00
value of the euro1
$ Value of the Euro (€)
  • 1 January 1999: $1.1719
  • 26 October 2000: $0.8228 (low)
  • 1 January 2002: $0.8920
  • 22 April 2008: $1.6018 (high trade)
  • 24 April 2008: $1.5952 (high close)
  • 1 October 2009: $1.455
who needs dollars
Who Needs Dollars?
  • People who want to …
    • buy U. S. goods and services
    • invest in U. S. assets
    • travel to the U. S.
  • Anyone who wants to buy oil!
why the weak euro why the strong u s dollar
Why the weak Euro (€)?Why the strong U. S. Dollar ($)?
  • Stronger U. S. economic growth
  • Shrinking U. S. Government deficit
why the weak euro why the strong u s dollar1
Why the weak Euro (€)?Why the strong U. S. Dollar ($)?
  • Stronger U. S. economic growth
  • Shrinking U. S. Government deficit
  • Strong U. S. stock market performance; compound annual returns for ten years ended -
what s changed to weaken the1
What’s Changed to Weaken the $?
  • Slower U. S. growth
  • Large U. S. government deficits
what s changed to weaken the2
What’s Changed to Weaken the $?
  • Slower U. S. Growth
  • Large U. S. Government deficits
  • Weaker U. S. market returns (S&P 500):
political effect
Political Effect?
  • U. S. Treasury Secretaries:
  • Robert E. Rubin(1995-1999) – “strong dollar”
  • Lawrence H. Summers(1999-01) – “strong dollar”
  • Paul H. O’Neill(2001-02) – “market decides the value of the dollar”
  • John W. Snow(2003-06) – “A strong dollar is in the national interest.”
political effect u s treasury secretaries
Political Effect?[U. S. Treasury Secretaries]
  • Henry Paulson (2006 -2009) – “As I think you know, I believe very strongly that a strong dollar is in our nation’s interest, and I’m a big believer in currencies being set in a competitive, open marketplace.”
achilles heel financial times may 31 2002
Achilles Heel?[Financial Times, May 31, 2002]
  • “The Achilles heel of the US dollar has been the bulging current account deficit, which is expected to reach $465bn (€516bn) this year.”
achilles heel financial times may 31 20021
Achilles Heel?[Financial Times, May 31, 2002]
  • This means the US needs to attract $1.3bn in overseas funds everyday to prevent the dollar from falling.”
foreign holdings of u s treasury securities

Foreign Holdings of U. S. Treasury Securities

Source: U. S. Treasury International Capital (TIC) Reports, monthly

[www.treas.gov/tic/mfh.txt]

concerns about the us economy
Concerns About the US Economy?
  • Corporate governance and accounting standards (Enron; WorldCom; Xerox)
  • Productivity gains have not translated into higher corporate profitability
  • Surge in government spending …could depress economic growth
impact of a weaker u s dollar disadvantages
Impact of a Weaker U. S. Dollar[Disadvantages]
  • Foreign goods more expensive
  • Foreign investment more expensive
  • Foreign travel more expensive
  • U. S. interest rates – higher; less foreign capital
impact of a weaker u s dollar advantages
Impact of a Weaker U. S. Dollar[Advantages]
  • American products are more competitive abroad; increased exports; lower U. S. trade deficit
  • U. S. A. manufacturing sector more competitive
  • Increased return on U. S. overseas investments
where do we go from here
Where Do We Go From Here?
  • “Dollar slips to all-time low ($1.3667) vs. Euro”
        • Associated Press
        • December 31, 2004
  • “Bears are betting on a decline in the dollar.”
        • Barron’s
        • August 21, 2006
where do we go from here1
Where Do We Go From Here?
  • “OFF THE CHARTS; Dollar Sinks the Lowest Since It Started to Float”
        • The New York Times
        • September 22, 2007
  • “Fear of European Slump As Currency Sets Record”
        • The New York Times
        • September 22, 2007
where do we go from here2
Where Do We Go From Here?
  • “As Dollars Pile Up, Uneasy Traders Lower the Currency’s Value”
        • The New York Times
        • May 23, 2009