The LA Times chronicles the impact of a falling dollar ’round the world. It’s a good story and you can read into the effects that a continued weak dollar will have on the US economy fairly easy. When our manufacturers in China and India see no profit based on the exchange rate, something will change. Either the dollar will stop being the currency of contracts, something the entertainment industry has already figured out, or that price of manufactured goods will raise erratically. Uncertainty of course is something the industrial world doesn’t like. There’s been many articles writing about the threat of the petro dollar soon becoming the petro euro. Should this happen, all those treasury notes held by foreign companies instantly devalue. If you think credit is tight now ….
The low dollar keeps Japanese seafood buyers happy. It encourages New England fishermen to sell stocks of coveted Atlantic bluefin tuna in Japan, where they can be paid in more valuable yen. This is spurring Kazuaki Shimura, a deputy general manager for Daito Gyorui, one of Tsukiji’s powerful trading houses, to take advantage of the U.S. currency to offset high oil prices and shrinking fish stocks. His company will send buyers to Boston this year to guarantee the inventory.
“If the Americans get a good catch, we’ll go in August,” he says, leaning back in his chair as company accountants tally the day’s take. “We have to seize the opportunity while the dollar is still down.”
Sushi is one thing, but the made in China goods are a bigger impact.
Yiwu, China
in a region of china that manufactures Christmas for much of the world, Du Xiufeng is not a jolly man. He once made $62,000 selling 120,000 snowman stockings to Wal-Mart. Much has changed in the two years since, and Du, who speaks through clenched teeth and has become as thin as his wallet, can’t even turn a penny profit on such orders anymore.
The dollar has fallen so fast against the yuan in recent months that Du winces at the currency rate updates arriving on his cellphone. Last October, he won an order to make 150,000 travel blankets for Target. Du calculated that after production costs he’d a earn nickel profit on each. But the adjusted exchange rate wiped out the entire $7,500 he was hoping to pocket.
“Di, di, di” - down, down, down, he says in his warehouse in Yiwu, a city in eastern China’s Zhejiang province. “Every falling cent is like cutting flesh from me.”
But read the whole article, it’s worth it.
source: LA Times, Day of the dollar: A global connection, By Jeffrey Fleishman, June 21, 2008
