The Dollar is Falling and the Bottom Could Drop Out of Many Industries

The U.S. dollar has been falling drastically in value when compared to a number of other currencies in world markets. We’ve touched on it before, but now it’s time to discuss this in detail and how it could affect the restaurant industry.

What Happened

We all know about the recent (and many say current) recession, dubbed the “Great Recession.” Even now, unemployment is hovering in the range of 10% and economists say that the true number is much higher since so many people have given up looking for work or are working in part time jobs when they would really like to be working full time.

In order to help the economy, the U.S. Treasury has been printing money like it’sgoing out of style tomorrow! The Fed (Federal Reserve – the National Bank of the United States) has kept interest rates artificially low in order to stimulate demand.

All these efforts however have caused a drastic reduction in the value of the dollar when compared to many world currencies. The Euro, the Yen, the British Pound – they’re all relatively strong against the dollar.

That’s why so many exporters are having a field day selling to customers overseas. Plus, tourism is up from these countries as well sine our country is a relative bargain for vacationers.

The Bad News

So what could be bad about this you ask? Lots. First of all, a number of countries are now working to weaken their own currencies in order to keep their own exports flowing to the United States. China for example has been keeping the yuan at an artificially low value compared to the dollar in order to keep their exports cheap.

However, as more and more countries try to compete and see who can make their currencies weak compared to the dollar, it becomes in the words of one economist, “a race to the bottom.” At that point, global economic malaise begins to take over. This will have a direct effect on our industry as fewer and fewer people are able to afford to eat out.

Inflation

The other side of this is that the Fed’s current monetary policy may lead to increased levels of inflation, since money is cheap and demand begins to outstrip demand. This would further push down the fund people have for eating out.

All in all, it’s a scary cat and mouse game at times is very reminiscent of the Great Depression. (But keep in mind there are many factors which mean we’re nowhere near a real depression!) And we don’t even have prohibition to get people into the speakeasies this time. Give them good food instead!

Tags: dollar, eating out, economy