World Traveller..

Whether you believe the falling dollar to be good or bad for the economy may be dependent on what side of the world you live in. If you are in an emerging nation, then the price of American goods just got cheaper for you. However, many foreign countries hold investments in the dollar currency, as a foreign investment that is now headed south. You can expect to see nations beginning to diversify their money holdings to include other currencies, besides the dollar, in greater proportions and interest rates to increase in the United States as the Federal Reserve tries to combat depreciation in the dollar’s value. This will be particularly harsh for American consumers already saddled with rising gas and food prices, and now higher rates on consumer loans too.

However, the pain doesn’t end there for Americans. Should they choose to travel, the falling dollar’s value becomes readily apparent in currency exchange rates. Their money just won’t buy as much as it used to buy. With increased fuel costs, the trip overseas is expensive and once there, the lodging and food may appear to be astronomically priced in comparison to what the dollar buys in the United States. However, the same is true for tourists coming to the United States from other countries. The currency exchange rate is much more favorable for them with the falling dollar, which is why tourism should increase for people who’ve always had inkling to visit the United States.

It’s not all bad news for Americans, however. The falling dollar will also make imported goods far more expensive in comparison to home grown goods. This can have a big effect on consumer habits, with people more likely to shun foreign-made cars when compared to less expensive American models. On the surface, this may seem like more bad news, but actually its good news. The competition in the market place will begin to favor American industry and manufacturing companies that can now compete at a discount on the global market place. This can mean a resurgence of manufacturing in the United States and more investment to build manufacturing plants here too. This will mean more jobs for a sector of the American economy that has long lost jobs to overseas competition: the blue collar worker. Outsourcing, which cut American salaries to the bone, may experience a shift back as American salaries are perceived to be cheaper on the global market place than other country’s workers.