The Yankee Dollar

There’s been a lot of grumbling from our American cousins on various
web bulletin boards about the falling value of the dollar. Retirees
here have been particularly hard hit; they are required to have
800,000 Baht in their bank account each year three months before they
renew their retirement visa.

Personally, I haven’t been particularly bothered by the dollar’s fall.
Less than 10% of my investments are in the US (I saw the writing on
the wall several years ago), and the values of the pound and euro
aren’t that far from where they were three years ago.

I was, however, taken aback when I booked my hotel room in Bangkok for
this weekend. The cost has gone up from about £35/night three years
ago to closer to £50. It took me a moment to realise that this was
because hotel room prices are based upon a US Dollar figure. I then
decided to dig up some data on the USD/THB exchange rate over the last
couple of years.

USD/THB Exchange Rate
[Click for larger image]

In short, whereas two years ago one dollar would buy you 42 Baht,
now you get less than 30 – a 29% fall in value.

Putting it another way, the American retiree who two
years ago had to transfer $19,000 to stay in Thailand now has to
transfer $27,000 – a staggering increase. I can now see why some
retirees are saying that they don’t have enough money to continue
living here and will have to leave the country, abandoning their wives
and children.

This isn’t all because the Baht is particularly strong, though it has
been supported, as have almost all currencies in the SE Asian area, by
proximity to China. And a large inflow of speculative money has
forced the value of the Baht up (though the government has taken
fairly draconian steps to halt this inflow). The root problem is that
the value of the Dollar has fallen against pretty well any currency
you care to mention.

America is bankrupt, and has been for some time. It owes far more to
other countries than it can possibly hope to repay. Its currency has,
in the past, been propped up by what are effectively loans from other
countries – massive loans. Now, these other countries (most notably
China) are dramatically cutting back their US Dollar reserves. This
in turn drives the value of the dollar down further, making it look
less and less suitable as a reserve currency. And so the spiral
downwards begins. At the same time you have the rise of the Euro as a
credible alternative reserve currency. (Oil and other international
deals are increasingly being done in Euros rather than Dollars.)

I feel rather like Cassandra, but I can’t help but think that we’re
seeing the beginning of the end of the American empire.

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