Dollar Falling Against Foreign Currency

The dollar seems to be in a free-fall against foreign currencies. It would now take $1.97 to equal one English pound. This is the lowest value for the dollar against the pound in 14 years. Many currency experts expect the dollars slide to continue, and expect to see the $2 pound very soon.

The dollar is also sliding against the Euro. It now takes $1.36 to equal one Euro [the currency used by the European Union]. This is bad news for Americans traveling abroad. Everything they buy will cost more dollars than it used to. It is also bad news for foreign products in America such as TVs, autos, electronic equipment,etc. All of these products will be costing more dollars.

But strangely enough, this could also be good for some segments of our economy. With the dollar so weak, it should encourage more foreigners to visit America and buy more American products. Foreign travelers will be able to purchase more, because to them the American products will be cheaper than they were before.

It could also have a beneficial effect on our trade deficit. Since the falling dollar makes American products cheaper and foreign products more expensive, it should help to close the enormous gap in our trade deficit with other countries.

But while it can have some beneficial effects, in the long run it will hurt our country. With the huge government deficit created by the Bush administration, we depend on the investment of wealthy foreigners. If the dollar is not stabilized, these investors will be frightened off and find other places for their money.

It is not good to have either too weak or too strong a dollar. It needs to be stabilized against other currencies. No one wants to invest in a country with an unstable currency.