The Value of the Dollar
13 March 2008One of the increasingly unnerving questions facing world bankers today is the question of whether the dollar’s precipitous fall against other world currencies has been a carefully-orchestrated intentional act, geared to help US exports, or whether it is the victim of a series of missteps that are leading it to a complete free fall.
I had the great pleasure of spending a few hours at the annual meeting of SVB Financial this week, and I was pondering this question just before my speech.
I decided that it was difficult, but not impossible, to define the true value of a currency. Mostly, it is representative of what others think of a country’s financial future, a very complex equation, no doubt.
I came up with something much simpler, but, I think, equally accurate. Here is the formula for the Value of the Dollar, as shared with SVB on Tuesday:
D = (global perception of presidential IQ) x (ability of the financial system to respond)
Clearly, if the world thinks the boss is an idiot, the responsiveness of the system does not matter, and D will go to zero. Conversely, if the boss is a genius, but the system will not be controlled, then, again, it goes to zero.
Well, there you have it. If you live in a Red State, you can blame it on the system. If you live in a Blue State, you can blame it on the boss. In either case, the equation works perfectly.
I wish it were otherwise.
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