Posted on 03/13/2008 1:19:47 PM PDT by NormsRevenge
SAO PAULO, Brazil - Antique store owners in lower Manhattan, ticket vendors at India's Taj Mahal and Brazilian business executives heading to China all have one thing in common these days: They don't want U.S. dollars.
Hit by a free fall with no end in sight, the once mighty U.S. dollar is no longer just crashing on currency markets and making life more expensive for American tourists and business people abroad; its clout is evaporating worldwide as foreign businesses and individuals turn to other currencies.
Experts say the bleak U.S. economic forecast means it will take years for the greenback to recover its value and prestige.
Negative dollar sentiment is growing in nations where the dollar was historically accepted as equal or better than local currency — and dollar aversion is even extending to some quarters in the United States.
At the Taj Mahal, dollars were always legal tender, alongside rupees, for entry into the palace. But because of the falling value of the dollar, the government implemented a rupees-only policy a month ago. Indian merchants catering to tourists have also turned bearish on the dollar.
"Gone are the days when we used to run after dollars, holding onto them for rainy days," said Vijay Narain, a tour operator in the city of Agra where the Taj Mahal is located. "Now we prefer the euro. It gives us more riches."
In Bolivia, billboards feature George Washington's image on a $1 bill alongside a bright pink 500 euro note, encouraging savers to turn to the euro to tuck away money earned abroad or sent home in remittances.
"If the dollar's going down ... save it in Euros!!!" say the signs popping up around La Paz for Bolivia's Banco Bisa.
And in neighboring Brazil, the Confidence Cambio money-changing service was the first to start offering yuan so travelers to China no longer have to change the money into dollars first. The service is already a hit because Brazil does big business with China, and lots of Brazilians are heading to the Olympics this summer.
"Now we tell people not to take dollars when they go abroad, it's better to change it directly to the local currency," said Fabio Agostinho, one of the firm's managing partners. "If people leave here with dollars and go abroad, they lose when they exchange them. It's the same thing whether they're heading to China, Europe or even Argentina."
In Manhattan's Bowery district, Billy LeRoy, the owner of Billy's Antiques & Props, prefers payment in euros so he can stockpile the currency for his annual antique buying trip to Paris.
"Whip out dollars at the French flea market now, and they'll shoo you away," he said at his store near apartment buildings where Europeans are snapping up units because they've become dirt cheap. "Before it was like the second coming of Christ, but now they don't want it or if they do take dollars, they're going to take their pound of flesh."
The dollar has steadily eroded in value against the euro and other currencies since 2002 as U.S. budget and trade deficits ballooned, but fears of an American recession and credit crisis have sent the dollar to stunning lows amid predictions the slump will continue for a long time.
The euro traded for a record $1.5625 before declining to $1.5586 Thursday while the dollar dropped below 100 Japanese yen for the first time since November 1995. It traded as low as 99.75 yen before recovering some ground to 101.68 yen. The dollar also recently hit a 10-year low against the Chilean peso, and fell to its lowest level against Brazil's real since the nation floated its currency in 1999.
While low dollar cycles have come and gone for decades, experts caution that it's now much more difficult to predict when this one will end because the euro didn't exist as competition for the dollar before.
During previous U.S. economic downturns, big foreign funds typically snapped up U.S. treasuries, helping to shore up the dollar to a certain degree. But the euro and currencies from other nations are now seen as legitimate options, and interest rates are higher outside the United States — meaning the funds can get better returns on investments elsewhere.
"You have the U.S. still holding this trade deficit, but now you have the possibility of a U.S. led recession, and you have a weakening currency. So it's a very dark outlook for the dollar," said Gareth Sylvester, senior currency strategist with the British firm HIFX Inc., which executed $40 billion in currency trades last year.
Nations that were once seen as incredibly risky for investments — such as Brazil — are now seen as good long-term bets. And countries such as China and Russia, with burgeoning coffers of money to invest abroad, are thought to be shifting some of their reserves or diversifying fresh income to destinations and currencies outside the United States.
It used to be important for most countries "to accumulate dollars as a precautionary element against rainy days, but the accumulation of reserves has become so large in most emerging market countries that the balance is way beyond what's needed for precautionary reasons," said Eliot Kalter, a fellow at Tufts University's Fletcher School of Law and Diplomacy and a former International Monetary Fund official.
While most experts believe the dollar will eventually regain strength, no one is willing to predict when that will happen.
"I think the factors that are affecting the weakness of the dollar will be reversed, but no time soon," Kalter said.
The problem right now, is that "people just don't want to be holding U.S dollars and U.S.-based equities," Sylvester added. "If you are an investor with a million dollars to invest, you look for the highest yield — you're looking at South Africa, Australia, New Zealand."
And it's not only the big time investors that are looking for other options.
In Peru, where savings in U.S. dollars were long a popular hedge against inflation, many citizens are closing dollar accounts in favor of Peruvian soles.
At the same time, businesses like supermarkets, movie theaters and cable TV companies that used to accept dollars are now demanding soles.
Edwin Figueroa, a 29-year-old systems engineer, switched his checking account from dollars to soles seven months ago as the dollar's decline started worrying him. He doesn't think he'll be going back anytime soon.
The Peruvian sol "is stable now," he said. "And maybe in a year, the dollar will even go lower."
a ‘cheery’ little piece..
where’s muh damn rebate check 8-?
Send me all your worthless dollars - I collect them, as a hobby.
Tell me again how a weak dollar makes American stronger?
Do you want us to have a strong manufactoring base or a strong dollar? You can’t have both so pick, do you want us to import like crazy or import less and export much more.
It works right up to the point where it stops. I guessi it came to a hard stop.
Actually, its the weak manufacturing base that is causing this loss. The huge trade deficit is at work here. Tell me again, why free trade is a good policy?
I was just listening to the idiot on CNN tell me that Cuba doesn’t want our dollars either.
According to CNN - the world is collapsing, we’re all going to be in sackcloth and eating dust.
Oh, and Obama is the savior of all mankind.
This is not a good sign - for as long as I have lived here - the US dollar was king.
I see the dollar getting even weaker than it is now.
I’ll take a strong dollar and industry devoid of anti-competitive socialist unions, thankyouverymuch.
I’ve been pessimistic about the U.S. dollar for the last couple years, but the contrarian in me thinks that articles like this one signal that the dollar has just about bottomed. When the “man on the street” in some garden-variety, third-world country is convinced that the Euro is a much safer currency than the U.S. dollar, it’s a fairly safe bet that the Euro is headed for a crash.
It is often the case that by the time the media gets around to writing about a trend that trend is due to turn. Is that the case here?
Your suggestion that the two are mutually exclusive suggests a lack of understanding of many things and they way things are currently going, we could end up with very little of either.
>Do you want us to have a strong manufactoring base or a strong dollar?<
Are you trying to say that we have never had both?
Yup me too. Send me your “worthless” US dollars.
I said the same thing about the canadian dollar many years ago, and look where it is right now. Just like life, the economy is cyclical, the dollar HAS to bottom out before it starts to rise again.
“Do you want us to have a strong manufactoring base or a strong dollar? You can’t have both so pick, do you want us to import like crazy or import less and export much more.”
I’m as old as dirt and remember quite clearly in the 1950’s we had a strong dollar and strong manufacturing.
We have shipped our patrimony into the global ether and dismantled our financial superiority.
IOW, it ain’t comin’ back as long as Americans are paid what they are paid, and I don’t mean union wages, but wages across the board from sales clerk to professional, and as long as the corporations pander to the enormous numbers of new consumers in Asia and Africa and care less about some paltry 300 million in the USA.
You know those new medical junkets? Surgery in India is tens of thousands of dollars cheaper than here and those docs have been trained in the US. Our docs are going to live less large in the future. As will all of us.
I hope you all have taken steps to protect yourselves and your families.
You know that is basically true. The really smart money gets in on a trend at the beginning and the middle. Towards the end, they use the media to convince the little guys to buy or sell, so they can offload to them and take their profits.
Be of good cheer-New hires received $14.00 per hour and no benefits. The day is here; all those anti-competitive socialist unions are pretty much dead. Of course the people who can no longer get health care from the companies they work for will vote in droves for the Democrats who are dangling health care programs. Oh and Social Security will be increased since no one gets pensions anymore. Wow, happy days are here again.
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