The dollar in a world of junk
We read about the US dollar's decline. But what does it mean to you and me? Maybe that's not even the best question. Maybe the question to ask is, "What does it mean?" period.
The dollar has been declining against other currencies - and gold. Let's take a quick look at what it means when the dollar declines against other currencies - for example, China.
When the value of our dollar declines against the Chinese currency, it makes Chinese goods more expensive. Since we import so much from China, that means the price of many of our consumer goods will rise. And let's remember that we import goods from many other countries. And, for the most part, the dollar has declined against their currencies too. Same effect: higher prices.
But have you noticed the price of Chinese products going up? I haven't. The reason prices haven't gone up so far is that the Chinese have been manufacturing so much stuff that the supply of Chinese goods has outstripped the demand for them. The same has been true of goods from other countries. There's a lot of stuff being shipped across the world's oceans waiting to be bought up by us consumers.
Will this situation change in the future? Actually, right now, the dollar seems to be rallying, i.e., gaining strength against other currencies. While this may not sustain over the long-term, some experts think it could rally for the next 6 - 12 months. That would stem any rise in prices. Ah, relief!
But at some point, the dollar will resume its decline. Then what? Will the price of everything we buy go up? Add this to the rising cost of gasoline and food and we may be in for tough times as consumers.
One thing to keep in mind: we Americans buy lots and lots and lots of stuff. Is it all necessary? Or are we buying a lot of junk?
I was just advised to replace my laptop every three years. Every three years! What that means to me is that laptops have become cheaper but junkier. I suspect you could find a lot of products that we're buying that have to be replaced more often these days. The price may be low, but if you have to keep replacing the item, it tells me the stuff is pretty much junk.
Even if the dollar rallies in the coming months, we'll have to face the music eventually. It will resume its decline. So back to our original question: What does the decline in the dollar mean to you and me? It means that the dollar buys either less junk, or that the items we buy have become junkier, or some combination of both.
Maybe the real question is what are we doing buying all this junk in the first place?
The dollar has been declining against other currencies - and gold. Let's take a quick look at what it means when the dollar declines against other currencies - for example, China.
When the value of our dollar declines against the Chinese currency, it makes Chinese goods more expensive. Since we import so much from China, that means the price of many of our consumer goods will rise. And let's remember that we import goods from many other countries. And, for the most part, the dollar has declined against their currencies too. Same effect: higher prices.
But have you noticed the price of Chinese products going up? I haven't. The reason prices haven't gone up so far is that the Chinese have been manufacturing so much stuff that the supply of Chinese goods has outstripped the demand for them. The same has been true of goods from other countries. There's a lot of stuff being shipped across the world's oceans waiting to be bought up by us consumers.
Will this situation change in the future? Actually, right now, the dollar seems to be rallying, i.e., gaining strength against other currencies. While this may not sustain over the long-term, some experts think it could rally for the next 6 - 12 months. That would stem any rise in prices. Ah, relief!
But at some point, the dollar will resume its decline. Then what? Will the price of everything we buy go up? Add this to the rising cost of gasoline and food and we may be in for tough times as consumers.
One thing to keep in mind: we Americans buy lots and lots and lots of stuff. Is it all necessary? Or are we buying a lot of junk?
I was just advised to replace my laptop every three years. Every three years! What that means to me is that laptops have become cheaper but junkier. I suspect you could find a lot of products that we're buying that have to be replaced more often these days. The price may be low, but if you have to keep replacing the item, it tells me the stuff is pretty much junk.
Even if the dollar rallies in the coming months, we'll have to face the music eventually. It will resume its decline. So back to our original question: What does the decline in the dollar mean to you and me? It means that the dollar buys either less junk, or that the items we buy have become junkier, or some combination of both.
Maybe the real question is what are we doing buying all this junk in the first place?
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