Bottom Dollar

If you’ve been following closely, you know that the dollar has been declining steadily against many foreign currencies. From recent highs—reached in mid-2001 or early 2002—the dollar has dropped 38 percent against the euro, 23 percent against the yen and 25 percent against the Canadian dollar. And most economists expect the slide to continue. By the year-end, the euro may rise to $1.45 from $1.34 and the yen to 97 from 104 (that’s 97 yen to the dollar), says economist Nariman Behravesh of Global Insight.

If you sense a contradiction, you’re right; and there’s the dilemma. The world economy can’t get along without our massive trade deficits—and perhaps can’t get along with them, either.