Monday, October 01, 2007

Guess what your dollar is good for abroad? Good guess!

Well, gang, it happened again. The dollar sank against the Euro this morning to a new low. It sank against the Euro several times last week. And currency traders are betting the dollar will continue to sink. The ship is going down.

What’s that mean? Well, once upon a time we called it “The Almighty Dollar.” Back in 1959, a crummy five bucks in Paris could get you a clean hotel room, three squares a day, and still leave you some loose change for tootling-around money. There was even a guidebook called “Europe on $5 a Day.”

Today five bucks in Paris will get you a thimble-sized cup of espresso. Maybe. If you’re careful about the cafĂ© where you order it. Or anyway, you could pull it off when I was there last month. Today, who knows?

Bush Dumbo-nomics

This is a consequence of Bush Administration’s Dumbo-nomics. If you cut taxes, export all your industry to places where slave labor works cheap so that US companies can turn bigger profits, and then focus your government’s spending on a trillion dollar war about – oh right, we keep changing what it’s supposed to be about– your dollar turns to toilet paper.

So if you're the Bush Administration you can try to disguise what you’re doing by making money cheap – essentially running the printing presses overtime and lowering interest rates – and then pouring the less-valuable cash into the economy, enabling people to buy houses at outrageously inflated prices with cheap mortgage money.

Except, you know all about the housing bubble. That’s what happens when you borrow, borrow, borrow your way into so-called prosperity.

Now we’ve got inflation, plus a threat of recession, plus an increasingly-worthless dollar. If an Al Qaida saboteur had come to the US to do us in by deliberately manipulating the economy to our national detriment, he couldn’t have done a better job than the current administration.

But, but, but, but….!
What about American exports?

Conservative apologists for the Bush Administration will say, “But wait a second! A cheap dollar cheapens American exports, and that’s good for the American economy.”

Yeah, it would be, if the United States hadn’t exported virtually all of its industry.There's almost nothing left. We hardly make anything here any more, except for American cars that even lots of Americans don’t seem to want, high fructose corn syrup and partly hydrogenated corn oil.

So what do we do here? Well, our biggest and most prosperous industry seems to be moving money around. You know, brokerage, investment banking, mortgage lending, hedge-funding, that sort of thing. You can’t export that stuff since it's so much more intangible than say, steel or Barbie dolls when they still were made here.

Then we trade houses. Can’t export those, either. Although increasingly, some European can outbid you if you're out to buy, even with cheap mortgage money.

Meanwhile, China is making everything from poisonous toys, to poisonous fish, to poisonous dog food – and who knows what else Chinese melamine got into besides wheat gluten that went into dog food – and selling it to us, the former bread basket of the world.

Well, uh, then what about
the boost to tourism here?

Yes, the cheap dollar attracts tourists. That’s good for the hotel business, much of which is owned by foreign investors and therefore not so helpful to us. But it’s going to make your own vacations start feeling mighty expensive.

Think about it. You can’t afford Euro-based Europe any more. Not if you’re sane. But if you’re planning to go to New York, San Francisco, Miami or even the Grand Tetons, to name just a few places tourists like, be warned. You’ll be competing for hotel room space with folks who are flush with Euros. They can outbid you, out pay you, and crowd you out. And once the hoteliers see the Euros coming, they’ll raise prices accordingly. So eventually you’ll priced out, too.

Oh, eventually that will even have an impact on domestic airlines. Why cater to bargain-seeking Americans when you can charge Europeans more for the same seats? So unless your idea of a really cool vacation is piling into the family jalopy and sleeping in Cousin Hector’s basement on the other coast, you’re screwed again, pal.

Oh, I forgot. If you want to replace the family jalopy that’ll cost you more too, and not only if it’s a foreign car paid for in dollars. When American cars start looking cheap in comparison, guess what American carmakers will do.

Did I mention the price of gasoline? Oh, right. You already know about that.

P.S. Like the toilet paper in the photograph above? Get it here for only $7.95 a roll. just use the money directly.

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