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US stock market at an all time high (Vanguard Total Stock Market ETF at 154 and the much more familiar, though slightly less representative S&P 500 at 1555), USD at an all time low (1.416 for 1 Euro). Coincidence? Who cares!

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of course not
if the price of goods / shares in business is the same in precious metals, the same price in dollars will be high when the price of metals is high

and yes, i do care
the whole accounting and taxation systems are based on the assumption of flat prices. if one bought euros at $0.83 and sold at $1.41, he is really just where he started, but from the IRS perspective he has a 70% taxable profit

Well, again, if you live in the US, then it would be a nice 80% profit in the foreign exchange trading market. We did not have an 80% inflation to match, so the gain is quite real - you can buy a lot more for $1.41 today than you could for $0.83 in 2001.

I'd disagree with "a lot more"
Oil went way up, metals went way up, agricultural products went up, houses went waaaay up. Yes, according to CPI inflation was much lower, but did you know, for example, that CPI takes into account comparable rent (which didn't go up at all - my apartments rent for same exact $$$ as they were in 2002 when I bought the house; meanwhile taxes, water and sewer charges all went up), and not the house price? So if housing is 1/3 of all expenses and house prices (roughly) doubled, you'd have (roughly) 33% inflation just from housing alone.

The official inflation numbers are 17% from 2001 to 2007

While that is true, the same applies to Europe, with a vengeance - their housing bubble is even bigger, so, arguably, 1 euro = $1.41 buys a lot less today than the same euro bought in 2001. So if we are talking in house-purchasing power terms, the dollar is one of the least inflated currencies now, as in the emerging markets the housing went completely through the roof.

Right. The question is - which of the prices matters to you? Do you pay for stuff in gold/silver or in USD? If we had high inflation to match the falling dollar, then I would certainly care, but inflation is amazingly low (both relative to the dollar's fall and by historical standards). Traveling to Europe is getting a bit more expensive, but foreign products in the US are not displaying any signs of being priced in euros or dinars.

So is this good or bad for the average Joe?

Katya's macro-analysis (grossly oversimplified and to be taken lightly by the more economically-minded):

Depends on what the average Joe does. If Joe maxes out his 401(k), makes periodic investments into the stock market, with a significant allocation to the US market, works for a US-based company, especially one that exports and does not worry about housing bubbles (i.e., does not care that the housing costs have risen, as he already owns the house he wants and will not lose much when the bubble deflates and then bursts in the next year or two) - well, this Joe has all the reason in the world to be happy at the moment. If, to top it all off, Joe has a fixed mortgage, rather than an ARM (which will likely rise, as the rates go up to lure back investors who are financing our deficits) - then Joe is probably ecstatic.

If, on the other hand, Joe does not invest, buys European sports cars, uses premium gasoline, has an adjustable mortgage which he can barely afford even at today's rates - well, then, good luck!

what if Joe is thinking of buying a house? any advice?

I do firmly believe that we are far from having seen the bottom of the housing market. My personal prognosis is that the market will continue to go down over the next year or two, especially in the high-priced urban areas and so waiting makes sense. Having said that I will fess up to not putting my money where my mouth is - we decided to buy our house a few months ago (not at the peak, but definitely not the bottom, either). Living in a house has a ton of advantages not measured in dollar terms. So, if you can afford it now and can find what you like - it's a buyer's market already.

One thing I would definitely recommend is getting a fixed mortgage rather than an ARM.

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