Dollar Woes!
Posted 09-06-2007 at 04:22 AM by Farfallina
The dollar has fallen, and medicine cannot help him!
I look back with nostalgia to the days when the dollar equaled 1.35 euros, and now I have to settle for 0.74! Economists expect it to tumble 20% more!
5 years ago, a 700 euro bedroom in downtown Rome meant I paid 518 dollars.
Now that very same 700 euro bedroom means I have to fork out 946 dollars!
That means that in 5 years our dollar has lost almost HALF it's value, and falling! Woa!…
"The dollar has fallen for a simple reason: Americans spend a lot more than they save. American consumers, of course, are known for living on credit, and they buy hundreds of billions of dollars’ worth a year of foreign goods. We don’t have enough money at home to pay for all this spending, so we borrow from foreigners" which creates a deficit that erodes the dollar.
With a weak dollar, foreign goods are expensive, domestic goods more affordable, and in theory the deficit gap should close! Though Asia is buying dollars to keep it from crashing, and foreign businesses are absorbing many losses; all in self-interest that keeps feeding American rampant consumerism, and show no signs of wanting to change their ways!
I think back to the Argentine currency crisis and wonder; Is this another cruel joke? Another staring game where the last investor out looses! Meanwhile, many economists warn us that a dollar sell-off is looming! The dollar could loose it's place as the international currency! The Titanic is sinking but music is playing and people are dancing! Then again, the American economy defies gravity and is very, very, very FLEXIBLE. I know that.
Warren Buffet puts it best: "In general, the batting average of doom sayers in the U.S. is terrible. Our country has consistently made fools of those who were skeptical about either our economic potential or our resiliency. Many pessimistic seers simply underestimated the dynamism that has allowed us to overcome problems that once seemed ominous. We still have a truly remarkable country and economy."
In any case, meanwhile a correction takes place, us expats at the ATM machine are left saying; OUCH!
Total Comments 3
Comments
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Good post! It's sad that so many Americans - especially the ones who do not travel- do not realize how far the dollar has sank. I was in Spain during 9/11 and I watched the dollar drop like a stone after that. What good is investing your money when it is constantly being devalued? If you have the opportunity I suggest putting some money in Euros or GBP as a hedge. Somebody has a vested interest in a weak dollar so it's going to drop even more - What does Bush care if a loaf of bread costs a $1 or $10? He can afford it either way.Posted 09-06-2007 at 03:15 PM by justindemetri
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Yes, the falling dollar is scary for freelance writers like me too, who get paid in dollars. I am wondering if Euro will soon replace the dollar as the most used international currency?Posted 09-10-2007 at 02:36 AM by bubbles - When the dollar was high I earned euros and had a ton of student debt to pay off, by the time I finished paying for university it was low. Though I was just back in the U.S. and shopping was good...
Though American saving habits are terrible, don't forget the defecit spending the U.S. has been doing to fund Iraq and give tax cuts to wealthy people. Our government is responsible for this as well.Posted 09-13-2007 at 06:23 PM by Liz
