Monday, December 24, 2007

Some soul searching on the falling dollar


The falling dollar is all the rage in economic discussions these days, just as some years ago the strong dollar was. We’ve fallen 40% again the Euro (something I noticed since I retired from a European-owned company, ING) in seven years (I last traveled in Europe in 2001, just before it was adopted -- when I found Spain and Portugal much cheaper than France and the UK; I don’t know how it is now).

One concern that I would wonder is how it would affect the prices of computers and electronics, as I expect to have to replace or upgrade some of mine in 2008. I’ve watched the Dell site, and haven’t really noticed problems. One obvious remedy is to relocate some component manufacturing back into the States. That would be better for jobs.

We hear the discussions all the time that a weak dollar is good for exports. It might be good for American movie making if the WGA strike can end. No longer is it necessary to go to Vancouver or Toronto to make the pilot for the next hit sci-fi series. The good old Directors Guild of Canada seal on so many B movies might become less common.

Of course, foreigners invest in American properties, but if the dollar gets too low they can effectively call in margins and create financial chaos.

The Washington Post has a front page story today (Dec. 24, 2007, p A01) by Anthony Faiola, “Dollar’s Fall Is Felt Around the Globe: Weakening US Currency Harms Overseas Markets,” here.

What is the cause of the fall? The obvious no-brainer answer is the expenses for the Iraq (and Afghanistan) wars without raising taxes. Another is a tendency for Americans to live beyond their means, and want something for nothing, an outgrowth of extreme capitalism. The subprime foreclosure crisis today is the latest symptom, and this follows only a few years after the Enron and WorldComm messes, and these indeed follow only a decade or so after the Texas Savings and Loan meltdown of the late 80s. Do today’s generations understand how the Great Depression came about?

Adding to this is the issue that other parts of the world are competing with American consumers, needing quickly to develop new technologies to deal with apparently approaching (or already breached) tipping points in oil production and global warming.

The February 2008 issue of Mother Jones has a long article by Jacques Leslie, “The Last Empire: Can the world survive China’s headlong rush to emulate the American way of life?” There are subchapters called “China eats the world” and “Pulp nonfiction.” Nevertheless, the Cultural Revolution under Chairman Mao did plenty of abuse to the environment back in the 60s, and the primitive farming methods (in combination with rural residence habits) tends to incubate new infections zoonosis diseases. This particular article doesn't appear online yet, but there are many related links, such as this, "The Last Empire: China's Pollution Problem Goes Global," by Leslie on Dec. 10, 2007, here. Anderson Cooper had dealt with China's pollution in ins 2007 four hour CNN documentary "Planet in Peril". Consumers, of course, have become concerned about the safety of some products made in China (especially children's toys) when manufactured for almost no wages and with unconvincing supervision from American retailers.

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