How do compare how stable the US exchage rate is against other curriencies?

7 posts / 0 new
Last post
2190844's picture
2190844
Status: Member (Offline)
Joined: May 17 2010
Posts: 1
How do compare how stable the US exchage rate is against other curriencies?

I am trying to find a way to compare the stability of a few different countries exchange rates over a few years and was wondering what I would  compare each countries exchange rate against to give me meaningful results. I was thinking about comparing them to a really stable curriency but than any changes in the stable curriencies exchange rate are going to mess up my results. Atleast that is what I think will happen

Travlin's picture
Travlin
Status: Diamond Member (Offline)
Joined: Apr 15 2010
Posts: 1322
Re: How do compare how stable the US exchage rate is ...

The standard answer is gold bullion, and I can't think of anything better.  The central banks and their allies at JP Morgan etc.try to suppress it, but it is still the best standard.  Oil is subject to political influence, and since it is priced in US dollars it is skewed.  There is a good reason gold used to officially be the standard for all currencies.  I've seen graphs where various things are priced in gold over the past and the results are surprising.

redpill's picture
redpill
Status: Member (Offline)
Joined: May 6 2010
Posts: 23
Re: How do compare how stable the US exchage rate is ...

 

I'd probably use Swiss Francs.

piquod12's picture
piquod12
Status: Bronze Member (Offline)
Joined: Apr 13 2010
Posts: 99
Re: How do compare how stable the US exchage rate is ...

Currency strength and stability is normally measured relative to other currencies. There is no 'absolute' currency with legal status Globally. As Travlin sais you can use gold but gold itself will fluctuate according to supply and demand. If comparing a countries relative competitiveness (i.e. against another country) you would need to measure both currencies of interest against gold which means you can take gold out of the equation and end up back with relative currency comparisons. In the end this is what currency strength is - a measure of the productivity and competitiveness of the underlying country. When for example you buy USD's you buy the balance sheet and income statement of the US.

One recognised way is to compare against a basket of other major currencies of countries with which trade is carried out. So for the $ this gives what is known as the USD Index which measures the performance of the US Dollar against a basket of currencies: EUR, JPY, GBP, CAD, CHF and SEK.

 

plato1965's picture
plato1965
Status: Platinum Member (Offline)
Joined: Feb 18 2009
Posts: 615
Re: How do compare how stable the US exchage rate is ...

 I'll repost my graph.. I find visual information much more intuitively digestible than numerical data..

 

 This assumes of course that a currency can be measured by it's gold-buying power..  if you simply wanted to see how the paper currencies perform relative to each other you could normalise by resetting the "centre of gravity".. (simple or weighted ..? )

 It's very reminiscent of orbital mechanics... I think of the paper currencies as a planetary system (eg dollar=jupiter) with fiat system moons (pound, euro, yen) but all orbiting the sun (gold).

 The swaps between central banks serve to keep the fiat system bound, but if one of them loses value too rapidly, like the euro last week, it triggers gold buying, which then makes all other fiat currencies look poor.. positive feedback...

 

compinthegroove's picture
compinthegroove
Status: Silver Member (Offline)
Joined: Nov 8 2009
Posts: 113
Re: How do compare how stable the US exchage rate is ...

Looks like the best alternative currency to the dollar (other than gold) is silver.  No surprise there.

plato1965's picture
plato1965
Status: Platinum Member (Offline)
Joined: Feb 18 2009
Posts: 615
Re: How do compare how stable the US exchage rate is ...

 

 The emergence of a bottom up gold standard.. ? What FOFOA would call "freegold". 

 http://www.zerohedge.com/article/todays-unprecedented-swiss-bank-intervention-driven-massive-capital-flight-germany-switzerla

 http://www.youtube.com/watch?v=p-y_1SOC2L0

 

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments