See-Saw Dynamics of Falling Dollar in Global Market
Jun 9th, 2008 by Jimmy
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.
the falling dollar is also not good for Indonesian (with rupiah) who work abroad and getting paid in dollar
Good points. Addressing your last paragraph, we’ve already begun to see work falling back in our laps. A couple years ago all of our film industry began leaving LA and New York for Canada. Now we see everyone coming back.
Thanks to tax breaks given to the film industry for working in the State of Hawaii, we’re seeing much more filming over here in Oahu, Molokai and Kauai.
Tourism is down in a big way, but we’ve always been dependent on mainland visitors. Hopefully Hawaii begins to see more international visitors fill the void.
Thanks again, Jimmy. Let’s hope the see saw tips back up towards more manufacturing in the US, and international tourism.
I’ve lived here in Mexico for three years now and I have seen the drastic effects in the reduction of the value of the dollar.
I’m paid in US funds so it effects me directly.
Some businesses and even banks will not exchange large amounts of US currency for the local Peso. It’s worse when there severe un-stability in the market too and I am finding that they are just not accepting them.
Thanks for the text. Good working.
Thank you for showing both sides of this issue. I appreciate the research that was obviously put into this article.
The falling dollar is a big concern for most people. It isn’t just Americans affected by it and I couldn’t have said it better myself.
Great article, Congrats.
Thanks for sharing information, Now i know about it
Thanks again
So true – and the historic low dollar makes for some very attractive travelling to the US for us Europeans
Another way of making a low-budget trip is to rent or exchange a room or apartment – I’ve done this some times now, everytime with great success. Besides saving a lot of money (be it Euros or Dollars), you meet up with some very nice and open-minded people! One site I’ve found very useful is CasaSwap (http://www.casaswap.com or http://www.casaswap.dk). It’s a free site aimed at young people and students from around the world, where people can rent, sublet or swap housing with each other… very clever
Well, that’s just my 10 cents – great blog by the way!
Regards,
Louis
I should travel to the US
Well, if you make money from website targeted on a US audience, it’s quite the same problem, no matter where in the world you live. As far as the trend of buying local products is concerned, there is some truth in it – but won’t products from low-wage countries still be cheaper? I guess it depends on the industry.
The US dollar’s fall is certainly making me more interested in taking trips or buying things from America. As a Canadian, I can purchase nearly 50% with my dollar compared to a few years ago. I don’t envy American travelers though. The rising transportation costs combined with the declining dollar make for a double whammy.
Like in everything in life, there are always pros and cons, this apply to a falling currency as well.
Like you blog and your layout. Good post, keep it up, cheers!
Your posted article about dollar is very important for consumers and producers, because many years in many Asian countries, in Armenia as well , dollar has been as a main currency for their investments. For the individual businessmen and for citizens also, this falling was a tragedy.
Your comments are very professional and important for all, You showed two principal parties of this state of affairs.
Thank You
Great article, Jimmy. We are in the US and have definitely been negatively affected by the dollar fall. Things are rebounding slowly, but we are certainly not where we expected to be at this point.
We are all gonna be screwed because of the falling dollar. Everything is gonna become more expensive.
The falling dollar is definitely a hard thing to gauge. The world economy is just so complex and so interconnected now from globalization that it is hard to tell exactly what the impact will be on America and our future. I think that waiting and seeing could be dangerous, but what else can you do?
There is a interesting turn to USD this month, let’s see how it will continue
I do feel sorry for the American people with the falling dollar, travelling abroad like going over to Europe will cost them a fortune, but it goes up and down over the years and swings in roundabouts to eventually balance itself out.
Everything in this blog is completely true. However the good news is that people will always travel and will always take vacations. However those vacations will now change. More and more people will travel closer to home and shorter, instead of flying from NJ to FL to go to Disney for a week travelers are more likely to just take a weekend trip to Six Flags or some smaller theme or water park. Instead of eating at high end 5 star restaurants consumer will dine and more relaxed and casual.
I think that the next president should really focus on creating public works that will create jobs and for the now highest unemployment rate we’ve ever seen. A $300 dollar stimulus check is going to do much of anything. That was like putting a band-aide of a guy whose arm just got chopped off.
The falling dollar has a negative impact on my country’s tourism. Though I still see foreign tourists here, the percentage of tourists from middle eastern seems to have exceeded those from the US. From what I know, our country is slowly moving away from the dollar to strengten our weak economy.
I’m an American and this country is beginning to really stress me out, between health insurance and the struggling economy. I’m really starting wonder if this country will be able to survive.
We must admit that in one way or the other some countries economy largely depend on US.Thus, with the dropping of US economy alot of businesses have fallen here in Phil.And we are hitting the highest record inflation rate for three decades-12% increase for just the second quarter of the year!
Can you imagine that in some countries dollar prices are increasing and some where decreaseing…
What is it?
I can’t get it why it happens ?..
Bali is the beautiful. Please visit Bali
I think people will still travel , disney is moving its fleet to europe.
Thankfully, the dollar has rebounded a bit since this was written. it was horrible when I was in Australia. I think everyone should try to hedge a bit by having some money in foreign currency before they start a trip.
US make the world crying. And I am cry too…
(
Thailand has taken a pretty big hit in this economy. It’s lost pretty much 20% of it’s American exports in the last 2 months and it’s baht is falling again against the dollar.
Until this mess gets straightened out I think pretty much every country is going to suffer but most will pull through well enough.
America on the other hand has major problems. It’s easy to say we can start manufacturing again but it won’t be easy or fast. American labor is expensive and the once well used manufacturing plants that were abandoned for the cheap labor of Asia are now new housing developments and condo’s.
An emerging country such as Thailand will take a hit but keep coming back due to it’s agriculture and manufacturing. America on the other hand isn’t sure what it does anymore and what it does do well is generally done better by other countries.
This economic situation will either start America’s fires again or be it’s lasp gasp.
Yeah!you are right.It has got some positive factors too like for foreigners who can trvel cheaper to the usa.
As a Brit who loves to travel to the USA we took full advantage of that weak $ – unfortunately now its swung back the other way and travelling to the US or buying US products isn’t as appealing. Personally I’m hoping it swings back in our favour next year as we have a trip to Disney World planned!
This will be particularly harsh for American consumers already saddled with rising gas and food prices, and now higher rates on consumer loans too.
If it continues like this I guess we will need to use horses as transportation again
My family is in Poland and I’m in the USA. In the 90’s I used to travel to Poland and feel like a king: I spend dollars and received value: anything, any where, and time. Nowadays it’s almost the opposite. The dollar is so weak that it makes travel to visit family prohibitively expensive and even if we did go it would have to be frugal. Oh, how I long for the old day of 4 zloty for 1 dollar instead of 2 zloty for on dollar.
I couldn’t have said any of this better myself. Great post…
We in Eastern Europe have dollar raising from day to day
Is it possible that dollar depends on the crisis level?
Interesting read! Thanks for sharing.
That’s just how should economy work.
Allthough, this recession is affecting all economys all over the world. I don’t know if we will bounce back very easily.
the economic condition brings some effect for people to spend their money choose.
This is all excellent news for people who don’t like American tourist.
Due to higher travel cost, there will be less of them to deal with. What will become of the poor girls in Thailand’s red light districts?
Bozo
Laser Modules For Raves!!!
Well they screwed up and now we are in a world of recession
Man, I think with the fuel charges this low, I hope the travel industry can see the light of the day.
Sammy
Nice Template! Nice Concept! and Nice Information. All made together a new Travel Blog like your’s!
Not only is the falling dollar the cause for less world travel by americans. I work out of las vegas, and i have seen quite a drop in the number or visitors.
what would you say about the slow down happening right, i was planning to travel with my family but the economic situation has left me with no cash. Wonder when i will be able to travel again!!
The last few years seen the explosion of India and China. If they can both survive the US market crash, then they will become global partners and help stabilize the entire world markets. It may be painful for a while but eventually the world will be a better place. Of coarse the big long term problem will be can the planet survive so many consumers.
Great thoughts on the dollar
I hope the global crisis ends soon and the economy back to normal
Do not forget, its not just Americans traveling. A weak dollar means lots of travel bargains for people visiting the US. When the Euro was super strong vacation spots in the US boomed with European travelers. Hawaii,Florida, parts of California, all do well with a weaker dollar. Of course if the whole globe gets weak, then only the luxury destinations benefit. (People with money still tend to have money in a downturn).
Nice article. It seems not only are Americans affected by this but also other countries as well who do business with the US. There is always a downside to the every ups and downs of the dollar. Sometimes in this rough times, it all boils to what type of perspective we have in life.
Interesting thoughts, and exactly falling dollar is´nt always bad….
You are right that there are pros and cons to the falling dollar value, although I think for most US citizens it is going to be more of a problem in the near future. In Monte Carlo the tourism industry has slowed as there are less foreign tourists with less dollars to spend in the casinos…
im visit u
Now what countries are experiencing a fall in their currency, that would make it enticing for Americans to visit? Is Iceland still an option?
As a Canadian we have been destroyed recently by the currency – Only two years ago we were 1.10 your dollars for one of our dollars! Now we are down to 75 cents. Instantly travel is 25%+ more expensive… the Euro is the same way. When oil goes high, our currency does too… so I’m hoping it goes back up
- James Emms
The problem however as I see it is the lack of stability. You simply cannot plan in advance. Not so long ago, pound sterling bought a lot of dollars. In fact £1 was worth more than $2. We planned a holiday in Las Vegas in summer 2009 on that basis. Now I can only get $1.40 max for each pound. The cost of my vacation has just gone up by 30% for reasons totally beyond anyones control.
There are some countries affected by the financial crisis where the dollar is still doing good compared to the local currency.
Three examples in eastern europe: Hungary, Romania, Bulgaria. (Hungary – Budapest is quite worth it)
The falling dollar will encourage tourists visiting America, but there are more American visitors to other destinations that other visitors going to America.
This means that the tourism industry is likely to be hit hard further. ..Oh Credit Crunch!
Yes, all bad news have some good consequences… As a coin has two sides.
I advice better to travel to countries, which produce fuel. You will be pleasant surprised with its prices
Travel is expensive, no matter where you go, including going just 10 miles to the grocery store, let alone somewhere like Paris and have to pay for lodging and food, there is no money left in your wallet to see the sights.
I think that people are exploring other options instead of the 40 hour per week job in the U.S. I read on CNN.com that many more students are beginning to work abroad rather than bother with finding employment in the U.S. job market. I, myself, decided to teach abroad this year, and maybe longer. Although this is something that I’ve always wanted to do, I feel that the timing is right this year.
Lots of people in America can travel to Mexico to have much cheaper vacation if you compare the travel from USA to Spain for example.
For me the constant decline of the American Dollar is going to affect me this summer. I am off to Orlando later in the year and the exchange rate from the Pound to Dollar is in absolute turmoil. I remember last time I was out there I was getting nearly 2$ to the £. Still, it could be a lot worse and over the past few months it has picked up ever so slightly. Although I would like it to go up a little bit more before I go out there in August.
In addition, it makes our goods cheaper overseas. I have seen a large increase in orders from overseas in the past year.
Im dreading my next trip to america, the exchange rate was so bad for us in the UK.
Your analysis is right on target. Moreover, it demonstrates why a capitalist system will eventually self-correct, unless there is political intervention like protectionism.
Great post. It depends on the countries economy among the stock trade market. Now the peoples are worrying against the american economy which affects word wise.
The dollar has always been shooting up and down and probably always will, the only way that currencies will stabilize is when we have one currency for the whole planet.
Ste
Though the falling dollar might not have the purchasing power oversees, let’s not overlook that a recession makes travelling cheaper. The hotel and airlines industry must slash rates like never before. And of course the biggest benefit– less crowds!
I’ve noticed a bounce back in the dollar to Thai baht. But it still isn’t back to where it was a couple years ago. Although travel there is still cheap, it is not the bargain it was in the past.
Luckily the US dollar is back up much higher now than it was when you wrote this last summer, which is good for travellers. I don’t think it will last though, so do all your travelling now! lol