Falling Value of US Dollar Hits Drivers, Tourists

The trouble with money is that it can be slippery. Give the man with no money a credit card and he can buy things he cannot afford. Give him a no-money-down mortgage and he can even buy a whole house. And give the central bank the power to create dollars “out of thin air” – and all of a sudden past, present and future seem to run together in a hopeless confusion. In order to spend, the man with a credit card must be using up someone’s wealth – but whose? And what is the value of the dollar created out of thin air?

The Dow went over 14,000 last Thursday. Gold hit US$678. And home sales in California fell to a 12-year low.

The price of gasoline has been backing off. The last time we were in France, we paid US$8 for a gallon of gas. In the United States it is around US$3 – still about 30% higher than it was at the beginning of the year. Still, Americans are using more gas than ever – with consumption up 1.5% over the last year.

However, a poll done by Reuters/Zogby tells us that if the price were to get to US$3.50 a gallon, drivers would finally slack off. At least, that’s what 40% of them told pollsters.

Americans are shocked when they come to Europe and see how much we have to pay for things. “I’ll just have to work a few extra years to pay off this vacation,” said one traveller to the New York Times. A hotel room can easily cost US$500 a night. One American reported paying US$12 for a can of coke at a café. Another said he paid US$22 for a plate of Irish stew.

What gives? The US dollar. And what analysts say is bugging the buck is the fact that, as Ben Bernanke put it to Congress yesterday, referring to the trouble in subprime lending, “it could get worse before it gets better”.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail Markets and Money.
Bill Bonner

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