The US dollar has fallen of late and speculation about a dollar collapse driven by expansive monetary policy and fiscal profligacy and facilitated by scared global and domestic investors has started in the rumor mills. Although this speculation never stopped in some corners and it is not total without basis although I find it hard to see the dollar breaking down without the breakdown of Bretton Woods II which we seem to be returning to rather rapidly. But that is another story….I want to point out the the recent fall in dollar might possibly be just a return to normalcy (removal of the inverse risk premium), this would match some risky asset markets but it can also be seen when you look and see that the people (at a country level) who scrambled for dollar when the crisis started are paying it back (the dollar loans the federal reserves gave out to foreign central banks are being paid back rather quickly). (Add this to recent reserve growth and then compare that rate of growth to pre-crisis growth rates…)
