Boom2Bust.com

When The World Was Our Mall

A few years ago I was fortunate enough to travel to Europe and benefit from a strong U.S. dollar. Since then the greenback has declined significantly, and I had serious doubts whether I would go overseas again anytime soon. I’ve heard plenty of stories of fellow Americans who were reduced to window shopping on their European travels as a result of an unfavorable exchange rate caused by a weakening dollar. By the beginning of August, the euro had reached an all-time high against the dollar and the British pound reached a 26-year peak. Meanwhile, the greenback sank to a 22-year low against the New Zealand dollar, an 18-year low against the Aussie dollar, and a 30-year low against the Canadian dollar. Kenneth Rogoff, professor of public policy and economics at Harvard, told the Chicago Tribune yesterday that, “Over the next few years the dollar will continue to go down. The question has just been how fast and how soon? The bill is coming due for a decade of massive U.S. over-borrowing. Economists are predicting that a 20 percent further drop is likely in the next three to five years, and a 40 percent drop is possible.”

The Tribune explained their version of why the U.S. dollar is declining:

Why are we playing a dirge for the dollar? Blame an American economy that’s faltering while others prosper, the sub-prime mortgage crisis and the $800 billion we put on the nation’s credit card every year. Interest rates are steady here but poised to move higher in Australia, New Zealand and Britain, so foreign investors are chasing higher returns by investing there, not here… Less demand for the dollar means a lower exchange rate. For Americans that means higher prices of crepes in France, paella in Spain and burgers in Canada.

“Within an economy, exchange rate is one of the most difficult factors to explore and to forecast,” said John Kester, chief of market intelligence in Madrid for the World Tourism Organization, a special branch of the United Nations. Kester told the Tribune that, “The dollar to the euro is weaker than ever and, in the long-term, the weakness will go on because it reflects imbalance in the U.S. economy.”

Thankfully, there is a silver lining to all of this. The Chicago Tribune identified several foreign destinations where U.S. travelers can still find good bargains, despite the greenback’s problems. These include:
• Central and South America
• Most of Asia, especially countries with low labor costs such as Malaysia, Thailand and Vietnam
• Turkey and Egypt, which have the infrastructure developed to support tourism but lower wage levels and costs of living
• And if you must visit the Old World, countries not yet tied to the euro in Central and Eastern Europe, such as the Czech Republic, are a good bet

I couldn’t agree more with the author of the piece, Diana Dawson, who reminisced, “Blasted dollar. It got us so far for so long. The world was our mall and travel was cheap… But it couldn’t last forever.”