PERHAPS THE MOST FASCINATING thing about the continuing fall of the U.S. dollar's value, at least to me, is how it has moved from a strictly financial matter to one recognized in popular culture. Consider that the dollar's weakness compared to the Canadian dollar has just been lampooned in The Onion, America's premier humor magazine; and the clever rapper Shawn "Jay-Z" Carter has just produced a music video in which the currency of admiration is not $100 bills, but €500 notes. And Mr Carter is not alone among celebrities in singing the praises of the continent's currency.
As with any financial development that suddenly receives public notice, there is plenty of associated wailing and rending of garments and gnashing of teeth. That makes it especially important to take the long view of this situation and avoid the emotional highs and lows that go along with it.
For many Americans -- including me -- there is a knee-jerk emotional reaction that goes with having a weak dollar. It is bad enough we must always listen to the Europeans gripe and moan about how the backward Yankee imperialist hypercapitalist running dogs are screwing everything up, but even more annoying is that their foofy currency -- once worth a pleasing U.S. 86 cents about five years ago -- is now worth roughly $1.47. The dollar once bought 32 Russian roubles and now only buys 25, it once bought 120 Japanese yen and now buys 110; and when it once bought nearly $1.60 Canadian, it now buys a mere 97 Canadian cents. This last item is particularly galling for me; as a college student I remember going to Canada with my strong dollars and spending loonies like they were pesos. No more. No more.
I mean, it's getting to the point where Americans have to hold their tongues when the Europeans and others start in with their myriad complaints, and that's frustrating as all get out. It's kind of like that episode of "The Simpsons" where the family, to raise money, turns their home into a boarding house for snotty German tourists. They may act up, but we can't do anything about it because we need their euros. And pounds and loonies and rand and francs.
However, taking the long-term view of this situation tends to blunt these emotional and irrational fears. After all, in most cases the immutable laws of economics are driving the situation, so there is no use getting upset over things that are far beyond the ability of anyone to change. Also, while the fall in the dollar's value does make goods from abroad more expensive, when was the last time you bought something other than wine, food or high-end clothing products from Europe? Most people would have trouble recalling such a situation, since Americans generally buy imports (clothes, electronics, vehicles) produced in Asia or Latin America.
For most Americans, the only true downside to the fall in the dollar thus far is that it makes it more expensive to vacation in Europe. But again: how many Americans have actually been to Europe? 10 pc? Five? Plus, one can argue that so far, only America's upper and upper-middle classes are the ones really feeling the bite of this, since they're the only ones buying Bordeaux and Roquefort and expensive frippery.
Of course, there are risks if the dollar keeps falling (STAG-FLATION!) and it is possible, although certainly not yet probable, we could find ourselves in some horrible Seventies-era economic malaise as a result. But the risks to the rest of the world are far more pressing. Already our exports are becoming more competitive and our manufacturing sector is starting to rebound. If their currencies keep rising, it will inevitably wreck their economies and leave us in the driver's seat once again. That's enough to make a $1.60 or $1.70 euro tolerable, if you ask me.
In the meantime, it's worth noting there are plenty of countries out there whose currencies aren't rising against the dollar. True, many of these nations are complete basket cases, which means they're not exactly good tourist destinations. But some of these nations are relatively prosperous, enjoyable to visit, have ancient and rich cultures, wonderful food and delightful people.
Mexico is clearly at the top of this latter list, and I would encourage Americans to consider taking their vacations there; not so much in Cancun but rather places like San Miguel de Allende and Tlaxcala and Zihuatanejo. I must admit surprise the Mexican tourism authorities haven't gone full-press in promoting the relative inexpense of traveling in Mexico. But I've an idea in this regard:
Hey, you never know -- it might just work!Posted by Benjamin Kepple at November 18, 2007 11:55 AM | TrackBack