Forget comparing the US$ to the Euro. They are in the same boat as we are. Compare the US$ to the currencies of the Asian industrial exporters, Oil, Gold, etc...
Read this. Then consider what the cure is. A nation whose regulatory system, tort system, and government spending has precluded that nation from providing basic goods and services to itself is not long for political stability. How will the markets bring this back into equilibrium? By making the US$ fall versus the currencies of the economies that are eating the lunch of American industry. There is no other way. And that means... Drum roll... import price inflation EVEN IN AN ENVIRONMENT OF MONETARY DEFLATION.
In other words, in layman terms (I am the epitome of a "Layman"), while the banks may continue to shrink credit to the American economic system our trading partners are going to demand more for less. That $2 tool from Home Depot? That'll be $10 please. This will go for imported food, vehicles, clothes, electronics, OIL, chemicals, etc...
On a macro basis, there is little that can be done to prevent this given our sh*t stain of political discourse: Our smug Left, who in addition to being innumerate (can't count and can't work a calculator) lay their claim of intellectual enlightenment at the feet of the murder of innocent children and gay marriage; and our mean spirited Right who never met a problem that couldn't be cured with more prison space or the bombing of innocent children.
I long to hear the "thud" of their deceased bodies hitting the floor.
But I digress...
I have been a US$ bear for years, but a few weeks ago I thought that this sell off was overdone. No more. The only reason the US$ has ANY value is the world's system relies on it exclusively - but who said the system could continue to function as currently constituted? In any kind of US$ crisis world trade would hit the skids. Anybody notice what has been happening with the Baltic Dry Goods Index lately? You can read the graphs for yourself. That is not exactly indicative of something good for the US$.
Of course, an engineered "crisis" would send people for the exits and back into the US$. My friend the Mad Scientist thinks that this will be necessary in order to fund the deficit over the next couple of years (if capital is driven out of risk assets and into "safe havens" like the US$ and U.S. Treasuries, the U.S. Treasury Department can get the funding it needs for our outrageous deficit spending). Unfortunately, I believe he is correct.
Could there be one more US$ rally? Yes, sort of. The US$ could rally against the Euro, but is that really a broad rally indicating VALUE? NAFC. This is not to say that there will be a straight line decline in store for the US$ - that just isn't how markets work.
The U.S., one of the first Liberal Democracies of the World, Fighter of Fascist and Communist regimes the world over and WINNING, and then being brought down by Social Security, Medicare, Fannie Mae, Freddie Mac, AIG, Goldman "The Anti-Christ" Sachs, et al... brought down by our own... what an ignominious end.
It does not HAVE to be this way, but it is the most likely outcome. I get ill thinking about it.
But at least we have "Hope" and "Change you can Believe In."
Greg