Minor Thoughts from me to you

Lately, the dollar has been sinking lower and lower. Indeed, Nixon was President the last time the dollar was this low. A lot of people are really upset about that. I'm having trouble understanding why. Take this commenter for instance:

The dollar, as predicted is being crushed. We are now at Par with the Canadian Dollar, the Loonie as it is called. This was all so predictable. You cannot run an 800 billion dollar trade deficit and have your currency in demand. We have a lot farther to fall. Within 5 years from 2008 we should see the Canadian Dollar worth 25 % more than the U.S. dollar. The Euro at 1.40 now, should move to near 2.50, as China buys more and more of the Euro. The pound at 2.04 as I write this will be near 3.00. Be ready for CHINA. When they finally let their currency float it will appreciate 70% over a 36 month period. The US trade deficit will be cut in half and then some by 2020.

He starts out by blaming everything on our trade deficit (which is pretty much an illusion to begin with). He finishes by saying that the disastrous result of a falling dollar will be ... a smaller trade deficit. Isn't that exactly what a lot of people (not me!) have been saying that we need? Where's the problem?

A high dollar is worth more compared to foreign currencies. Consequently, imports are cheap and the country imports a lot of stuff. On the downside, our exports are more expensive and we sell less stuff overseas. A low dollar is worth less compared to foreign currencies. Consequently, imports are expensive, but our exports are cheap. We export a little and import a little.

Right now, it appears that our exports may be picking up. People living on our northern border are used to seeing Americans going to Canada to buy things cheaply. Now, the trend is reversing. Canadians are crossing the border to buy cheaper goods.

On either side of the border, a buck is now a buck, or as Canadians call it on their side, a loonie. Coupled with high prices and high taxes for many things in Canada, the strength of the Canadian dollar is driving Canadians into the United States to shop for shoes, school supplies, gasoline, used cars and second homes.

In Vermont, Buzz Roy, owner of Brown's Drugstore in Derby Line, said of his Canadian customers: "They don't buy anything in particular, but everything in general. We've seen a gradual increase over the summer, and we've seen a bigger increase this week."

Mr. Roy said more customers would make trips if it were easier to cross the border, "but they're still coming in droves."

In North Dakota, Crystal Schlecht, who works for the City of Cavalier, said the arts and crafts show in town last weekend had a surprisingly international feel in spite of the slow-go at the border crossing.

"I'd say 60 percent of the people the whole weekend were from Canada," she said. "And we've never really had that before."

Why does it matter that people choose to buy things in Euros or Loonies instead of dollars? Why does it matter that import may slow down and exports may pick up? How does that foretell that nation's doom?