I have enough trouble trying to understand my day-to-day personal finances, so I don't give much thought to global economics. But, there's one thing that is crystal clear. It now costs me about one-third more to live here in Nice, France, than it did two years ago when I first visited. I didn't become a long-term resident until early this year, a period in which there has been a 15% loss in the value of the dollar.
What brings this to mind is the news today that the dollar reached an all-time low in the exchange rates against the euro. I heard news this morning that the euro had a sharp increase following the reports that President Bush had imposed trade sanctions against China.
Huh? What's that about? This is certainly above my pay-grade, or what would be my pay-grade if I had a job and was not drawing flat-lined Social Security checks. What I do know is that it costs me much more to have my morning croissant, pay my rent, go to a movie, take the bus, buy gas for my scooter, and a hundred other ordinary things that ordinary people do every day.
I'm blaming Wal-Mart for my money problems. Of course, there are no Wal-Marts in France and my only connection with Wal-Mart is that I bought some underwear at one of their jillion or so mega-stores on my last trip to California. But, this doesn't mitigate my blaming Wal-Mart. I've already said that I don't understand global economics. After a half-hour of research and reading on the Web, I've concluded that Wal-Mart is the problem.
I read articles today by AP, Reuters, Financial Times, Bloomberg, CNN, New York Times, and others, and here is what I found and why I blame Wal-Mart.
The dollar is trading at an all-time low against the euro over growing fears of U.S. protectionism and a waning appetite for U.S. assets among foreign investors. The euro rose to a new peak of $1.1978 Wednesday in London, extending its gains over 2% in New York the previous day. Some traders say the euro is set to break the US$1.20 level.
The dollar has dropped almost 25% against the euro, from January 2002 through mid-October 2003, and yesterday broke to its lowest level ever. There are several reasons for the weakness. First, for years the US has been buying a lot more goods and services from other countries than the US has been selling outside its borders, which depresses the value of the dollar against other curriences.
Low US interest rates also undercut the buck since, all other things being equal, investors tend to favor the currencies of countries with higher rates. Some news accounts said the growing budget deficit is raising doubts about the long-term strength of the dollar.
The Bush administrations' decision Tuesday to impose quotas on Chinese textile goods may end up hurting the U.S. economy, and U.S. workers, more than it helps. And, we now get to why I'm blaming Wal-Mart for my having to pay one-third more for my daily croissant.
Wal-Mart alone accounts for 10% of the trade deficit with China. That's a big chunk of change for just one company.
Unwittingly, I contributed to this trade deficit problem when I bought my underwear at Wal-Mart.