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Dear Fools,

We had a discussion on Purchase Power Parity on the GG Board some month ago. It seems that the USD is undervalued against the Euro and other currencies of theindustrialized world (CHF, GBP...)

Do you believe that this is wanted by US FED and US Government ?
Do you believe that it last for many years?
Do you think there will be a risk that the USD lose its position as leading global currency?

Thanks for your answers.
Waldstein
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No. of Recommendations: 1
Undervalued currencies don't weaken a country; you have more to fear from an overvalued currency. When my (Canadian) currency was overvalued, we had massive job losses as jobs migrated to the U.S. Over the next couple of years, $1 Canadian dollar dropped to 62 cents U.S. at which point it was undervalued. As our dollar dropped, our employment levels rose. Exporters benefitted. Tourism increased, and locals bought Canadian as never before. We did have to pay our foreign debt, when it was in foreign currencies, at a greater disadvantage - however, the great majority of our debt was in canadian dollars so had no impact.
This will be true of the U.S. as well. I hear economists praise "strong currencies", but you have more to gain from letting the dollar drop. In fact many countries are on to this, so keep their own currencies depressed deliberately - China, for instance.
The way down to 62 cents was great for us Canadians- all my U.S. stocks grew at the U.S. rate plus the exchange on the U.S. dollar. However, now that the Canadian dollar is 92 cents American, it's very hard for me to make money even with winning stocks. So, U.S. investors are really going to enjoy the ride down!

MacMillan
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