The stock market rose yesterday. The dollar fell. As incredible as it would have sounded two years ago, oil now seems ready to go to US$100…and gold seems ready to cross the US$800 mark.
Ai yi yi…the dollar is below US$1.44 to the euro. But who cares? The experts tell us that the lower dollar is making it easier for US exporters. American companies will prosper, they say.
The Fed is expected to favour US exporters when it meets today and tomorrow. Many analysts are betting that rates will be cut another quarter of a point. Bernanke is much more worried about troubles in the housing market, they say, than about the falling dollar. They’re surely right. No one seems particularly concerned about a falling buck.
But look at what is happening. The dollar is falling. It may fall gently. It may rally. Or it may fall hard. But one thing is almost certain; it will be worth less in the future than it is today.
A dollar is a pound… is a euro…is a peso. Our taxi ride from the train station in Köln to our hotel in Bad Godesburg was 70 euros. In Buenos Aires, it would have been 70 pesos. In the United States, 70 dollars would be about right.
In Paris yesterday we had lunch with a colleague. It would have cost us about 40 pounds in London…40 dollars in the United States…or 40 pesos in Argentina. We paid 40 euros. But the real cost varies with the currencies. Americans are aghast at how much it costs to live in Europe…and pleasantly surprised when they get their luncheon cheque in Buenos Aires. Argentina is a cheap country.
“Well, it may be cheap for you foreigners,” Gabriela had told us, “but it’s not cheap for us.” Salaries are lower too. We’re outsourcing some of our publishing work to Buenos Aires because we can hire people for less money down there. And so as to economise your time, dear reader, we will jump directly to our forecast: soon, foreigners will outsource work TO the United States!
Aha…we’re ahead of the crowd on this one, aren’t we?
The Daily Reckoning Australia