The struggling dollar
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Tess Vigeland: Chris just talked about how freezing interest rates would help consumers, but a lot of folks seem to be just as worried about the dollar as they are about the mortgage crisis.
The greenback has been losing ground all year against other currencies — even the Canadian looney! But is the dollar’s fall as bad as it sounds?
Catherine Mann, a professor of economics at Brandeis, says the biggest risk is inflation — all that stuff we import gets more and more expensive.
Catherine Mann: The worst case scenario is that foreign producers really have to send through that cost increase and that will show up on the retail shelf. At the same time, we get a back door effect because our exports will be going abroad and so prices of those products will rise here as well. So there would be two reasons for why you’d have higher inflation in the U.S.
But on the other hand, our goods become cheaper so more foreigners snap them up, generating sales for the economy.
Mann says for the average consumer, the dollar’s fall may be kind of embarrassing, but so far it’s not having a direct effect on our wallets.
Mann: The issues in the subprime market, the financial system volatility, those are really the worry. The falling dollar is not one of the biggest worries facing U.S. consumers these days.
Unless, of course, you’re traveling to Europe — or Canada — for the holidays.
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