By Jim Sack
There is a sale going on in Europe, thanks to financial problems in Greece, Ireland and a couple more European countries, that can benefit you but won’t help our economy much.
The dollar has risen between three and five percent on most world currencies and is poised (great word) to go much higher. That means an extra day in London, a few more gifts from Rome, a very, very nice dinner for two followed by tango in Buenos Aires, an adventurous cruise up the Amazon where their coin is discounted just a bit over eight percent.
Since January 1st the dollar has been on a tear, relatively speaking in the world of foreign exchange. The dollar is five percent higher against the Danish Krone. Kobenhaven: a truly lovely city. Up six percent against the Hungarian forint: Budapest, gulash, gypsy bands and the broad Danube. Up five percent against the South African rand just in time for the World Cup. For the more prosaic traveler the British pound is down almost four percent against the dollar. And, Chile, where a never-ending sea coast and fertile hills yield bikinis, great sea food and world class wine is discounted almost seven percent. Investors are seeking shelter in the US dollar, so they are buying our greenback and selling their currencies.
Only the Russian ruble, the Japanese yen and a few other Asian currency are holding par or rising, as is the case with the Yen, against the dollar. In the Middle East the currencies of most oil countries have stayed on a par with our dollar.
So, now is a good time for travel to certain countries or to get a discount on goods and services they produce.
It is, however, not the best time to be an exporter, as President Obama hopes. American goods are consequently more expensive now because our money has risen in value. That means our products will be pricy compared to the same product from another part of the world. That makes it harder to create or sustain jobs in our export industries. A more expensive dollar is a drag on jobs, but good for travel, education, leisure,
There are a few countries where their currency has risen against the dollar, where our products are consequently cheaper: Columbia, Japan and Israel. Hmmm. Well, we could sell brake assemblies to the Japanese.
Export is important to any economy. It equates with income. We, as a nation are spending more than we earn. This is described monthly as a balance of trade imbalance. China and Germany will continue to be the two top exporters, that is countries with a favorable balance of payments with the rest of the world. These two countries earn more than they spend. Germany makes high value products, China makes low end products. You can find German and Chinese products everywhere, but not so American products in the rest of the world.
So, I will guess that given the economic troubles in Portugal, Ireland, Italy, Greece and Spain, collectively ridiculed as the PIIGS due to their bad investments and profligate spending, the dollar will continue to be a safe haven for foreign investors. The dollar will continue to rise in value and your summer vacation to see the cousins in Germany or muddle about the streets of London will be significantly cheaper. Unfortunately, it is not doing job creation and balance of payment problems much good.
Enjoy your trip. Gute Reise! Bon voyage.
No related posts.
Entries (RSS)
