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Welcome to the Currency War, Part 4: Corporate Revenues Plunge

by John Rubino
Dollar Collapse

The Eurozone meltdown has sent capital pouring into (temporarily) safe haven currencies like the Swiss franc, Brazilian real, and the US dollar. The dollar in particular spiked — by about 12% — between October 2011 and August 2012.


This sounds like a good thing for the US but it’s not, because US multinationals lose big when the dollar pops. Assume, for example, that you’re making computers in California and selling them to Germany, and the dollar goes up by 10%. Suddenly your computers are 10% more expensive, which makes it hard to sell as many as you expected. And those that you do sell are paid for with euros, which are now worth 10% less than they were a few months ago. When you convert those euros to dollars in order to pay your bills, your revenues are 10% lower than they should be. Your costs, meanwhile, are mostly in dollars, so your profit ends up being far lower than you expected.

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