The hidden tax for Americans

Dollar decline

Alan Greenspan, head of the Federal Reserve Bank made ominous comments about the dollar in Germany Friday, at a meeting of international bankers. He said that the dollar would likely decline further. This followed a statement by Treasury Secretary John Snow suggesting that the U.S. would not support the dollar if it falls further.As the U.S. Dollar shows even more weakness, there is one aspect of it that many Americans do not understand.


Why? When the U.S. Dollar declines, it means that every item that Americans import increases in cost. Since over 90% of consumer items in America and 65% of autos and heavy equipment in America are imported, then every American is paying more for nearly every item that we purchase. The U.S. dollar has declined by over 35% in the past 30 months. It is like a hidden tax. It means that every American is paying 35% more for clothing, supplies, food, toys, shoes, equipment, cars...anything that is imported.

When the politicians brag about "lowering taxes" by 5% or 8%, don't let the surface layer of the logic mislead you. Poor economic leadership, and deficit spending cause a currency to decline. And a declining currency can be the most punishing "hidden tax" Americans face. How does it impact real estate. It makes real estate more attractive to foreign investors. It allows foreign buyers, to buy American real estate at an equivilent of 30 to 35% less because of the relative value of the currencies. Another impact: When Americans travel abroad, they will notice that everything costs 35% more! Americans will also notice that the US Dollar isn't respected as it once was. The Dollar is being supplanted by the Euro and other currencies that seem to be more stable.

What to do? At some point, Americans are going to figure out that $400,000,000,000.00 is putting an impossible financial and debt burden on our nation. The USA has generated the deepest deficits in the past 4 years, than at any time in U.S. history. This inevitably will increase interest rates. The increase in interest rates will further depress real estate values.

Michael Brandenberger, Director of M.B. Mortgage Capital, in Dallas wrote recently: "There is some talk that foreign investment in U.S. Treasuries could start to diminish as the high deficit continues to erode the value of the dollar against other currencies. Which could result in higher Treasury Bill yields." Check his site out, which tracks interest rates for most property types, at Americans musts demand that U.S. politicians use sound economic management, balance the US budget, and stop deficit spending. This implies that the enormous spending on defense and international military operations will end.