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Looking for a simple, but well-informed, answer as to why the dollar keeps dropping against the Euro

Looking for a simple, but well-informed, answer as to why the dollar keeps dropping against the Euro

Dec 23rd, 2003, 05:02 AM
Join Date: Jan 2003
Posts: 473
Flyfish sums up my feelings- life is too short to worry about it. Whether it's a falling dollar, terrorist threat, whatever- I hate to see people putting off travel plans for the above reasons. Many times I've heard people say maybe they'll go "next year" and quite often next year never comes.
Beatle is offline  
Dec 23rd, 2003, 05:15 AM
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More good news just came out regarding the American economy, and eventually the US dollar:

Government reports showed on Tuesday that the U.S. economy grew at its fastest rate in nearly 20 years in the third quarter, boosted by robust consumer spending that has carried on into the closing months of the year,

The Commerce Department said gross domestic product, or GDP, which measures total output within U.S. borders, advanced at an 8.2 percent annual rate -- the same as the department estimated a month ago and more than double the 3.1 percent pace posted in the second quarter.

Keep your fingers crossed and think positive.
Dec 23rd, 2003, 05:37 AM
Join Date: Oct 2003
Posts: 3,759
Based on current reports the dollar will start gaining ground shortly. However, because of the interest rates in the US, don't look for any major changes until the rates go up. The Pres. is hesitant to raise rates as that is currently helping fuel the economy. As I mentioned on the US board earlier, you are probably saving enough in mortgage interest this year to in fact, pay for a trip to Europe if you have refi'd in the past 18 months. So, the point is you are going to spend the money somewhere, be it in higher rates or a weakened dollar. For what many families spend going to Disneyworld for a week, I could travel in Europe for a month, even w/today's exchange. It should not be a deciding factor.
SAnParis is offline  
Dec 23rd, 2003, 05:48 AM
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Read all the above comments and you will realize why so few people can lay any claim to understanding economics.

I will hold dollars when I believe that the United States (its government and its people) will keep their promises to balance their incomes and expenses, sell as much as they will buy, and offer a safe haven for my wealth.

I will hold dollars when I see the American government and its people believe in setting aside savings.

I will hold dollars when I believe those dollars will retain their purchasing power.

These conditions are not being met? So I will sell dollars and keep my wealth in other currencies.

It's just that simple.
USNR is offline  
Dec 23rd, 2003, 05:54 AM
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USNR, all of the things you listed might not happen and the dollar could still go up.

Do you really keep your wealth in foreign currencies? If so, which ones look stable or have good potential for appeciation over the next two years?
Dec 23rd, 2003, 06:35 AM
Join Date: Jan 2003
Posts: 801
Flyfish has it right. Remember for those of us who frequently travel got the advantage of the .88 rate several years ago.

The U.S. trade and domestic deficits cause the current 1.24 rate. The domestic deficit will be corrected with the better economy that appears on the horizon.

The trade deficit is another matter, however, and is difficult to cure. All those NAFTA advocates have helped bring this problem on. Their call for lower wages and profit in the U.S. and higher wages and profits in repressive dictatorships like Communist China will have to be confronted someday soon.

Life is short. If you have a lot of time you can travel happily in the U.S. I did so for thirty years. If you wish to go to Europe, however, prudent planning can make it so. Some folks I met, for example, keep a savings account of Euros in Europe and use it to offset travel costs.

Interesting subject, though more economics than travel-related.
Powell is offline  
Dec 23rd, 2003, 07:32 AM
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"robust consumer spending" unfortunately has come to mean "consumers digging themselves deeper into debt and buying stuff made overseas they don't need instead of saving and building up their pensions."
BTilke is offline  
Dec 23rd, 2003, 07:50 AM
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For those who feel that deficits, trade imbalances, political ineptness, etc are causing the $ decline, why is it those same criticisms were not applicable during the '70s/early '80s, when the deutschemark went from $.44 to $.58?
Yes, the deficit is larger than back then, but so is the economy. Yes, we have a trade imbalance, but we have had it for 4 or 5 decades. Yes, our savings rate is lower than that of Europeans and Orientals, but the last time it was equal was in the early '40s.
Just because the euro has no history before 2000, doesn't mean that previous occurences/facts are prehistoric. To ignore this history is to expose the paucity of one's education and intellectual curiousity..
tomboy is offline  
Dec 23rd, 2003, 10:53 AM
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Good lord, peter. Even Al Gore has admitted he lost the election fair and square IAW the laws of America. Only the far fringe left is still whining about the 2000 election.

Get over your intense bitterness and move on. Its the only sane, healthy thing to do. If you don't wise up, GWB's re-election in 2004 will really depress you.
Dec 23rd, 2003, 11:37 AM
Join Date: Jan 2003
Posts: 33,425
I think what Peter wrote does sum it up pretty well and simply -- a lot of the value of currency is simply related to confidence. Look at all the goofy things that affect the stock market, for example, most seem to have nothing to do with how well a company is doing or its financial situation.

I don't understand your comments, Dumas -- I think Peter is not even American, but in any case, nothing in his post refers to Bush's election and seems a pretty straightfoward comment on the situation. A lot of people in the world don't believe in things he says, this is very evident if you read the international press-- and I think that may now be true for the majority of the US population, from the polls I've read -- at least in reference to certain subjects. YOur response seems completely offbase and as if you were reading an entirely different post.

If Peter wrote a diff. post than the one just above yours right now that makes your remarks responsive to his, I guess I missed it.
Christina is offline  
Dec 23rd, 2003, 12:00 PM
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Er, Dumas

I'll make this simple.

........ check the figures.

Regardless of the counting cock up, the majority did not vote for Mr Bush.

I speak as a former currency trader.

mpprh is offline  
Dec 24th, 2003, 08:29 AM
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Hi J,

Do you want simple or do you want well-informed? You can't have both.
ira is offline  
Dec 27th, 2003, 07:41 AM
Original Poster
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Now that Christmaas is over, bringing it back for a second round of discussion. I guess if I have to make a choice, I want well-informed in language and terms that a reasonably well-educated peson can undestand. It has been an interesting thread and I've appreciated that other than a few people most of the answers haven't been rants and raves based on personal political viewpoints.

We had been hoping to take a 10 day trip to southern Europe in March. Now, however, I am starting to do some exploring of prices and places along the southeast US coast. It wil be interesting to see how US prices compare for those of us who normally travel the 2 star hotel route in Europe and can find very little in the US that would be considered appealing at that level of accomodation. I want to know if Patrick's discovery that the US is more expensive even considering the bad exchange rate will also apply to the area I am looking at.
julies is offline  
Dec 27th, 2003, 11:46 AM
Join Date: Dec 2003
Posts: 91
My husband is a corporate finance guy.
His explanations why Euro is strong vs. the Dollar
1) Worldwide uncertainty in expansion of the US economic recovery, limiting capital inflows into the US (i.e. demand for the dollar)

2) Current US economic policy of "weak dollar" to increase the velocity of money, thereby stimulating the US economy (this would help get Bush re-elected).

3) Record low interest rates in the US are not attractive to international fixed-income investors.

He says that the Dollar won't rise against the Euro until
1) after November 2004 elections
2) US Fed raises short-term interest rates.

Hope this helps.
mistik321 is offline  
Dec 27th, 2003, 12:22 PM
Join Date: Sep 2003
Posts: 259
Knowing how much money you anticipate spending for a 10-day trip (not counting airfares) would probably yield better trip advice than a dichotomy of world economics. Surely you have some kind of figure in mind. Regardless, whatever that figure is, I can guarantee you that a 10-day trip to Europe *could* be done for equal or less than a 10-day trip to South Carolina. It's a matter of priorities, not about the value of the Almighty Dollar.
KS452 is offline  
Dec 27th, 2003, 02:27 PM
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Posts: 59
read the rules: no advertising about whatever it is your web site promotes. But the fact is, Bush won and will hopefully win again. Especially if Dean is the candidate.

Maybe currency traders prefer Democrats, but stock and bond traders surely don't.

Magnus is offline  
Dec 27th, 2003, 08:33 PM
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Actually, most people are surprised to learn that generally the stock market has done much better under Democratic Presidents than under Republicans.
RufusTFirefly is offline  
Dec 28th, 2003, 03:24 AM
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Nope, no surprise Rufus.

IIRC the old adage is "Democrats start wars. Republicans start depressions".
ira is offline  

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