[DesertCat]

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do you think the fiscal budget or the balance of payments has a larger impact on the strength of the dollar?

Barron

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I think the fiscal deficit helps drives the balance of payment deficit by attracting foreign cash flows to U.S. treasuries, i.e. they aren't buying our goods with the dollars we send them, they are reinvesting them in U.S treasuries because we are borrowing huge amounts of money. This balance of payments deficit helps drive the devaluation of the dollar.

Jimbo,

I didn't write those words because I was a big fan of Clinton. The balanced budgets we had during his administration were partially the responsibility of a Republican congress fighting his spending proposals. During that period the U.S. dollar was very strong. But during Bush's administration we abandoned all semblence of fiscal responsibility, in part because there was no counterbalancing force in congress. IMHO of course.

But regardless of the factors driving the U.S. dollar, the result is very clear. When the Euro was introduced a dollar could buy 0.75 Euros. Throughout the remainder of Clinton's administration the dollar increased in value vs. the Euro. By Nov. 2000 (GW Bushes election), a dollar could buy 1.17 Euros. Today a dollar buys 0.73 Euros. The devaluation of the dollar has added roughly $25 per barrel (over 1/3) to our imported oil prices by itself since the end of 2000.