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by C. Fred Bergsten, Peterson Institute Testimony before the Committee on Financial Services, US House of Representatives The dollar rose by a real trade-weighted average of about 40 percent from 1995 to early 2002, contributing to a sharp increase in US current account deficits that ultimately reached unsustainable levels of almost $800 billion and exceeded 6 percent of GDP. Since early 2002, the dollar has reversed this earlier rise and is back to where the large swing began over a decade ago (see figure 1). These fluctuations mirror to a remarkably similar extent the previous largest swing of the dollar, in the 1980s, when it rose by about 50 percent during the first half of the decade and then fell by an equivalent amount during 1985–87. The dollar is now at a very similar level to where it stood in both 1980 and 1995. It... [read full story]
