How does the weak US Dollar affect us?

I’m no monetary expert and my views may differ from yours.
I believe the weak dollar has been positive in exporting American products and a boon to tourism. However, the prolonged weak dollar is causing concern in world markets and it is in danger of being replaced as a standard, particularly with the pricing of oil. There is talk that the Euro may replace the dollar as a currency standard. The lack of confidence in the dollar has many investors placing their money elsewhere. GWB deliberately kept it weak hoping to stimulate the economy after his invasion of Iraq that took our budget surplus and placed us in debt, and that was followed by the crash on Wall Street. The actions of President Obama to correct this damage have placed us further in debt.
At one time the dollar was backed by Gold. It had value. President Nixon eliminated the gold standard allowing the market to determine its value, and we know what happened to the market. Continually spending beyond ones means, borrowing money to stay afloat, may be considered necessary, but comes with high risks.
Many base their livelihood on the dollar. I am personally affected by the weak dollar since my income is in dollars and must be converted to Euros. During the Clinton Administration, the Euro was on par with the dollar. Yesterday it costs $1.50 to buy one Euro.

Financial responsibility in government doesn’t appear to operate on the same standards that control our private lives. In the recent past financial institutions threw credit cards at people with a good track record of payment that often extended beyond their ability to repay, causing many to file for bankruptcy. With the loss of a job, the good paying track record was no longer relevant. Governments are penalized differently. The value of currency is highly significant for investor confidence. Return on investment with a weak currency without backing, doesn’t mean much. Short-term thinking can spell disaster in the long term. Our government needs to curb spending and act responsibly just as we do are required to do in our private lives. Trying to live up to campaign promises and revive the economy is a gigantic problem. The cost to wage and sustain war is affecting everyone. The controversy surrounding the need to be engaged in Afghanistan continues.

What are your thoughts?

Our president came into office at a critical time, and inherited a mess left by his predecessor. He is doing the best he can, I think, with the situation. It isn't going to get better overnight. And getting better is going to involve drastic changes as well as time. I doubt that we are through the worst of it. It seems that most business are staying afloat by cutting jobs, and that is very scary.

I am not an economist, but have noted others who are concerned about the dollar. If it continues to drop, what would the result be?

Ann

I read an article this morning regarding concerns in the world about American's shift from consumption to saving, which many have found necessary to maintain their private lives.

To protect the environment, we need to be less industrial, but this is not what has kept the world economy going.

We need to be more of a service society, repairing rather than getting something new when something breaks down. I see this happening, but slowly and not without challenge. Our town has new fronts on old buildings, taken down those that were not able to be repaired but not built new in their place. My son works in construction and stopped building houses a few years ago. Now he is finding work in remodeling and repair.

We are in an economic shift and it is challenging.

Carol

11/14/2009

Abe..

Great thread...I believe Americans are
getting scared, especially 16 million who are out of work
and the peculiar thing is they don't count the other few
million who are off the un-employment ! I do believe the
dollar is worth less than it was say 10, 20 years ago. People
in this country are getting Frugal, they buy only what they
need and I'm sure this Christmas the stores here in the USA
are in for a big shock , people are scared and they will buy
small items, not expensive items. I for one was thinking of
buying a new TV HDTV, I thought to myself, we'll the TV I now
have is only 6 years old, it could wait till next year. I even
notice in the supermarkets everything is getting expensive and
you get tired of running all over town looking for a sale and at
the same time wasting gas ! How is it in Germany ? Are the
people affected there ? My great grandparents came from there
( Germany ) they came to New York in 1865 . One day I would
love to see it. I just hope they don't change the American dollar
to the Euro..........

Cheers.Joe....

Ann,
I don't know what the end result will be if the dollar continues to slide, but it will certainly have a negative impact. Once decisions are made to look away from America as a role model, there's no turning back.

Carol,
saving is needed for our private lives but that is not what industry wants. They want you to spend. That's why Bush gave borrowed money to each tax payer hoping they would spend it and boost the economy. Most didn't.

Joe,
I can't speak for the rest of Europe, but Germans were always thrifty and bought things when they could afford it. That changed in the recent past with the younger generation following America's lead with buying on credit. With the recent economic crisis, they are becoming more frugal like their parents. What is different here is that prices have come down drastically and that includes food prices. Merchants realize that to move their inventories it must appeal to the shopper. Raising prices in a down economy is not only bad business, but in my view, stupid. Earning less per item with greater volume makes more sense.

Like I said, I'm not an economist, so bear with me, but it seems, if we are to get through this, that some of the losses are going to have to come from the top. A company cuts 1000 jobs and start showing a profit because they are paying fewer salaries, but those thousand people are not going to be able to contribute to any boost in spending. I would like to know if the executives of that company reduced their own salaries and/or bonuses.

Ann

Ann,
executives of smaller firms more visible to the public are likely to do that. Large concerns will not unless forced to do so by its shareholders. The executives who flew to Washington D.C. in their corporate jets asking for money were eventually brought to task for that. It was not done willingly but to save face and get the money they sought. Smaller firms where executives have more contact with their employees are more sensitive to public opinion. The executives of conglomerates are often out of touch with the workforce. Their focus is strictly on the bottom line, the profit picture. Cutting jobs is usually the first thing they do. Reducing salaries of the executives is the last thing considered, if at all.

Yes, I'm aware of that, Abe, but there ought to be some way to regulate it.

Ann

Ann,
I don't think there's a chance at regulating executive salaries. It is contrary to Free Enterprise. Consumers can influence the actions of a company, but to be effective it requires campaigns with demonstrations. For a single company, that can work. For numerous companies, it just won't happen.

The issue being the weak dollar, it is controlled by the Fed and the government. They must take appropriate action.

I just heard on the news that Obama is in China and will take issue with them about unfair trade practices resulting from their deliberate efforts to keep the value of the yuan low. How ironic. I'm baffled.

The problem of the dollar seems inextricably caught up in the behavior of those conglomerates. We passed Anti-Trust legislation once. There needs to be a better way to regulate any business that gets so large. Their unfettered growth is the basis for our current situation, it seems to me. The dollar is caught up in that.


At least, it seems that way from my limited perspective.

Ann

alj wrote:

The problem of the dollar seems inextricably caught up in the behavior of those conglomerates. We passed Anti-Trust legislation once. There needs to be a better way to regulate any business that gets so large. Their unfettered growth is the basis for our current situation, it seems to me. The dollar is caught up in that.


At least, it seems that way from my limited perspective.

Ann

I think your perspective is right on target. There is a chance for change and that's what Obama is trying to do. When a government is in cahoots with the powerful people of industry, as they have been, regulations are ignored.
When people talk regulation, the power-based groups cry foul. They yell socialism, communism and create other euphemisms to defend their actions, and the average person buys it.

Abe,

Another example:

http://www.usatoday.com/money/companies/management/2009-11-18-pensions_N.htm?csp=34&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+UsatodaycomMoney-TopStories+(Money+-+Top+Stories)

Ann

Ann, that is a good example.
I believe Regulation can and should be made for public companies. People buy stocks in a company and need protection from fraud. Paying bonuses in any year the company suffers a loss is in my view fraudulent. Bonuses should be pegged to profits and not turnover. Turnover at the expense of profit is an easy way to pump up sales to increase bonus payouts and the shareholders get nothing. Rewarding loss is bad business.