Foreign Direct Investment, Inflation & Declining Dollar

From "Finster", a regular contributor to the Daily Reckoning Discussion Board…

A log chart of the foreign direct investment (FDI) over the past seven years, shows in grisly detail the decline and fall of the U.S. dollar. By this measure, the U.S. dollar has lost 13.8% of its value over the past two years, with prices increasing an overall 16.0% over that time frame.

That works out to an annualized rate of inflation of 7.7%. No wonder gold, silver, platinum, copper, oil, gas, etceteras have been going crazy. When inflation roars, they usually do.

Folks, this means that you had to have an after-tax nominal gain on your investments of 7.7% just to break even. If your pay has gone up by the average amount of 3%-4%, you have been taking a cut in pay, not getting an increase. Real wages in the U.S. have been falling. Nominal GDP has grown by 6.7% on average over the period, so in fact real GDP has been in contraction by some 1% per annum.

To view the chart and comment, go to the DR Discussion Board and click on The Crashing Dollar