Posted by: davepidgeon | November 7, 2008

A dollar’s worth is more

Maybe there is an upside to rising unemployment and declining gross domestic product. Actually, I don’t think there is, but for those who have an eye for backpacking through Europe and were put off by the weak U.S. dollar versus foreign currencies, here’s a bit of silver lining:

The dollar is stronger than it has been in months and, against some currencies, years. The strength of the dollar is largely related to risk aversion, explains Kathleen Stephansen, director of global economics at Credit Suisse in New York. Right now, there is so much uncertainty in the global markets that countries would rather have a lower value against the dollar than no value at all.

The Australia dollar, for example, has dipped: 1.6 AUD now equals $1, a 52 percent jump from June. And there are similar situations across Eastern and Western Europe, Asia and South America.

In fact, the dollar—when compared with a weighted average of major foreign currencies’ values—is the strongest it’s been since June 2007, according to a current Federal Reserve Index. This is good news for American jet-setters. Suddenly, an “expensive” trip may not be considered so expensive.

I suspect this is why gasoline prices have fallen, and I wonder if the airline industry will make similar price cuts. If no one can afford your product (gasoline, airline tickets), you aren’t making money, so you might as well sell your product and earn less equity than make no equity at all.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: