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The return of the dollar

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Ints Kalnins/Reuters

(Read caption) A tourist looks at currency exchange rates in Tallinn on May 15. The small Baltic state of Estonia is set next year to become the 17th member of the euro zone, likely to be the crisis-hit currency area's last enlargement for at least four years. The euro, once touted by rappers, supermodels and world leaders alike, has hit historic lows.

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With the euro taking out historic lows against the US dollar, I thought it would be interesting to time warp back a couple of years if only to emphasize how quickly things have changed in the currency situation.

During the latter years of the aught's decade, I remember seeing wealthy Europeans, who were vacationing in New York, casually shopping for Manhattan penthouses in between trying on sweaters at Barneys. The euro (or pound)-to-dollar exchange rate turned cities like Miami and New York into a giant game of monopoly, with name-brand architects building just fast enough to satiate the Dutch and British tourists.

A simple Google article search of economic headlines from 2007 yields a remarkable amount of dollar-related hysteria. As recently as just 2 or 3 years ago, the Death of the Dollar was all anyone could talk about.

And along with the global distaste for the once-supreme global currency came a newfound infatuation with the Euro...

*In the context of the oil trade, which is typically conducted in dollars, middle eastern despots took advantage of the anti-dollar zeitgeist with grand pronouncements about their intentions to move their reserves out of US currency. The United Arab Emirates held a press conference on the topic, Iran began requesting that its oil buyers pay them in euros, not dollars.

*The US dollar was also hated on in popular culture. Rappers like Jay-Z began flashing wads of euros in their videos. Supermodel Giselle Bundchen famously insisted on being paid for her "work" in euros as well.

*When the US was seen to be pushing too hard for a yuan de-pegging, China would counter by floating vague hints about dumping dollars and treasuries and making overtures about diversifying away from the dollar and into euros.

*Even the renowned economic experts in the world of organized crime weighed in - anecdotes about drug dealers refusing to deal in dollars peppered the media on a regular basis.

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So what did the supermodels, drug kingpins, communists, gangsta rappers and oil warlords have wrong? They concerned themselves too much with with American economic data and not enough with sovereign indebtedness throughout the old continent.

We may have had a housing loan bubble, but Europe has a human benefits bubble - which one is less surmountable?

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