The turn of the year saw a rapid decline in the value of the American dollar as international confidence in the United States and its currency declined. What is the meaning of this for Americans, and what does it portend for the future?
by Melvin Rhodes
Americans have long thought that they are the wealthiest nation on earth. Individually, Americans believe they are better off than they would be anywhere else.
But is this the case?
I have five brothers living in England. Four of them annually visit other countries, something that few Americans can afford to do. Three of them have visited the United States.
Additionally, they have all had HDTVs for some time, a quality of picture still lacking in my home. They and their families all eat out as much as people do on this side of the Atlantic. They also all seem to have the latest vehicles, albeit usually smaller than those in the United States, perhaps reflecting the fact that parking spaces are few and far between!
It's not difficult to see why they are doing so well. Just take a look at the currency markets: The dollar has fallen over 15 percent in a few weeks. It now takes two U.S. dollars to buy one British pound. In fact, with commission and charges, it will cost you more than that to convert greenbacks into British notes in any bank.
So now, in dollar terms, my brothers are getting almost twice as much value for their pounds as they did 20 years ago when the pound and the dollar were almost at par.
Inflation in real estate
Another reason they are doing well is real estate inflation. With a much higher population density than the United States, and with limited space, house prices in the United Kingdom have shot up, so that now any British homeowner is among the richest people in the Western world.
We visited a couple of friends in London a couple of years ago. Their home was then worth 540,000 British pounds, at the time almost $1 million. Yet it was a small dwelling with very cramped rooms and no garage. Also, the home was a terraced house, meaning it was in a street full of homes with no gaps (or garages) between them. Parking was a constant nightmare as everybody had to park on the street. Sometimes they had to park on another street! (No wonder people have smaller cars!) If this couple sold their home in London, they could move to the U.S. Midwest, buy a bigger home for $150,000 and deposit the balance in the bank, living off the interest for the rest of their lives!
