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How Far and Fast Will the Dollar Fall?

It reached parity with the Canadian dollar today. Paul Krugman writes:

Is This the Wile E. Coyote Moment?: Lots of buzz suddenly about the possibility of a sharp fall in the dollar.... A nice summary at Barry Ritholtz’s blog The Big Picture.... [T]he problem is that I’ve been seeing it coming for several years, and it keeps not arriving.... [T]he U.S. trade deficit is, fundamentally, not sustainable in the long run, which means that sooner or later the dollar has to decline a lot. But international investors have been... betting that the dollar won’t ever decline.

So, according to the story, one of these days there will be a Wile E. Coyote momen... the dollar... who has run off a cliff, looks down and realizes that he’s standing on thin air--and plunges.... Maybe the dollar’s Wile E. Coyote moment has arrived – although, again, I’ve been wrong about this so far...

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