Even more spectacular than the recent decline of the dollar against major world currencies has been the long-run decline of the US currency: since 1960 the dollar has lost two-thirds of its value against major world currencies. At the same time, however, at least since the early 1990s, the US has been seen to produce superior economic results, i.e. a higher productivity growth than most of Europe and Japan with more or less the same rates of inflation. In this CEPS Commentary, Associate Senior Fellow Paul De Grauwe attempts to explain this paradox.