Itty bitty cups of five dollar coffee, or the plummeting US dollar

So you’ve probably heard about the falling US dollar, but you might not know what that means for you. For me it means physical pain upon every ATM withdrawal: one euro now costs me $1.5495. That means that those tiny cups of European coffee now cost much more, and worse, that I now pay $125 more per month for the same rent, bills, food and other sundries I was buying back in October. But this thing doesn’t just affect those of us weird enough to want to live overseas; it has an impact on everyone back home, too, though it’s difficult to understand just what that impact is if you’re not into integers. I’m pretty sure that my two semesters as an economics major back in uni don’t qualify me to speak expertly, but I do know how to read. Those of you who do know what you’re talking about can feel free to correct any misinformation, but it seems that, as usual, the man is to blame.

First, though, what this means to you. In the short term, it should affect you every time you get in the car. The rising cost of oil -- which is priced in dollars -- could very well be linked to the weakening dollar: "Dollar weakness has boosted the price of dollar-denominated commodities and helped oil to surge by more than a third since the middle of August. It has risen more than 50 per cent this year." (Times Online) It could also mean inflation caused by more expensive foreign imports. In the long term, the weak dollar means massive interest rate hikes. This "long term" doesn’t seem so "long" now that Alan Greenspan has predicted double-digit interest rates in coming years to thwart inflation. Think about the balloon interest rates that got us into the mortgage crisis we’re facing right now and think about those balloon rates being the only rates. Talk to your parents, and they’ll tell you about how they bought their first house back in the 80’s at 13%. Just to give you an idea of how bad it is: by the end of 2004, the dollar had lost a full third of its value to the euro, which had only been in existence since 1999. Last year alone, the euro appreciated 40% against the dollar. (And the book says, man cannot survive on bread alone, but I would like to say that with the current exchange rate, man can survive on bread, cheese and soup alone if you’re a graduate student in Europe watching your funds diminish by the hour.)

It should come as no surprise that the government and big business helped to get us into this mess. America’s debt -- accumulated during the Bush, Jr. years thanks to wars in the middle east which now cost taxpayers $275 million per day -- is a serious turnoff to investors and governments who would otherwise be attracted to the dollar. Moreover, that debt has largely been financed by China and Japan in the form of bonds, which basically serve as I.O.U.s from the US. Other factors determining the dollar’s value are American habits: low interest rates promote spending rather than saving. This proclivity combined with the recent credit and mortgage crises have helped to decrease investor confidence in the dollar. While citizens should have been more provident, corporations and government hold most of blame for their blatant exploitation of the American people. Who needs a $4000 credit line as a student in college?! And since when could a couple making $80,000 per year afford a quarter of a million dollar home?

I’d like to join the world’s eight-year-olds in giving big business and the US government a fat, ugly stuck-out tongue.



Okay, so she’s not sticking out his tongue, but I think you get my point.