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'Marketplace' Report: Dipping Dollar Not All Bad

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'Marketplace' Report: Dipping Dollar Not All Bad

Economy

'Marketplace' Report: Dipping Dollar Not All Bad

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MADELEINE BRAND, host:

From NPR News, this is DAY TO DAY.

On Wall Street today, the dollar briefly hit an all-time low against the Euro. And as the U.S. economy weakens, so does the dollar's buying power. Few economists are predicting a turnaround.

MARKETPLACE's Sam Eaton is here now. And Sam, how much should we be concerned here? Tell us, what does a lower dollar mean for us here - the U.S. economy?

SAM EATON: Well, Madeleine, it's really a mixed bag, depending on how you look at it. A lower dollar is great for U.S. exports, since they're suddenly a lot cheaper on the global market. And that means companies like Boeing will probably sell a lot more jets.

And that helps dig away at the record trade deficits, since the U.S. currently imports more goods and services than it exports. But for consumers, the picture isn't as rosy. For one thing, traveling will cost you a lot more today - even in Canada, it turns out. And since we import most of our goods from other places, the price of those goods - those flat screen TVs, that French cheese - is only going up.

BRAND: Oh no, French cheese. Okay. So what's causing the dollar to slide?

EATON: Well, on the surface, it's really the slowing U.S. economy. This is the immediate picture right now. We've got the mortgage crisis and the end of the housing bubble causing Americans to rein in their spending and of course their borrowing.

And since Americans' free-spending ways have been largely financed by foreign capital, the dollar has managed to stay high for a long time, and some are saying artificially high.

I talked to Harvard economist Ken Rogoff, who's also the former chief economist for the International Monetary Fund. And he says the Greenback may be due for a major correction.

Dr. KEN ROGOFF (Harvard University): There's a deeper underlying concern from global investors, which is that the United States has been borrowing massive amounts of money from the rest of the world for the last 10 or 15 years. And someday that is - it's going to stop or it's going to slow down.

CHADWICK: Now, Rogoff says we may be on the leading edge of that slowdown, which means the dollar could easily slide by, he says another 20 to 30 percent before it's all said and done.

BRAND: Hmm. Well, Sam, as we all have heard, the U.S. economy is already looking pretty bad because of the housing crisis. What happens if this major correction does pan out?

Dr. ROGOFF: Well, a slide in the U.S. dollar, even by as much as 30 percent, according to economists, isn't disastrous in and of itself. It all depends, of course, on how fast that fall occurs and how the markets react.

You have to member that despite the strength of the euro and the Chinese yuan, the dollar is still king here. It's the largest market in the world with something like $2 trillion worth traded every day.

And that means it's not just the U.S. that's watching this closely; the rest of the world could be hurt even more by the dollar's fall - a fast fall - since the U.S. imports so many of their products. And that in turn could lead to a global slowdown.

BRAND: Thank you, Sam. That is Sam Eaton of Public Radio's daily business show, MARKETPLACE. It's produced by American Public Media.

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