The Onion asks, “Last week, the U.S. dollar dipped to a record low against the euro. What are the reasons for the currency’s decline?”. Two of my favorites from their answers:
Inflation inevitable after U.S. Mint began allowing people to print $20 bills on their inkjet printers
Currency markets hate freedom
For less funny, but more economically insightful, commentary on this development see Pass the Buck by Grant M. Nülle and The China Factor and the US Dollar by Frank Shostak. For a general framework for understanding the long, strange trip of the U.S. dollar, read the classic What Has Government Done to Our Money? by Murray Rothbard.
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I am of the believe the Euro has appreciated to this current degree because the Rennubi cannot appreciate. If China’s peg were to be abandoned, the dollar/euro exchange would normalise.
In trade related terms, the Dollar/Euro rate should be 1/1.10 not 1/1.34~1.35
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