Source: Carpe Diem

For more on inflation and prices, see Does the Government Understate Inflation?.

U.S. oil demand was significantly down for the first six months of 2008, API said today in its Monthly Statistical Report.  While U.S. refiners churned out record and near-record amounts of oil products, imports – especially product imports — fell substantially.

Deliveries of all oil products – a measure of demand – fell 3.0 percent compared with the same first-half-year period in 2007, with gasoline deliveries slipping 1.7 percent.  For the preceding three years, oil demand had essentially held steady.

API statistics manager Ron Planting said, “At 20.08 million barrels per day, total demand was the lowest in five years.  And the decline in gasoline demand was the first significant one recorded in 17 years.  Higher pump prices and a slowing economy were undoubtedly factors.”…

As we saw in the previous post, the supply of oil will be going up a bit as the new Alaskan fields come on line beginning in 2010.  Now, we see that demand for oil products has fallen due to higher prices.

Individually, these changes in supply and demand are not hugely meaningful.  But, millions of such decisions are being made each and every day.  Oil producers want to produce more to take advantage of higher prices.  Consumers want to use less because of high prices.  These forces — supply and demand — operate all the time.  As demand falls and supply increases, prices should stabilize.  Who knows, they might even continue the recent downward momentum.

I do hope they do not go down too much though.  That may sound contradictory, but I believe high prices for oil will stimulate the growth of alternative energy sources and, in the long run, that’s a good thing.  See Oil Prices — Too Low For Too Long and A New Strategy for Energy Independence — T. Boone Pickens.

The Interior Department on Wednesday made 2.6 million acres of potentially oil-rich territory in northern Alaska available for energy exploration. At the same time, it deferred for a decade any decision to open 600,000 acres of land north of Teshekpuk Lake that is the summer home of thousands of migrating caribou and millions of waterfowl.

The decision will open up for drilling much of the northeast section of the Northeast National Petroleum Reserve-Alaska, holding an estimated 3.7 billion barrels of oil, Tom Lonnie, Alaska state director for the Bureau of Land Management, said in a conference call with reporters.

The northeast and northwest portions of the reserve could yield eight billion barrels of oil, he said.

Mr. Lonnie said he expected the first oil production to begin in the easternmost part of the reserve, west of the Colville River, from 2010 to 2012. A fully developed oil complex exists on state lands on the eastern banks of the river…

The first oil production could begin in 2010?  That’s fast.

It’s important to remember that, as opposed to ordinary income from salaries and bonuses, investors have far more control of when and if they will realize a gain on a sale of stocks, mutual funds, real estate or a business. And, this is not just an issue for the ‘rich.’ In recent years, most of the households reporting capital gains have been under $100,000 in annual income. For more on this see What Happens When You Raise Capital Gains Tax Rates?.

And, when the government tries more aggressive tax laws as a means of soaking the rich, we find that there are unintended consequences. A perfect example of this is the Alternative Minimum Tax (see Congress Patches Alternative Minimum Tax), which was enacted in 1969 to tax the very rich.

Unfortunately, it was never indexed for inflation so now it soaks millions of taxpayers who are definitely not rich by any reasonable standard.

In this fascinating presidential election, we again find the rich targeted as a source of income tax revenues to cure whatever fiscal ills the Federal government has.  Essentially, this type of political rhetoric has to do with using the tax code to redistribute wealth from the so-called rich into the hands of government. This piece from the Wall Street Journal [registration may be required; emphasis added] starts off the discussion as to why these terms such as ‘fair’ share or the ‘rich’ are misleading:

Source: Wall Street Journal

Their Fair Share (Wall Street Journal, July 21, 2008)

Washington is teeing up “the rich” for a big tax hike next year, as a way to make them “pay their fair share.” Well, the latest IRS data have arrived on who paid what share of income taxes in 2006, and it’s going to be hard for the rich to pay any more than they already do. The data show that the 2003 Bush tax cuts caused what may be the biggest increase in tax payments by the rich in American history.The nearby chart [see above] shows that the top 1% of taxpayers, those who earn above $388,806, paid 40% of all income taxes in 2006, the highest share in at least 40 years. The top 10% in income, those earning more than $108,904, paid 71%. Barack Obama says he’s going to cut taxes for those at the bottom, but that’s also going to be a challenge because Americans with an income below the median paid a record low 2.9% of all income taxes, while the top 50% paid 97.1%. Perhaps he thinks half the country should pay all the taxes to support the other half.

Aha, we are told: The rich paid more taxes because they made a greater share of the money. That is true. The top 1% earned 22% of all reported income. But they also paid a share of taxes not far from double their share of income. In other words, the tax code is already steeply progressive.

…The way to soak the rich is with low tax rates, and last week’s IRS data provide more powerful validation of that proposition…

 

Fortunately, Americans seem to be quite immune to rhetoric that appeals to class and income envy.  And, they also understand that using the tax code to redistribute income is not the way to improve the economy.  These charts from a recent Gallup survey bear out this point:

For the full results of the Gallup Poll, go here.

The Largest Tax Increase in 60 Years

When you hear politicians discuss letting the ‘Bush’ tax cuts expire, you may not realize exactly that doing so would result in the largest income tax increase we have seen in 60 years. The genesis of this huge tax increase would be the termination of the tax cuts of 2001 and 2003. If those tax cuts fade into history, then income tax rates will skyrocket. And, estate taxes will hit millions more Americans when they die. Here is a taste of what’s to come if the tax cuts expire:

• A huge boost in tax rates on dividends
• A large jump in capital gains rates
• The marriage tax penalty would be back
• The child tax credit would be reduced
• Estate tax exemptions would be cut drastically to $600,000

This piece from the Wall Street Journal (registration may be required; emphasis added) spells out what will happen if the tax cuts expire [emphasis added]:

Source: Wall Street Journal

The Coming Tax Bomb (Wall Street Journal, April 8, 2008, John F. Cogan & R. Glenn Hubbard)

…This would be the largest increase in personal income taxes since World War II. It would be more than twice as large as President Lyndon Johnson’s surcharge to finance the war in Vietnam and the war on poverty. It would be more than twice the combined personal income tax increases under Presidents George H. W. Bush and Bill Clinton. The increase would push total federal government revenues relative to GDP to 20%.

Why this large tax increase? The tax code changes enacted in 2001 and 2003 are scheduled to expire at the end of 2010. If they do, statutory marginal tax rates will rise across the board; ranging from a 13% increase for the highest income households to a 50% increase in tax rates faced by lower-income households. The marriage penalty will be reimposed and the child credit cut by $500 per child. The long-term capital gains tax rate will rise by one-third (to 20% from 15%) and the top tax rate on dividends will nearly triple (to 39.6% from 15%). The estate tax will roar back from extinction at the same time, with a top rate of 55% and an exempt amount of only $600,000. Finally, the Alternative Minimum Tax will reach far deeper into the middle class, ensnaring 25 million tax filers in its web…

This tax increase is being touted as the fiscally responsible thing to do because government needs the money. First, when it comes to spending our money, I do not see much in the way of fiscal responsibility from our political leaders in Washington — on either side of the aisle. In fact, they seem to know about as much about fiscal responsibility as my eight-year-old does. Maybe less.

Second, if obtaining higher tax revenues is the goal, then let’s figure out the best way to get them.  Unfortunately, as we have seen, raising tax rates is not the best way to raise tax revenues because taxpayers find many creative ways to avoid taxes when they feel they are too high.  Instead, the best and the most painless way to boost tax revenues is to boost economic activity.  As economic activity grows, income tax revenues grow commensurately without any increase in rates.  Most politicians seem to find this concept hard to understand, yet the key activity politicians should focus on is how to get the economy going, not how to get government growing.

Via: Steve Janachowski

Not exactly.  Now, we find out the Federal highway trust fund is going to go broke if we keep cutting back.  From the Los Angeles Times, this piece tells the story [emphasis added]:

U.S. Highway Trust Fund Veers Towards Crisis (Los Angeles Times, July 21, 2008, Richard Simon)

Soaring gasoline prices are hurting Uncle Sam in the wallet too.

As motorists cut back on their driving and buy more fuel-efficient cars, the government is taking in less money from the federal gasoline tax.

The result: The principal source of funding for highway projects will soon hit a big financial pothole. The federal highway trust fund could be in the red by $3.2 billion or more next year.

The fund, set to finance about $40 billion in transportation projects next year, is increasingly strained. And the problem has taken on greater urgency as lawmakers face a backlog of projects to maintain the nation’s aging interstate highway system and ease traffic congestion.

“The situation has only been exacerbated by rising fuel prices, which are causing motorists to drive less and resulting in less revenue for transportation improvements,” said David Bauer, senior vice president for government relations at the American Road and Transportation Builders Assn.

California risks losing $930 million, or about a third of its federal highway allotment, Caltrans Director Will Kempton said in a letter to the state’s congressional delegation. Kempton warned that unless Washington acted to address the shortfall, projects could be delayed, reduced or canceled.

In the short run, lawmakers are scrambling to figure out how to close the gap. Federal highway spending nationwide could be cut by a third beginning Oct. 1, according to the American Road and Transportation Builders Assn.

“The condition of the highway trust fund has been deteriorating for years, but skyrocketing gas prices have made an already dire situation worse,” said Sen. Patty Murray (D-Wash.), head of the Senate transportation appropriations subcommittee. “We are now less than a year away from a bankrupt trust fund, which would leave critical construction projects in peril.”

In the long run, lawmakers must figure out whether the 18.4-cent-a-gallon federal gasoline tax, which helped bring in money when fuel-hungry SUVs were hot, is still a viable way to fund transportation projects amid heightened concern about gasoline prices, U.S. dependence on foreign oil and global warming.

The federal gasoline tax is tied to every gallon sold, not every dollar spent, so federal gas tax revenue goes up only if consumption increases. This year, consumption is projected to drop for the first time since 1991.

Vehicle miles traveled on the nation’s roads are trending downward for the first time since the oil shocks of the late 1970s and early 1980s, according to the Cambridge Energy Research Associates consulting firm…

No doubt this will get resolved.  However, in a broader sense, it is a good reminder of just how complex our economy is and how we have to pay close attention to the unintended consequences of a particular change.  The highway trust fund was, essentially, predicated on a continually rising number of miles being driven such that revenues from gas taxes would go up and up.  Life does not always work that way though.  Just pointing this out…

Via: BrothersJuddBlog

Source: Calculated Risk

See also Real Estate — Is A Bottom In Sight?.  The terms Composite 10 and Composite 20 refer to real estate prices for a group of 10 cities or 20 cities, respectively.

For more on the Case-Schiller index, see an earlier post we did on it, Major Turning Point? — Robert Schiller.

Source: Carpe Diem

As we can see from this chart, current subprime loan originations have fallen from the high levels of the bubble years (2004-2006) and now they are well below the pre-bubble period (2001-2002).  Eventually, subprime loans will come back a bit, but at a sustainable level.  The data on subprime mortgage loans is from a Harvard study on the state of nation’s housing market.

Bravo For Bush (Kudlow’s Money Politic$, July 15, 2008, Larry Kudlow)

In a dramatic move yesterday President Bush removed the executive-branch moratorium on offshore drilling. Today, at a news conference, Bush repeated his new position, and slammed the Democratic Congress for not removing the congressional moratorium on the Outer Continental Shelf and elsewhere. Crude-oil futures for August delivery plunged $9.26, or 6.3 percent, almost immediately as Bush was speaking, bringing the barrel price down to $136.

Now isn’t this interesting?

Democrats keep saying that it will take 10 years or longer to produce oil from the offshore areas. And they say that oil prices won’t decline for at least that long. And they, along with Obama and McCain, bash so-called oil speculators. And today we had a real-world example as to why they are wrong. All of them. Reid, Pelosi, Obama, McCain — all of them.

Traders took a look at a feisty and aggressive George Bush and started selling the market well before a single new drop of oil has been lifted. What does this tell us? Well, if Congress moves to seal the deal, oil prices will probably keep on falling. That’s the way traders work. They discount the future. Psychology and expectations can turn on a dime.

The congressional ban on offshore drilling expires September 30, so that becomes a key date. A new report from Wall Street research house Sanford C. Bernstein says that California actually could start producing new oil within one year if the moratorium were lifted. The California oil is under shallow water and already has been explored. Drilling platforms have been in place since before the moratorium. They’re talking about 10 billion barrels worth off the coast of California…

The drop in the price of oil is probably a coincidence, but we do know that the price of oil is exceedingly high now primarily due to assumptions about the tight supply of oil worldwide.  If the U.S. ends it ban on drilling, then a significant new supply of oil will begin coming on line in future years.  Today’s price reflects assumptions about the future because oil producers around the world make a daily choice whether to produce oil or leave it in the ground.

The choice to leave it in the ground is based in part on the assumption that future prices will be higher than today’s price.  As high prices reduce demand both here and abroad, that alone will impact the world price of oil.  And, if oil producing countries believe the  U.S. is finally serious about drilling more and also about aggressively developing other energy sources, then producers may begin producing more to take advantage of high prices today.  And, that — more supply — would help reduce prices even further. For more on this, see 2 Trillion Barrels? — U.S. Oil Shale — Chart of the Day.

In the past couple of weeks, we have seen a sea change in attitudes here about drilling:

Source: Carpe Diem

We have also seen some viable new strategies for reducing our dependence on oil altogether, see A New Strategy for Energy Independence — T. Boone Pickens.

If you are having trouble understanding why gas prices are soaring, this post should help you understand the basic economics of supply and demand for daily necessities such as gaoline or food:

Why Are Food & Fuel Prices Soaring?

• Stocks have tumbled - both here and abroad.
• The dollar has fallen to new lows versus the Euro.
• Oil prices have doubled in the past year.
• Inflation has moved higher.
• Falling U.S. home prices have caused a widening array of problems.
• Subprime loans have collapsed.
• Banks, mortgage companies and hedge funds have suffered huge losses due to subprime lending excesses.
• Lending activity at banks has shrunk.
• Tax exempt municipal bonds had their worst performance in many years due to liquidity problems at banks, insurers, and hedge funds.
• The economy has slowed or even contracted.
• Job losses are mounting.

As you can imagine, all of these factors have contributed to widespread unease and a feeling of doubt about the future.  A recent article from the Washington Post [emphasis added] points out how bleak the current mood is, but also tries to put our present economic environment in a historic context:

Why We’re Gloomier Than The Economy (Washington Post, June 18, 2008, Neil Irwin)

“Ask Americans how the economy is doing, and their answer is stark: It is not just bad, it is run-for-the-hills terrible. Consumer confidence is at its lowest level in almost 30 years. Only 12 percent of Americans think the economy is in good shape. On the Internet, comparisons to the Great Depression are widespread.

But the reality is different. According to most broad measures of how the economy is doing, it’s not all that grim.

Soft? You betcha. In recession? Quite possibly. And a crisis in the financial markets has rattled nerves for months now. But so far, the economy is holding up better than it did during the last two recessions in 1990 and 2001. Employers haven’t shed as many jobs, the unemployment rate is still relatively low, and gross domestic product has kept rising. Things are nowhere near as bad as they were in the Great Depression, or even during the severe recession of 1982-83. The last time consumers were this miserable, in May 1980, the jobless rate was 7.5 percent and inflation was 14.4 percent. Now those numbers are 5.5 percent and 4.2 percent respectively…”

Objectively, conditions are not bad compared to 1980, so why is the mood so dark?  We believe that there are two factors at work today.  The first factor is that the economy and the financial markets are definitely struggling.  Coupled with that is the sharp decline in home prices - something we have not seen since 1991.  In addition, we are reminded daily of higher prices for food and fuel when we stop for gas or go to the grocery store.  All of these factors hurt our confidence.

We also believe that Americans are in doubt about major institutions in our country.  We know that President Bush’s approval rating is around 23%, which means that only 23% believe he is doing a good job.  However, Congress’s ratings are far worse and only 12% of Americans believe Congress is doing a good job.  In short, we are facing a crisis of confidence in our government as well as our economy.  Over the past 30 years, consumer sentiment slumps the most when we lose confidence in both the economy and in our government. And, that may be why consumer confidence is almost as low now as it was in 1980.

Index of Consumer Sentiment Nears 30-Year Low 

Source: St. Louis Federal Reserve Bank

This chart from the St. Louis Federal Reserve Bank shows the Index of Consumer Sentiment going back in time to January 1978.  It is hard to believe, but consumers are now gloomier than they have been in the past 30 years, with one exception - 1980.  That year we faced very difficult economic conditions during a contentious presidential campaign (Carter vs. Reagan).

We certainly have problems these days, but having lived through the early 1980s, I have a difficult time equating the difficulties we have now with the horrendous economic environment we had in 1980-82:

Double Digits in 1980-82: Inflation, Unemployment & Mortgage Rates

In the late 1970s and early 1980s we had sky-high inflation, unemployment and mortgages rates. At that time, the Federal Reserve’s Chairman, Paul Volcker, had to raise interest rates to unheard-of levels. These rate hikes led to a prolonged economic contraction that was the worst since the Great Depression of the 1930s. This description from Wikipedia gives a sense of how severe the reaction was [emphasis added]:

“…However, the change in policy contributed to the significant recession the U.S. economy experienced in the early 1980s, which included the highest unemployment levels since the Great Depression, and Volcker’s Fed also elicited the strongest political attacks and most wide-spread protests in the history of the Federal Reserve (unlike any protests experienced since 1922), due to the effects of the high interest rates on the construction and farming sectors, culminating in indebted farmers driving their tractors onto C Street and blockading the Eccles Building…”

The image of farmers blockading Washington D.C. with tractors is hard to imagine now, but those were tough times.  The reason Volcker raised interest rates so aggressively was that inflation went wild in the late 1970s. For example, inflation hit 11.3% in 1979, 13.5% in 1980 and 10.3% in 1981 before Volcker’s harsh medicine began to kick in and inflation moderated to 6.2% in 1982.

As inflation ratcheted higher, so did home mortgages rates. Thirty-year fixed rate mortgages went up to nearly 13% in November 1979 and did not fall under 12% again until November 1985. The peak rate for mortgages was 18.45% in October 1981. 18.45%!

But, even though high interest rates began knocking down inflation, soaring rates also led to sharply higher unemployment. The unemployment rate peaked at 10.8% in December 1982. However, it had been soaring for years and it remained at 8% or higher until January of 1984. Given all this, it is not surprising that investors and consumers were very negative in that time period 1980-82.

A Decade of Above-Average Returns Followed a Decade of Below-Average Returns

As you can see from the chart below, when consumer sentiment hit bottom in 1980, we had just been through a terrible decade for stocks.  In fact, the decade of the 1970s had negative real (adjusted for inflation) returns for stocks.  However, the decade of the 1980s was excellent for stocks.

Source: Brouwer & Janachowski, LLC

As you saw in the first chart above, in 1990, consumers again turned very negative due to a difficult real estate market, the onset of the first Gulf War in August 1990 and a slowing economy and impending recession in 1991.  Yet, again, the plunge in consumer confidence in 1990 came just before an excellent decade for the stock market.

Now, we are going through another difficult time for stocks, very similar to what happened in the 1970s.  In fact, stock market returns since 2000 have also been negative, adjusted for inflation.

As we saw in the chart above, returns from the stock market are cyclical.  Good times follow bad times.  Now, I cannot tell you that this plunge in consumer sentiment unquestionably presages a turning point for investments.   However, I can state with confidence that such extreme negativity in consumer sentiment is rare.  In fact, the index has only been lower once in 30 years.  I believe the current level of pessimism is overdone and that, ultimately, the country’s bleak mood will change.

As the Washington Post article referenced above concluded:

“…But now, coming off two decades of prosperity and low inflation, Americans have come to treat low unemployment and inflation as givens. We have gotten so used to things being good, in other words, that even when conditions become somewhat bad, it feels terrible.”

When you hear politicians and pundits opine that this is the worst crisis since the Depression, just mentally compare current conditions to those of the late 1970s and early 1980s. Back then, we had double digit inflation, unemployment and home mortgage rates. Today, inflation is around 4%, unemployment is 5.5% and 30-year fixed mortgages are about 6.25%. In other words, we are not remotely close to anything like double digits on any one of these factors, much less all three.

Summing It All Up

I believe that as the bad news gets absorbed and financial conditions moderate, the most likely outcome is that consumer sentiment - and the financial markets - will turn more positive. Several developments are now helping create the underpinnings for revitalized economic and market conditions.

• The dollar is trying to strengthen.  The Federal Reserve and the U.S. Treasury are now taking steps to shore up the dollar and this should have important positive effects throughout the economy and the financial markets.  We are beginning to see signs of strength in the exchange rate of the dollar versus the Euro and other foreign currencies.  A stronger dollar should lead to a retreat in oil prices and should also reduce inflationary pressures in food, gas and other necessities (See Gross Likes Dollar vs. Euro For First Time).
• The credit markets are beginning to stabilize.  Increasing lending activity will also pave the way toward renewed economic growth.
• The real estate market has experienced a significant correction and is now going through a bottoming process.
• Underlying values in the stock markets have improved dramatically as many companies continue to perform well and increase shareholder value even while their stock prices have fallen.

At this point, I do not know if “everything, but the kitchen sink” has been thrown at us.  Nonetheless, I believe the U.S. economy and our financial markets are fundamentally strong and resilient and that they will survive this downturn and begin growing again.

In the early 1980s, the stock market took time to regain positive momentum in the face of the many negatives, but patient investors were rewarded with a strong and prolonged turnaround in the markets.  I believe the same is true now.  Patient investors will again be rewarded as conditions improve.  And, when it does come, the turnaround in the stock market could be dramatic - on the upside.

When the dollar falls against the euro or the British pound or the Japanese yen, investors in those currencies or stocks or bonds denominated in those currencies will gain. And, U.S. companies that export goods will find their products are more competively-priced against rival products sold in the hot currencies. On the other hand, if you’re buying something that is imported or going on a vacation in London, well…that outrageously-priced cup of coffee just got more expensive.

Why is the dollar falling? There are many theories, but the most obvious one is short-term interest rates. Short-term rates are going up overseas and they’re not going up here, so very large institutional investors such as big banks, securities firms, central banks and so on are moving cash to other currencies. This is normal and not particularly significant. However, if the dollar kept falling, there is a point at which the U.S. Treasury and the Federal Reserve would have to take some steps to bolster the dollar. We are not at that point yet, in my opinion, but we should be.  I think the Treasury and the Fed should begin working with other central banks in order to stabilize the dollar, which has fallen steadily versus the Euro.  This chart shows how many dollars it takes to buy one Euro.  The Euro fell for several years versus the dollar and begin moving up in late 2001:

Source: St. Louis Federal Reserve Bank

David Gaffen at the Wall Street Journal’s MarketBeat Blog (daily reading for me by the way) gives a bit of background on why the mood seems so dour right now [emphasis in the original]:

Pity the Dollar (WSJ/MarketBeat Blog, July 15, 2008, David Gaffen)

…The U.S. currency hit a new record low against the euro Tuesday, three-month lows against the British pound and is nearly at parity with the Australian dollar, of all things, as global investors question the value of U.S. assets and the quality of the entire U.S. balance sheet, so to speak.

“Markets are fearing another major crisis, and they’re doubting that the Fed or U.S. Treasury will do anything near-term to alleviate the situation,” says Kathy Lien, chief strategist at DailyFX.com. “They’re skeptical about the efforts of the government.”

Of late, the euro traded at $1.5969, down from a record of $1.6038 reached earlier in the day. Global markets dropped sharply in the wake of the middling showing by U.S. markets Monday after a Fannie Mae/Freddie Mac rescue was announced.

…The dollar has continued to come under pressure as investors believe U.S. assets do not offer enough return for the risks being taken. Bond yields are low when compared with other major global economies, and the Fed is in a bind – it cannot raise rates while the economic malaise continues, but it fears worsening inflation if it lowers rates.

“The deteriorating market and economic conditions in the U.S. continue to be the chief causes of the broad decline in the U.S. currency,” writes Ashraf Laidi, chief currency strategist at CMC Markets. “As long as these continue, the dollar will deteriorate regardless of any jawboning by policy makers, which would be perceived as bluffing rather than communicating real policy intentions.”

…In part, the dollar’s decline mirrors the fall in U.S. equities, which are reacting to Mr. Bernanke’s testimony. “What’s basically happening at the moment is that the dollar is following equity markets, and they’re going down, and the reason it’s all happening is the credit crunch which is based in the States,” says Chris Furness, head of currency strategy at 4Cast Ltd.

Yesterday, we reported that PIMCO and Bill Gross had turned positive on the dollar vs. the Euro (see Gross Likes Dollar vs. Euro For First Time).  Obviously, the brain trust at PIMCO is responding to broad economic and financial trends so this should not be taken as a sign that the dollar will turn around right away.  However, it is positive in that the folks at PIMCO believe that the Euro is overvalued.

In order for the turnaround to begin though, I believe the Fed and other central bankers are going to have to give the currency markets a strong signal that they are supporting the dollar.  See also How Far Has the Dollar Fallen? And Why? — What’s Next?.