Thread: Falling greenbacks

Swooning Beautifully
Falling greenbacks used to induce economic panic. Now, it seems, the dollar's demise may actually be a good thing for America and the rest of the world.

By Emily Flynn Vencat
Newsweek International
June 18, 2007 Issue - Not so long ago, a single dollar was considered a pretty good tip for bellhops around the world. But lately, Megan Carrella, a 34-year-old New York executive who travels regularly from Mexico to Greece for business, has found hotel help less enthusiastic about her usual palm. She's taken to handing out at least two or three greenbacks to guarantee good service. "People used to really smile when you gave them a dollar," she says. "Now it seems almost like an insult."



Bellhops aren't the only ones whose love affair with the dollar is over. Since the dollar's peak in February 2002, it has now fallen 20 percentage points against a basket of global currencies including the rupee, Canadian dollar and real, with 3 percent of that fall coming in the past three months. Countries all over the world are dropping their local currency pegs to the dollar, and eurobonds are beginning to compete with the almighty T-bill as a reserve currency in places like Russia and Sweden. There's even a movement to start pricing Brent crude oil in euros rather than dollars. "Are we seeing the demise of the dollar?" asks Hans Redeker, head of foreign-exchange strategy at BNP Paribas. "Quite possibly, yes."

Not so long ago, that would have been reason for panic. But the disaster scenario of Asians' dumping the dollar, hastening its fall and triggering a global recession, never materializedâ€â€

The dollar has been declining for more than a year. European vacations are more expensive. The Canadian dollar is worth almost as much as ours. I remember when it was also 50% of our currency's value. The British pound has risen more against the dollar than it has been in 20 years. The Austrailia dollar is climbing fast, against our dollar.

This makes our exports cheaper and our imports more expensive. We import a lot. So, prices should go up. Our std. of living goes down.

Corproate America likes a weak dollar. They can more easily export.
Most Americans find a cheaper dollar inflationary.

The only benefit to me, is my internation mutual funds go up in value, because the foregin currency increases in value. 60% of my portfolio is foregin. They are all out performing the S & P 500.