From: Randall Parker 

The dollar needs to fall in order to cause the US trade deficit to decrease. That
much is obvious. But so far the dollar has basically given back gains it has made in
recent years. Here's an excerpt from a post in a totally different forum I read where
a software company executive was explaining how recent declines in the dollar were
not all that dramatic considered over a slightly longer period:

01/01/04 1 USD = 0.56007 GBP = 1.55522 DEM = 5.21597 FRF = 1.24070 CHF
01/01/97 1 USD = 0.58411 GBP = 1.54220 DEM = 5.18800 FRF = 1.34250 CHF

01/01/04 1 USD = 107.400 JPY = 1.33014 AUD 01/01/97 1 USD = 116.050 JPY = 1.25881 AUD

He says he looked it up here: http://www.oanda.com/convert/classic

I favor Warren Buffett's approach to the trade deficit:
http://www.fortune.com/fortune/subs/print/0,15935,525644,00.html

As for the EU's management: Well, it has higher unemployment rates, a far more dismal
demographic picture, and a worse pensions problem (the UK excepted, especially on the
  last point). The US has a very serious trade deficit problem that doesn't get
the
attention it deserves (though I certainly bring it up in various fora). But the US
economy has been growing faster for years and the EU integration is not helping to
close the growth gap.

If some of the US dollars ever do start coming home then the trade deficit will shift
rather rapidly toward being a trade surplus. Inflation may become a problem. But I
doubt the shift will happen on such a grand scale that suddenly that it will not be
possible to adjust to it.

Phil Payne wrote:

> If the dollar continues this decline (19% year-on-year against the Euro)
> then those holding these swathes of cash might dump them.  The EU is now a
> bigger and much better managed (fiscally) entity than the USA - and its
> currency is a better investment.  Even terrorists and despots manage their
> cash.
>
> How much US paper money is in these caches around the world, and what will
> happen when it all comes home?
>

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