the dollar goes kaput

[merchimerch]

Wow! When I was living in the U.K. in 2001, the dollar was worth about 1.5 British Pounds, and no one was paying much attention to the Euro because it was so friggen cheap.

Today, a mere 7 years later, the dollar just hit 2 pounds, and is now worth 1.5 Euros.

I wonder, will this inspire us to start making our own stuff again?

Probably not, since we import from even softer money countries. A girl can dream though.

Comments

[aelfscine.livejournal.com]

It will help us with exporting, if we had anything to export. We could pull China's trick and say "Have a brand new motherboard, only $500!" And since $500 is barely enough to buy a Big Mac anywhere else, people would love our motherboards.

But yes, overall this is sucky.

One thing I wonder is, what happens to existing debts if the value of the dollar goes down? If I have $30,000 in student loans and suddenly the dollar's worth half as much, does the value of my debt effectively become less?

[fallen42.livejournal.com]

Your debt is worth less on the world market, but that probably doesn't make much of a difference to you because the strenght of the dollar is not effecting your income or expenditures much due to our relationship with China. The thing that really changes the value of your debt to you is inflation which causes the value of our dollars to fall in our economy. Hopefully, at the same time inflation is occuring, wage growth is occuring at the same rate, in which case the value of your debt (at least the principal) shrinks in a real way since you have more dollars to pay off the same amount of debt. Unfortunately, for debt holders, the interest rate of the debt is nearly always higher than inflaton, so you lose in the long run, unless you have someone else paying that interest for you as is the case with government subsidised student loans.

To be sure, the falling dollar does put upward pressure on inflation as we still do buy quite a bit of stuff from places that are not China (Oil being a very large one). So in a roundabout way the falling dollar does affect student loan debt.