The incredible shrinking dollar - It's hit a new low against the euro, and importers and travelers are feeling the effects. U.S. binge borrowing is blamed.
On his way to Italy this week, John Blount was dreading the message he'd have to give the artisans who make the pasta and tomato sauce his San Francisco company imports to the U.S.
With the dollar hitting yet another record low against the euro in recent days, Blount faces the prospect of paying more than ever for the linguine, bucatini and other goods he buys in Italy.
He could raise prices for his American customers, but at the risk of losing their business. So the entrepreneur will once again lean on his small-town Italian suppliers to give him a break.
"I'm constantly telling the producers, 'It's getting harder to sell -- you have to lower your prices,' " Blount said.
Once the "almighty dollar," the U.S. currency is flirting with a new nickname: the American peso.
Since 2001 the dollar has lost more than half its value against the euro. But the decline against its major rivals is just the most visible sign of the buck's loss of purchasing power.
In much of the world -- from Brazil to Poland to Thailand -- one dollar buys less than it did a year ago, and far less than it did four years ago. On Friday, the U.S. currency hit a 30-year low against its Canadian peer.
The trend of a falling dollar isn't news to Wall Street or to the ranks of economists. But it was a shock to Katie Ochoa, 20, when she visited a friend in the Provence region of France in May.
Traveling on a budget, Ochoa said she wasn't prepared to find that a piece of pizza and a Coke would cost the equivalent of $8.
"We're supposed to be such a world power," said Ochoa, a student at the University of Redlands. "But our dollar isn't worth anything."
There's rarely a single explanation for why currencies rise and fall, but many experts believe that the sliding dollar is largely a function of the nation's borrowing binge of the last two decades. That has left the U.S. with a yawning trade deficit, and deep in debt to foreigners.
In theory, a currency is supposed to reflect the underlying health of the economy that stands behind it.
"The basic thing is, we have been living beyond our means," said Ted Truman, a senior fellow at the Peterson Institute for International Economics in Washington.
A dwindling dollar is, in effect, the marketplace's attempt to slow those trends, Truman said -- an effort to get Americans to buy less Italian rigatoni, for example, and more of the domestically produced stuff.
