The falling dollar has, justifiably, gotten a lot of press lately. It should get more. America spends like a drunken sailor on shore leave, far more than we take in. Thus we borrow almost unimaginable amounts of money from foreign governments to finance our spending spree. Recent articles by Ed Ponsi on the weak dollar have been enjoyable for their cogency, if depressing.

But it isn’t Ed who is depressing me; it’s the dollar. As he noted, the greenback has hit a new 15-year low. The Canadian dollar is at a three-decade high against the dollar. The Euro is close to a multi-year high. The big brokerages are calling for further Asian currency strength against the dollar.

Ed’s email today noted that Williiam Poole, president of the St. Louis Federal Reserve branch, had recently described the dollar’s fall as “inexplicable.” Ponsi then noted that 1) we are borrowing about $3 billion a DAY, and 2) Mr. Poole’s Fed keeps pumping more currency into our financial bloodstream, which also devalues it. Of course, a devaluing currency makes borrowing harder and drives up the interest we pay to big lenders, because lenders are being repaid in dollars with increasingly less value.

As Ed noted, the Fed refuses to tell us how much money it is printing because - get this - it is too expensive to compile the data. [The Fed has ignored Ed’s sage advice to simply print a few more dollars to pay the compilation costs.] The administration simply doesn’t want us to know the numbers. The administration pays lip service to wanting a strong dollar, but prefers to let market forces establish the dollar’s value - which the market is doing. Both George W. Bush and Hank Paulson have said so, recently. In other words, Mssrs. Bush and Paulson prefer to let the dollar float on down, because that is what market forces and doing and the only possible result to administration inaction.

The ONLY good thing about the falling dollar is that it makes our products and services more affordable. But since we are not primarily a manufacturing nation anymore, that increasingly is less of an “advantage.” On the other hand, if you order from abroad or travel abroad (which we are doing in fewer numbers) and spend, it simply costs more all the time.

Of course, the poor and elderly on fixed incomes are hurt the worst, because their fixed dollars buy less all the time. I’m seeing Canadians and other investors increasingly loathe to buy and write covered calls on US stocks for fears that the falling dollar will erode any gains made in the account - a reasonable fear. In fact, your bank account, your securities account, your house and every investment you own is becoming worth less by the week. How does that feel?

One not-so-bright spot: the combination of falling dollar and falling housing prices make our real estate pretty darned attractive to foreign buyers. With markets like Orlando taking it up the tailpipe, foreigners can get a vacation place close to Mickey Mouse at reasonable prices - getting more reasonable by the day.

Every time another media dust-up arises about abortion, gay marriage and similar hot-button topics, I want to scream: What about the dollar!?!?!

Well, Washington is not listening to pundits. But it would listen to all of us, woudn’t it? Consider writing or emailing your Senator and Congressman that you want something done about the weakening dollar, and you want it now. If you don’t believe that such actions could make a difference, look what our combined inaction is accomplishing.

This entry was posted on Tuesday, October 16th, 2007 at 1:33 pm and is filed under Markets/Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.