BERKELEY, Calif. — The blogosphere is abuzz with reports of the dollar’s looming demise. The greenback has fallen against the euro by nearly 15 percent since the beginning of the summer. Central banks have reportedly slowed their accumulation of dollars in favor of other currencies. One sensational if undocumented story has the Gulf States conspiring with China, Russia, Japan and France — now there’s an odd coalition for you — to shift the pricing of oil away from dollars.
Economists have no trouble explaining the dollar’s weakness after the fact. With American households saving more in order to rebuild their retirement accounts, the country has to export more. A weaker dollar is needed to make American goods more attractive to foreign consumers.
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