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20 Reasons Why a Falling Dollar Isn’t Necessarily a Bad Thing

January 2nd, 2008

By Jessica Hupp

The dollar’s strength is often seen as a sign of American prosperity, but a high-valued dollar isn’t always a boon to the economy. In fact, having a currency with a lower value can be good for a variety of different reasons. We’ll detail them here, highlighting sectors that stand to profit from the fallen dollar as well as silver linings that everyone can look forward to.

1. America becomes a more attractive investment: Although a falling dollar may be a warning sign to some, it’s a great deal to others. As investment in dollar-denominated assets becomes cheaper, it turns into a bargain for foreigners.
2. Tourism will increase: While Americans abroad may lament the dollar’s lower value, visitors to the US are likely to splurge more than they were able to in the past. That means they’re picking up iPods, expensive jewelry, and other luxury items that support American industries.
3. What goes down must come up: Opinions vary on this subject, but if the dollar is currently undervalued, investors in the currency will stand to profit in the future when it reaches a higher true valuation.
4. American exports become more competitive: When the dollar’s value falls, so does the price of our exports. Their prices are more attractive, and thus more competitive in the world market. This encourages a booming export sector.
5. Our debt is worth significantly less: It’s crazy, but true. Our $9 trillion plus debt represents less currency value the farther the dollar falls.
6. Outsourcing jobs could come back: As other currencies rise relative to the dollar’s value, outsourcing labor becomes less cost effective. This means that we could see some of the jobs we’ve lost to outsourcing come back to the US, most likely in areas where the cost of living is cheap.
7. Countries may want to outsource to America: As the euro’s value grows against the dollar more and more every day, European businesses may find a great deal on cheap, intelligent American labor. This will bring more money back stateside and improve the unemployment rate as well as foster growth in our economy.
8. It supports savings: As many imported goods become more expensive, American consumers are likely to hold off purchases in the hope that prices will fall. Another good example is the real estate sector. With ultra-high home prices and mortgage rates, potential buyers may be holding their cards until the time is right, saving up a larger down payment in the process.
9. Americans are more likely to support domestic entities: Another upside of more expensive imported goods is more domestic support. As imported goods get more expensive, domestic goods become relatively cheaper.
10. Manufacturing jobs increase: With domestic support of industry comes more domestic jobs. An increased demand for goods will support more employment, easing manufacturing industry and unemployment troubles.
11. It supports a more stable trade deficit level: Again, more expensive imports can be a good thing. As they slow, we’ll reach a smaller trade deficit that will help support the American economy.
12. It encourages smaller consumption: Higher prices mean consumers have less money to spend on products and will be forced to pare down their purchases. This leads to less waste and a more efficient marketplace.
13. Real estate: While real estate isn’t a wise investment for most Americans right now, foreign buyers may find a bargain in the US. Who knows, they just might bail you out of a nasty mortgage.
14. The cost of labor drops for business owners: For businesses in labor-driven industries, the cost of operating drops with the dollar. This is good for American industry and productivity.
15. It encourages American innovation: As the price of oil skyrockets, Americans become more and more desperate for alternative energy. This sparks problem-solving innovation that creates jobs and attracts investment.
16. Welfare costs go down: As unemployed workers and low wage earners find it easier to get jobs, they’ll be able to get off of welfare programs and relieve the burden on our budget.
17. More tax revenue for the government: With a more productive workforce, the government can collect more tax revenue, another way the dollar’s decline helps the federal budget.
18. A steadily falling dollar is a good forex bet: If you’re willing to bet against the dollar, you may stand to make a tidy profit. Invest in a steadily rising currency against the dollar, and you could earn money as the dollar’s value drops.
19. Safer products: This summer’s Chinese lead paint problem may become a thing of the past. As purchases go increasingly domestic, the threat of trouble from foreign lax regulations goes down.
20. It’s easier to become a millionaire: At the very least, a lower dollar value means it will be just a little bit easier to become a millionaire.

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