The Value of the Dollar

One 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.