Sinking Dollar Cripples American Travelers
In the heart of Madrid, the dollar’s woes have reached fevered extremes. The euro at its worst, shortly after its introduction, could buy only $0.69; it is now worth $1.57, an appreciation of 127.5%, or 2.275 times its lowest value against the dollar.
What’s worse, money changers advertising “no commission” do not adhere even loosely to the official rate of exchange, which is, in a post-gold-standard world, the actual value of currency; one can find rates as unfavorable as 0.47€ to the dollar, or 47€ for $100, which means change kiosks are charging $2.13 for 1€.
This astonishing collapse of the dollar against competitive currencies is more than a mere symptom of hard economic times. It is an engine of economic setback, with ripple effects fanning out to impact spending and growth on both continents.
So weak a dollar means Americans are now significantly poorer in comparison to Europeans than they were just a year ago. It means they can less afford luxury European-made goods or imported foods. It means the EU’s eastward expansion, which could benefit American consumers and businesses in terms of labor costs, is now a lost opportunity for the American economy.
It also means two very fundamental problems of economic distortion: 1. American tourists are now less able to fund their much appreciated and always increasing European holidays; 2. the measure of US GDP reliant on European buying of goods and services will increase dramatically, meaning a built-in weak-spot when the dollar strengthens again over time.
In Venice, Italy, Harry’s Bar, owned by the Cipriani family and made famous by Ernest Hemingway, is now offering a 20% discount to American passport-holders, as both a gesture of goodwill and an attempt to soften the blow as American patronage falls off at worrying pace, a trend likely to accelerate this year, as the dollar continues to slide and food, transport and health costs in the US are soaring, in a weak banking environment, with property values falling.
admin @ April 11, 2008