I’m not an economist. I’m just a pain in the ass blogger.
However, here in the United States, we are tormented by the weak dollar. In the early day of the weak dollar policy that has been one of many negative marks on the current administration, we were able to sort of laugh it off as our neighbors around the world fretted about the rising cost of doing business in US Dollars. In the US, we were able to just sit back and say, “Yeah, the dollar is weakening but it’s not all that bad, really.”
As the world around us displays, that is no longer the case. Gas prices are over $4.00/gallon everywhere, which is in turn increasing the cost of food and supplies. The credit crisis has turned a real estate boom into a real estate nightmare.
Then I read this post where Sören Zschoche pronounces, “Because whereas Europe and the rest of the world are slipping in a recession the weak dollar is helping the U.S. economy to get better through the crisis.”
While it’s true that there has been an increase in foreign investment in the U.S. Markets (it’s cheap to do!), that does not translate to a healthier economy – and certainly not a recovery.
I’m fortunate enough to be less pinched than others by the downturn. I don’t own my home. My car (sans Air Conditioning) is paid for. I am self-employed in an industry that seems to be resisting recession. Sure, I’m spending $4.07 at last check for gasoline, but outside of trips to DC, most of my driving is local. Realistically, I may be the least affected by the downturn.
However, not everyone is the same way. Everyone is feeling the pinch. People are being laid-off in droves, families are spending $1000/mo to keep gas in their cars just so people can go to work and bring home food. This is not, in the near-term, getting better.
First off, let’s be clear. The Fed has a lot of power, but they are not the ones who set the dollar policy. The Treasury department does, and that is an executive branch agency with a Cabinet-level department head. This is a Bush thing.
Therefore, nothing is changing before the election. After the election, we may see a new policy but it will take time for that kind of policy to cycle through and start effecting change.
Buckle up, folks. We have at least another 12-18 months of this before things get better.
Update: Paulette from Let Us Talk calls this a period when America is for Sale. She incriminates all Republican Presidents in the last 30 years. Not going to touch that. I disagree, but it’s certainly an interesting point.