Should a guy making 50-60k/yr worry about the U.S. Dollar’s decline or is it something for large businesses?
Should I think about converting my money to CAN or GBP???
Unless you’re planning a trip abroad, or a large foreign purchase (like an imported car), it is likely time to rejoice.
A weak dollar makes our exports cheaper to buy abroad. Thus, we export more, which is good for business.
I’m sure there are more subtleties to grasp, but that’s a start.
Depends on where you are and what you do.
If you work for an exporter, or are selling to tourists, great! There’s a good chance you are gaining customers.
If you are reliant on imported inputs, not so great. Your costs are increasing.
I think there is some room for concern in the effect that further devaluation of the dollar will have on inflation. High inflation will instantly reduce both your effective income and the value of any savings. I’m not an economist but maybe someone can chime in to explain how these things tie together (if at all).
And what do you mean by “convert your money to CAN or GBP”? Clearly you can’t function entirely in a non-native currency (I don’t think your local grocer will take loonies). If you’re talking about investments, then having a good mix of international investments as well as US-based ones can help spread out currency-related risks.
Well, presumably the OP is talking about savings, not the money used to pay regular bills.
But what’s strange here is that the corrective mechanisms don’t seem to work. We should be getting floods of Canadian dollars and other foreign currencies, as foreigners take advantage of the bargains. Heck, we’re a bargain now even for middle class Mexicans. Similarly they say we are selling more exports. All this foreign exchange ought to be bouying up the USD, but instead it keeps going down and down.
I don’t think I’ll ever be able to affort to see Europe again, unless I can somehow work there. Which is a longshot to put it mildly.
Why isn’t a weak dollar having an inflationary aspect? Since the US dollar is worth less than one year ago, then why wouldn’t a grocery store, with say, a pound of ground beef, say “Hey, I’m not parting with this pound of ground beef for $2.29 anymore, it needs to be $3.50 since dollars are worth less relative to this pound of beef.”
Conversely, it makes things we import more expensive; like oil, for instance. Much of the recent run up in the price of oil is due to a weaker dollar, so you will pay more for gas and heating oil as a result. That will have an inflationary ripple effect through the economy.
They can try, but the market determines the value of beef, not the grocery store. If they price it too high, customers will either find a store that sells it cheaper, or they will eat more chicken and pork.
Because the dollar is weak only with respect to foreign currencies. If the beef is US grown with all US ingredients then the dollar dropping relative to the yen, pound and euro has no effect on it.
What it does have effect on is foreign trade; imported goods and raw materials are more expensive and exports cheaper overseas. So it will drive up local inflation some, but help any industry that earns money overseas (unless it uses imported materials extensively).
It will eventually affect everything in the US, esp. if China slows or stops supporting the USD. I am quite concerned about my USD and have been moving it into EUR, CZK and gold for a long time, but still feel over exposed to USD.
The Gulf countries are in talks to unpeg their currencies from the USD and inflation here is very high. Kuwait already did. The real nail in the coffin will be if oil gets repriced to be sold in EUR which would hurt the US quite seriously.
Having some gold may not be a bad idea.
The real problem is that while a weak dollar helps US exports, the US imports so much more than it exports. How many things do you own that are made in China vs made in the US?
Wasn’t the dollar extremely weak under Reagan? I remember constant talk of the “twin towers” of debt. I know one referred to the US national debt, and the other was the trade deficit. But, IIRC, I thought this was caused by a strong Yen killing the US dollar. (America was just starting to buy a lot of Japanese products en masse (esp. Japanese cars) at this time like there was no tomorrow.)
If I am correct, I am confused how we could have imported so much and STILL had a weak dollar. Based on the posts above, sounds like a weak dollar in the 1980’s would have meant a lot of exporting from the US…thus no “twin towers of debt”.
Maybe I am missing something here as economics is a pseudo-science, anyway. Perhaps the SD can explain the difference between then and now. :huh?:
Theoretically this would lower our trade deficit, which would eventually strengthen the dollar. But because of the high cost of oil and wholesale movement of US manufacturing to other countries (with even weaker currencies), this does not appear to be happening.
On the bright side, maybe eventually we’ll be able to export cheap labor, a la India or Mexico.
I’d say it’s something we should worry about as a country, as it weakens us, but that there’s not a whole heck of a lot the average Joe can do about it.
I have been increasing the amount of stocks and bonds I have that are based in foreign based businesses and decreasing the amounts I have in domestic holdings. I’m sure this negatively affects the US economy as well, but I’m not responisle for the US economy, I’m responsible for my (and my family’s) money.
Since the average Joe depends on exports, it hurts. Prices will go up on most goods, because most goods aren’t made in the USA, and even goods that are assembled in the USA import numerous parts, so that the cost of building something in the USA goes up as well.
Also, making it too easy to borrow money created the credit crunch, so I wouldn’t endorse any plan that tries to make it easier to borrow money. A correction is a correction because something was wrong, so let the friggin’ market correct itself. We are masking the problem in the short term.
Further, mortgage rates tend to be supply/demand driven now as the world bond market has shown it can prevent the fed from driving mortgage rates effectively (getting off topic a bit).