Plan on $1.30 U.S. per Euro for your Spring trip and hope for a pleasant surprise. As for the rest of the discussion, one significant factor that hasn't been thrown into the equation as to the relative attractiveness of U.S. goods sold abroad in a weak dollar scenario is the impact of relatively higher commodity prices.

Let's take oil costs, for example. I would much rather have been buying my oil with Euros over the past year.

In energy-intensive manufacturing processes, higher energy costs can wipe out much or all of the advantage provided by a weak U.S. dollar. It's also a significant problem for a large segment of consumers, who lose a larger share of their discretionary income in order to simply keep up with fueling their vehicles and heating their homes. Consumer spending is a huge share of the U.S. economy.

My point is that the impact of high energy costs rippling through the U.S. economy can't simply be shrugged off with the assuption that weak dollars are a good thing for international trade and that the benefits must certainly offset the negative side of the coin.

Such a view all but ignores the huge trade deficit the U.S. operates under and the importance of imported energy to that figure. In the big picture, it's important to remember that we are net IMPORTERS, not exporters. It may also seriously shortchange the negative impact on goods and services that are produced and traded exclusively in the domestic market, for which either higher prices must be charged or profitability suffers.

I guess all I'm suggesting is that as an economic policy, the cheap buck may not be all it's cracked up to be and it deserves plenty of scrutiny, based on current outcomes. It should not just be passed off on with truisms that may not reflect today's economic realities.

Right on, Flyboy! No at last someone is making sense!

fly,

since oil on the international market is priced in USD, i don't see how the price is influenced by the weak dollar (for americans). i accept your point that the higher energy costs will increase costs and decrease profits for many companies but i don't see this "relative to the weak dollar" as you say.

i suppose one could argue that if you were buying oil with euros, then demand in europe (for example) would increase as the real price for those buying in euros is lower. however, this is clearly not the case as energy prices here in europe have increased as they have in the US (perhaps not as much because the strong euro/pound have tempered the increases. am i seeing it wrong?

I have said this on other threads, but here we go again:

The root of this problem is the Bush Administration's tax cuts. You cannot responsibly finance a war with tax cuts. Responsible government would indicate a tax increase to pay for the war. Of course, Bush will not do that and the end result is record breaking deficits.

The only way to pay the government's bills is to print money. When you print more money, the money becomes worth less in foreign courrencies.

And eventually, all the prices will rise dramatically in the US decreasing our standard of living. And, of course, any benefit 99% of the people got from the tax cuts has already been eclipsed by increases in health insurance, gas prices, etc., etc.

The bottom line is that so long as we remain in Iraq--where we are paying perhaps 90+% of the bills, the dollar is going to continue to fall relative to other currencies.

This is basic economics. However, the Bush Aministration has a fundamentalist (Christian?) belief in its own cock 'n' bull economics. It is my view that this country is headed for a major economic disaster. International currency markets believe that too--which is why the dollar has continued to fall. International currency markets do not believe in cock 'n' bull economics.

Now I will get off my speechmaking pedestal. . . .

No, you're not seeing it wrong. But in U.S. dollar terms, the increase has been amplified. The pricing of oil is in U.S. dollars, but those prices reflect the diminished value of the dollar. (Think: Canada is the largest international trading partner of the U.S. They also have significant domestic energy reserves and Canada exports a lot of natural gas to the U.S. Are you hearing Canadians clamoring for a return to $1.56 CDN per $1 U.S. instead of the current $1.20 because it's a better economic policy for their overall economy?)

Sadly, the halcyon days of 2000, when you could get 1.2 Euros for a buck, are gone for good.

I was in Munich last month and the prices were staggering. I thought I was prepared for the price differences, but it's tough -- at least for me -- to pay $7 for a beer, even though it's just $7.

I'd been going to Germany and Austria every year for the past 5-6 years, but I just don't see how I can do that anymore. I can't afford $150 per night for hotels that used to cost $80.

It really sucks. And I blame, of course, George Bush. His administration pushed for a weak dollar. It may be good for some people, but not for me.

I'm no Bush supporter, and I think some of the decisions he's made on the financial side of things have been extremely stupid.

That said, the economy is cyclical, and always has been. Clinton did have the good fortune of being in office on the up-part of the cycle, while Bush came in during the down-slide.

Fauxstemarie, I could tell right away you don't know much about economics.

You make yourself look silly by trying to link christian beliefs to a pro-growth tax policy which GREW us out of a recession made much worse by 911, high energy costs and corporate scandals.

More americans are working now than ever before. Exports are at record highs and more exports mean more jobs. Home ownership is also at a record high and interest rates are very low as is inflation.

Millions of americans re-financed thier home and car loans and saved big money.

The economy is recovering and the deficits will shrink as it grows.

And deficit spending during a war or a recession are pretty standard practices, done by both parties.

Do your homework before you shoot off your big mouth.

What I was trying to say obliquely I will now say directly: economics is not an exact science but based in a theory of how people interested in money want to believe things work. Proponents of capitalism believe all other theories are incorrect and always trot out the idea that there's proof that capitalism works because people are making money out of it. Critics of it point out the social ills that are not served by capitalism and focus on one or another set of specific failures, many of which have to do with whether the market is, in fact, free.

It always amazes me, however, that certain "economists" are so quick to savage anyone who doesn't think things are working so well as "failing to do their homework" or "ignoring the facts" when what they really mean is that these people are traitors to the idea that the current system "works" -- and not incidentally that it seems that these treacherous, "ignorant" people don't think the conservative stewardship of our economy has been good. Can you spell "deficit"?

The facts include things like the 20% of American children that live below the poverty line and the catastrophes we see in health care and transportation systems. And forgive me, but saying "more Americans are working now than ever before" just BEGS to have someone note that there ARE more Americans than ever before.

Speaking of big mouths.....

PS: this isn't just a wartime deficit -- it's a deficit of staggering and unprecedented proportions that far exceeds the likelihood it can ever be overcome by a technological revolution (like the one driven by computers and software) -- nor by wars that can no longer be won with heavy machinery and weaponry (as WW2 was).

Here's an interesting chart from which certain inferences may be drawn:

<b>http://www.senate.gov/~budget/republican/images/charts/economic/unemploymentrate.gif</b>

Interesting stuff!
To asnwer jlsayre's question, why are you concerned? If the exchange rate were to go down 10%, and you trip costs, say $3000, that's $300. If $300 enough of a delta to make you cancel your trip? Would you not go somewhere because of $300, which, spread out over two weeks would be ~$22/day? I would hope not. NO ONE here can predict, so why not just worry about what hotel or restaurant to go to, and let the currency do what it is going to do. Too much stress otherwise.

My understanding is that interests rates are trending up and will be higher next year (in the 3-4% range?). This may help the US$, but repercusions may be felt in the morgtgage and household debt areas. And as a comment to someone who said the foreigners don't want to invest in USA, note, a BIG NOTE, that they are BY FAR the largest buyer of US treasury bills and bonds. This helps to support the US dollar and mitigate interest rate rises. Should China and Japan decide to start selling their bonds (I'm simplifying of course) this will have a negative impact of US$ and interest rates. Foreigners are supporting the deficit! TexasAggie can tell you the long term consequence of a budget and trade/current account deficit.
Mike

What catastrophes do YOU SEE in health care and transportation systems? Most people don't want to pay for it and expect the company or the government to pick up the tab.

Poverty line? Please, that line is so high 25 africans could survive on one
inflated US figure. If any one goes hungry in america its USUALLY due to drugs, booze or just being lazy! Getting out of bed is real tough for some slackers.

Don't have a job - then move your big butt to where there are jobs. I did it and plenty of other people have to. Trouble is, lots of people want a job when and where they want it and don't want to go to school to re-train if they get laid off. Don't get paid enough, then work overtime or get a second job. Been there, done that! It makes you tired, but it will not kill you.

The employment rate? Its better than under clinton (when the media said it was so darn good) and let's not even compare it to EU rates.

It might be good for soccr and others to not lose perspective. Yes, the national debt has increased greatly during Bush's first term and I'm not happy about that either, but neither do I think the sky is falling.

The national debt at the end of the fiscal year ending before Clinton took office (FY92) was 4.1 trillion - at the end of his first term (FY96) it was at 5.2, an increase of 1.1 trillion. In his second term it increased another 0.5 trillion (admittedly pretty good performance). So, Bush &quot;inherited&quot; a debt of 5.7 trillion (end of FY00) and at the end of FYO4 had run it up to 7.4 trillion - an increase of 1.7 trillion (admittedly pretty bad performance). And, yes, it's likely to continue increasing at a good clip for a while.

The point, however, is that we're not talking about mega-differences - 1.1 Clinton vs. 1.7 Bush in their first terms, for example. As I said, I don't like it either, but I don't think that sort of difference would lead any rational person to conclude that our economy has gone from just wonderful to doomed over the last 4 years because of budget deficits.

I'd like to see you live on $12,000/year -- in the US not Africa, btw -- hansikday. And good for you for moving to find a job -- glad you had the money and skills to do that. Try it without a car, busfare, or a bicycle.

People can't afford health care because overhead in the private insurers is now 40%, where it was 8% when it was just medicare and medicaid, and because people would rather have big buildings with fancy machinery to save marginal but dramatic cases instead of providing neighborhood and preventive health care, quality nursing, etc., and because when unfortunate things happen to greedy people, they love to sue the nearest deep pocket regardless of blame (and the lawyers love them, too!). As for your blanket assumptions about the character of people who are struggling to get by, despicably wrong, but you wouldn't know that wearing those grudging blinders.

How's that for Friday perspective? But I sitll think O.P. might want to buy gold. ;-)

&lt;If any one goes hungry in america its USUALLY due to drugs, booze or just being lazy!&gt;

Well now THAT simply is not true! It is the WORKING POOR and children that make up the largest percentage of people seeking help from food banks.

I agree. Another group that is showing up more frequently is the elderly. It's time for a reality check out there.

Well, yeah.

But, to be fair, it must be pointed out that the reason the elderly need financial support is because they spent their money on travel instead of investing it.

Tsk tsk, Robespierre -- obviously the impoverished elderly spent too much on cake.....

Maybe they should all get a job at Wal-Mart! Ya' think?