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Tuesday, July 8, 2008

The Dollar vs. the Euro

Earlier this week, I read this article about the current state of the American economy. I found the discussion of the dollar versus the Euro to be fascinating.

First off, I don't think that I knew that the dollar was considered "the leading international currency." Given the recent American domination in many areas, I suppose it makes sense, but I never thought of it as a leading currency. I knew that the dollar was often accepted in other countries, but I assumed that was mostly in tourist areas or in poorer countries. I would never expect the dollar to be dominant in Europe. I suppose the description is more in terms of banking currency, of course, and I can't say that's an area I've ever stopped to ponder.

The article discusses how the Euro may be taking the place of the dollar. Quite shocking to me was the fact that many Manhattan retailers are putting signs in their windows indicating that they accept Euros. This is an indication both that the dollar is losing its dominance and that European tourists are flocking to the U.S. to take advantage of the exchange rate.

I suppose it's good for the economy that foreigners are taking advantage of the exchange rate and coming to the U.S. for vacation. I'm sure that many vacation destinations in the U.S. are struggling because of all the Americans who have decided to scale back this year and have a "staycation" instead, so an influx of foreign visitors will hopefully boost them back to their normal levels.

Unfortunately, it looks like the dollar may have a few more years of struggle ahead of it. Some believe that the dollar is at an unnatural low, others believe that in the 90's, the dollar was overvalued and now things have started to normalize to where they should be. I can't say that I know enough about international monetary policy to make an informed guess. But I do thing the next few years will be interesting.

And hey, if the exchange rates don't improve, maybe this means I'll be able to convince all my friends to take that trip to Yellowstone I've been hoping for, rather than the exotic foreign destination they seem to all crave.

Abundant Life Spending Spree - $25,600
$25,600 will probably buy me a hybrid car. Not that I do a lot of driving as it is. But with gas prices as they are, it seems to make sense. Plus it's just good to do the most green thing possible (even though I hear hybrid cars aren't as green as they seem, what with the methods of disposal available for the batteries).


Tom said...

Isn't it funny how some "experts" believe that the dollar is undervalued and others think it's still overvalued? Make up your minds! I, too, wish I knew more about currency valuation...

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