The Five Year 30% drop of the dollar

The Five Year 30% Drop of the Dollar. I recently went to the yahoo financial page to the euro, dollar comparison and called up 5 years of changes. I realized that with the dollar in freefall the last 5 years there is no real benchmark that makes any sense to me but to calibrate in the loss of the dollar against the Euro. Though the Fed might be allowing the dollar to drop to stop Americans from purchasing so many Chinese goods and setting up an even worse trade balance with them, I don't think this is the case.

However, it is obvious to everyone that foreign investment is starting to dry up in America because of so many foreign banks and investment companies and foreign investors getting burned in the subprime meltdown and all its continuing ramifications worldwide.

Also, the Fed reducing interest rates make the US a bad place to invest. So on multiple fronts foreign investment in the US is starting to dry up and probably will continue to dry up until the Subprime debacle hits bottom sometime in the next 5 years.

However, then you will see a mad rush of foreign investors buying real estate properties in the US at bargain basement prices. This will cause an exponential skyrocketing of real estate values in the US up to I'm not sure what level in the short run. What will happen in the long run is anyone's guess.

If we plug into the US Stock market the 30% drop in the dollar and revalue it to what it is in the real dollar value 5 years ago then we get about 8750 if we start with a hypothetical of a 12,500 stock market price. 8750 is only 1700 points above the low of the market in 2001 after 9-11. Also if you take oil at a hypothetical 100 dollars a barrel it makes much more sense to say oil really is about 70 dollars a barrel adjusted for the steep decline in the dollar by 30% over the last 5 years.

IF you look at it this way you can begin to make much more sense on the world stage what is actually happening than falsely believing that the dollar is the same as 5 years ago when actually it is worth only 70% of what it was then. Because of the actions of the Fed it is likely to decline to 50% of it value 5 years ago. The only silver lining in this I believe is that for foreign investors to divest in this market of US investments(if they bought them 5 or more years ago) they would have to take a 30% loss in dollar value plus any other losses in the stock market. Many wise foreign investors that can afford to wait this financial debacle out 5 or more years likely will show a profit whereas those who divest now will take horrendous losses.

So if foreign investors are in the US for the long haul they will likely be okay but given the world situation right now it is hard to say completely where it will all shake out.

So even though those of us living in America don't need so much to consider this like a foreign investor would, still it affects us all here to so we should be aware all this is taking place.