September 20, 2007

The value of a dollar

The US dollar's value internationally has continued its long downward slide, with the dollar hitting a new low versus the Euro and the Canadian dollar reaching parity ($1US=$1CA) with the dollar. Scroll to the bottom of the Kitco site and you will find currency charts indicating the relative value of a dollar.

What does this mean? Imports will gradually become more expensive and American exports should gradually decline in price - if you assume that the dollar falls evenly against all currencies. This helps certain locales, much like my hometown of Rouses Point, as it enables Canadian consumers to come to the US and spend Canadian dollars at no discount against American dollars. I remember a time when there were sign posting specials to Canadian customers - the Canadian dollar would be accepted at a 35% discount instead of the 39% market rate.

Of course, the Chinese government has still not allowed the yuan to float freely against the dollar; the yuan remains roughly equal to 13 cents. But who needs fair trade when you're hamstrung by a giant country with a dictatorial streak and nuclear weapons?

That's what I thought.


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