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July 02, 2007

The cost of a lower dollar

The cost of European wines and cheeses -- and vacations -- has jumped considerably in the past year. The lower-valued U.S. dollar is to blame, explains N.C. State University economist Mike Walden.

"When the dollar goes down in value against foreign currency, it makes anything that's a product of the foreign country -- from wine to cheese to ... going on a foreign vacation -- it can make all those more expensive," says Dr. Walden a professor of agricultural and resource economics.

"And we have already seen it in the data where imports from foreign countries as well as going on vacation in Europe or other places has gotten much more expensive because of the lower-valued dollar," he adds.

"Now there's a silver lining here, and the silver lining is if you are a U.S. company and you are manufacturing products you sell in foreign countries, because the dollar's value is lower that actually makes your product cheaper in those foreign countries," Walden says.

"And so we would expect to see our exports go up. And in fact the lower-valued dollar is a direct result of the big trade deficit that we've had in the last few years. And the lower-valued dollar is going to make that trade deficit get somewhat smaller."

Posted by deeshore at July 2, 2007 08:00 AM