Dollar woes show high cost of low prices

by J Scott Christianson, Columbia Daily Tribune Columnist

If you don’t know who Gisele Bündchen is, you probably suffer from the same malady I do: being hopelessly fashion-challenged and fashion-world ignorant.

It turns out Bündchen is the world’s richest supermodel, earning more than $30 million in the first six months of this year for her modeling services. But she recently made the economic news when she reportedly refused to be paid by Procter & Gamble Co. in U.S. dollars because Bündchen has lost confidence in the value of our currency.

You know your currency is in trouble when even supermodels are refusing to accept it.

A reduction in the value of the dollar has been on the horizon for some time, as year after year we have racked up ever larger trade deficits. Last year the U.S. trade deficit hit $764 billion, about 6 percent of the gross domestic product. This deficit has resulted in foreign interests purchasing U.S. debt at the rate of nearly $2 billion a day.

The last time the dollar hit such lows money could not be exchanged quite as easily as it can now. In a world where money can move across the world electronically in a matter of seconds, billions of dollars can be changed into euros or yen with the press of a button. The ability to quickly change currency could trigger a run away from the dollar and a run-up of inflation here in the United States. Controlled by computers with pre-programmed “stop-loss” orders to protect investors’ profits, it could all be over before we even knew what happened.

Frankly, I think some countries would like to see us suffer if the dollar loses its standing as the world’s de facto currency. Despite President George W. Bush’s campaign pledge to act with “great humility” when dealing with other nations, most of the world sees us as an arrogant, bullying nation with little concern about the effect of our policies on others. Karen Hughes, one of Bush’s longtime advisers, recently quit her job as undersecretary for public diplomacy and public affairs after a frustrating attempt to use her skills to promote a positive image of the United States in other countries. Apparently no amount of PR could compensate for the administration’s policies. Countries that have felt unable to stand up to our foreign policies might experience a good deal of schadenfreude as we fall on hard times.