CBS 'The Early Show' Tells Only Half of the Devalued Dollar Story
Another day, another weak dollar story.
CBS Business Correspondent Anthony Mason gave viewers a one-sided report about what the weak dollar means to the U.S. economy on the November 12 â€śThe Early Show.â€ť
â€ś[T]he weak dollar is really wreaking havoc on investor confidence and in many ways, the impact is just beginning to be felt,â€ť Mason said. â€śThe dollar, once the gold standard of currencies, is falling hard and fast around the world. At $1.46, the euro is up nearly 12 percent against the greenback. The yen traded at $110.38 per dollar, an 18-month high. And for the first time since 1976, the Canadian dollar has risen over 20 percent in value against the U.S. dollar at $1.06.â€ť
Mason referred to supermodel Gisele Bundchenâ€™s reported desire to not be paid in dollars (which her sister, who is her manager, claimed was â€śa joke by some journalistâ€ť) and the video of rap artist Jay-Zâ€™s latest single â€śBlue Magic,â€ť where he flashes a fistful of euros, as proof the declining dollar has infiltrated pop culture â€“ items which previously appeared on The Wall Street Journalâ€™s November 6 blog and CNBCâ€™s November 7 â€śMad Moneyâ€ť hosted by Jim Cramer.
While thatâ€™s what currency markets supposedly say about the dollar, there are other underlying stories. A weak dollar has its upside, beyond just encouraging European visitors to spend more in the United States, as Mason pointed out. Exports of U.S. goods increase, having a positive economic effect.
â€śThis will increase the demand for U.S. dollars and bid up the price of U.S. dollars,â€ť Dr. Gary L. Wolfram, a Business & Media Institute adviser, explained November 7. â€śOne of the strongest parts of the U.S. economy in recent months has been exports, just as the value of the dollar has been declining.â€ť
Another point left out of Masonâ€™s report is that not everyone thinks the exchange rate of the dollar accurately reflects what the dollar is really worth.
â€śThough the dollar is grossly undervalued and it may not be far from the ultimate trough [versus the British pound] the market is likely to push it lower,'' said Stephen Jen, Morgan Stanley's London-based head of currency research, according to Bloomberg on November 10.
Mason also partially blamed the decline of the dollar for the rise in oil prices.
â€ś[Y]ou go to a department store in New York right now and you're likely to get elbowed aside by a stampede of Europeans, who are here like on this feeding frenzy, because everything looks so cheap,â€ť Mason said. â€śBut that same thing, as I say, applies to oil. The same people who can buy everything here because it looks cheap, can buy oil because it looks cheap. That's raising your gas prices.â€ť
However, a closer look at oil as it relates to the fall of the dollar suggests thereâ€™s more at play than just currency inflation. According to Dr. Mark J. Perry, a professor of economics and finance at the University of Michigan, the increase in oil prices versus the fall of the dollar doesnâ€™t add up.
â€śA weak dollar doesn't justify $100 [a barrel] oil,â€ť Perry wrote on his Carpe Diem blog. â€śSince Aug. 22, the dollar is down by only 8% against a basket of currencies while the oil price has risen by 40%.â€ť
Perry related the price of oil to the price of natural gas to show $100 barrel oil cannot last. â€śOn a relative basis â€“ comparing the amount of energy bought with a dollarâ€™s worth of oil with a dollarâ€™s worth of natural gas â€“ the price for natural gas is now about half that of oil, further suggesting that $100 oil is not sustainable,â€ť he wrote.
Perry also blamed the high price of oil on speculation artificially boosting prices.
So, whatâ€™s causing the negative attitude toward the dollar? CNBCâ€™s Larry Kudlow blamed the media.
â€śThe dollarâ€™s slump, particularly in the last six to 12 months, is because these currency markets think that the U.S. economy is crumbling,â€ť Kudlow said on the October 12 â€śHugh Hewitt Radio Show.â€ť â€śThey actually believe the crap that they read in The Financial Times and The New York Times â€“ and I hate to say, but sometimes on the front page of The Wall Street Journal.â€ť