some of my marginally informed thinking
I think when you folks are talking about the dollar falling you are framing it against the US Dollar Lehman Index, or something like it, which is a basket of currencies - the main two being the Euro and the Yen. The dollar has dropped about 5 percent against those currencies in the past year.
As I mentioned a few months ago here, there are ways of protecting your vacation money against a declining a dollar. For instance, if you had bet against the dollar a year ago with a mutual fund like, say, Rydex Weakening Dollar 2x you would have made a little over 5 percent on your money (after paying the load).
Truth is, you would have been better off putting the vacation money an ING or EmigrantDirect savings account where the yield would be about the same and you would not expose yourself to anywhere near the same level of risk.
Thing is, anyway, I'm not planning on visiting those countries with currencies that are regularly used as benchmarks against the dollar (Germany, France, UK, Italy, Japan) it does not matter much to me that the dollar has dropped against them. Why the heck would you go to those places?
What matters to me is how the dollar is doing against the countries on my short list of vacation destinations.
For instance, if I were planning a vacation to Thailand or Brazil, well, the dollar has taken a dive compared to the real and the baht. It's lost around 10 percent of it's value against those currencies in the past year. That might play a factor in planning. Of course there are a number of other costs and benefits to weigh before reaching a final decision.
The dollar has lost about 5 percent against the Colombian peso in the past year. This is in balance with the five percent gain if you've been saving vacation money in a bet against the dollar (not considering inflation). This works out okay, since Colombia is a fine destination.
Of course, the Dominican Republic is better. The US dollar has been basically unchanged against the Dominican Peso over the course of the past year.
More interestingly, the dollar has increased in value against the Argentine peso by about 2 percent over the past year and it's increased by over 4 percent against the Indonesian rupiah.
And there's always Zimbabwe if you want your dollar to go a long way and don't weight other factors and costs at all.
For perspective, in most parts of the US, you pay sales tax of around 6 percent, but that probably does not keep you from buying the things you want. As a voter, you have a lot more control over state sales taxation than you do over national currency valuation. My guess is you will pay a lot more in sales tax over the next year than whatever extra you might pay in Brazil if you go on a vacation there shortly.
Not Just Some Theoretical Argument
[QUOTE=Jelly Donut]You can pick whatever date you want in order to make the data blend with your argument.[/QUOTE]Well, I didn't do that.
I picked the week I bought my plane ticket to the day I arrived. So this was my reality.
No 5% money market account was going to come close to making up the difference that the dollar lost.
Of course, I realize that rate fluctuation is a risk you take when you travel outside the country. But that still doesn't make the crashing dollar any more pleasing.
DB