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It depends on how rapidly (orderly) the descent is. If it is a slow, incremental descent, then it is beneficial in that it lessens the impact of the huge federal deficit. Personally, I believe this is a part of the Bush Administration calculation for addressing the deficit. Conversely, it makes goods more expensive for American consumers, and those countries' denominations pegged to the dollar. If, however, the descent is rapid (disorderly), that will drag the equity markets and undermine the bond markets. It really depends on the nature of the drop. If the value of the dollar drops relative to other currencies but it can still purchase the same amount of necessities then it helps American businesses but hurts Americans who want to buy goods from nations whose currencies have risen against the dollar. Most Americans won't notice a difference if this happens. If the dollars value falls relative to necessities then it hurts all Americans and helps businesses again. It all depends on what the elite bankers want to do. The currencies of Europe are overvalued with respect to the dollar and this is only due to their manipulation. thc: Overvalued? I think not. The reaction, IMO, is from other nation's anticipation of the US economy. Bush has a record for deficit spending; most countries will work to limit their exposure to declining value US assets (treasury bonds, etc.). That's just good economics. Foreigners (especially Japan) are propping up the dollar. Without their support our dollar would've crashed. It could still happen if they decided to reduce their exposure to the dollar. If our economic well-being depends on foreigners financing our debt, no the falling dollar is NOT GOOD for America. If a falling dollar really is good for U.S. exports, why do we still have a MASSIVE trade deficit? To balance that out the dollar will have MUCH further to fall. You should read an article about this in the Economist magazine. Interest rates are likely to JUMP if the dollar falls quickly. Cathexis If you compare the purchasing power of the dollar to the EURO and the pound you'll see that the exchange rates drastically underestimate the value of the dollar. thc: If one has an unfounded love of the dollar, I'd agree. Based on economics, I'd say it was a wake-up call to Americans.
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