In what seems like a cruel trick typically reserved for
parlour games, Todd Ariss has witnessed his revenues shrink
before his disbelieving eyes. The now-you-see-it-now-you-don’t
switch is a result of the evaporating worth of the U.S. dollar.
Although he’s a Canadian business owner, Ariss said
he collects the majority of his income in American currency
because 90 percent of his clients are located in the United
States. As a result, his innovative Vancouver-based web development
company, Pica Interactive, has seen a depletion in its bottom
line since its inception 18 months ago.
“Since we bill in U.S. dollars we have taken about
an 8-percent hit in revenue,” Ariss said. “One
client whom we have a long-term contract with we originally
agreed on a hourly U.S. dollar rate but that was when our
dollar was quite a bit lower and now in order to keep the
client we are taking the hit instead of them. With the higher
Canadian dollar we no longer have the same competitive advantage
in the U.S. market as we used to.”
In the past five years, the U.S. dollar has plunged against
the world’s other major currencies, a group that includes
the Canadian dollar, which is nearing par with the greenback
after being mired at the 60-cent level for years. The drastic
change has led to a volatile economic climate for businesses
and consumers. Like Pica Interactive, many companies that
export their products or services to the U.S. have been stung
by the decline.
The reasons for the fall vary, from the skyrocketing trade
deficit -- estimated at $609 billion -- to low interest rates
to the basic law of supply and demand. Twelve years ago,
$380 billion was in circulation, according to the Federal
Reserve, and in 2006 that total surpassed $800 billion. With
each new U.S. dollar printed, the value of the currency shrinks,
leaving businessmen like Ariss seeking unique ways to adjust.
“We now arrange our contracts with U.S. clients so
that, although they are free to pay us in U.S. dollars, we
have them agree to be billed in Canadian dollars. This means
we’re no
longer absorbing the risk as the currency moves against us,” he
said.
For Americans, the declining dollar hasn’t been a
major issue until recently, with the global credit crunch
causing a correction in the stock market and continued uncertainty
surrounding the worth of the currency. In 2003, a devalued
U.S. dollar was seen as a beneficial tool by some policy
makers. U.S. treasury secretary John Snow, although thought
to be a staunch advocate of a strong-dollar policy, told
ABC News: "When the dollar is at a lower level, it helps
exports, and I think exports are getting stronger as a result.”
With international consumers better able to afford American-made
products, U.S. manufacturers saw an increase in their share
of foreign markets. Likewise, consumers outside the U.S.
have reaped benefits. Many products are less expensive and
visiting American desitinations is a bargain compared to
years past. But the benefits haven’t made up for the
deficiencies for businesses. The trade deficit has broadened
and investors are fleeing from the dollar. In 2004, Bill
Gates and Warren Buffett both declared themselves bearish
on the currency, as clear an indication as any that the heyday
of the American buck may be in jeopardy, and there are observers
who believe the fallout will be dire.
Last week, an editorial in the New York Times stated: “In
the absence of policies to boost domestic savings -- and
thereby slow the build up of debt -- a steady decline of
the dollar implies a steady decline in American living standards.
A sharply accelerating decline would imply severe economic
distress.”
Congressman Ron Paul, who is running for president, was
more ominous when he warned that the dollar’s retreat
will have consequences for the public. In Texas Straight
Talk last year, the Republican said, “Our relative
wealth as a nation is measured in dollars, and the steady
erosion of the value of those dollars means we will all be
poorer in the future.”
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