Last week we uncovered a portion of the IMF (International Monetary Standard). This week, Cora and I discovered how one of the IMF's operations works in real-time. We were able to fantasize about foreign travel as we researched how the American dollar compared to other monetary units through online currency calculators.

Just go to your favorite search engine and type in "exchange rate calculator" and you can choose from several online rate exchange tools. Try a few of them out to see which one you and your children prefer to use. We picked several different calculators just to see if they would give us the same rates. We weren't surprised when we found a small difference among them. The IMF keeps a daily tally of all currencies on their own special page, and comparisons between IMF rates and other exchange calculators took only minutes of our time.

Our first goal was to see how many Australian dollars we could buy with one American dollar. We picked Australia, because I've lived there, and it's a place where Cora would like to visit. We found, on the average, that one American dollar would buy about 1.51 Australian dollars. Or, as I explained to Cora, one of her American dollars would equal $1.51 American dollars in Australia (just a few years ago, one American dollar bought close to 1.75 Australian dollars).

Being the sharp teen she is, she asked whether our dollar - converted to Australian dollars - would buy the same amount of goods in Australia as it would in the states. With a bit more research, we found most goods in Australia are about the same price as they are here. There are some exceptions, such as phone service, computers, and large appliances. Clothes, food, and rent were about the same as they would be in a larges U.S. city. One explanation for this pricing difference would be additional costs of shipping goods to and from Australia (way?down?there?on the map).

We continued our research, and found one U.S. dollar would buy the following (based on the average of three different calculator figures and rounded off): 1.16 Euro, 116.85 Japanese Yen, and .61 British Pounds. We went back three hours later, and found the exchange rates increased during that time. The dollar was still $1.00, but the Euro was now 1.17, the Yen was 117.03, and British Pound was .63. How could this rate change so quickly? What did it mean?

Cora and I hunted for current and historic information on the strength of the U.S. dollar. Using the exercise we practiced two weeks ago with the World Bank and Bush's tax cuts, we typed "2003 U.S. dollar drop" into our favorite search engine. We came up with some interesting current headlines. The news was extracted from local sources situated in various countries around the globe. It seems the strength of the American dollar is interesting to many people, especially to politicians and special-interest groups.

In 2001, the dollar increased in value by almost 30%. This increase, or overvaluation, worried many Americans because it affected the prices of U.S. imports and exports. Our products were priced out of many global markets, which made it difficult to sell to other countries. Imports, on the other hand, were much less expensive than usual. This dollar overvaluation also created a huge disparity in global exchange rates. This information was supported by another story about worries over the current strengthening Australian dollar. It seems Australians now have the same concerns America had two years ago about imports, exports, and disparities in the exchange rates.

Within the past year, the American dollar decreased in value by almost 30%. In spite of distress over a "soft" dollar, this drop seems to bring the price of our goods in line with other markets, and decreases the cost of exports; however, this dollar drop also increases the price of imports into the U.S.

We found one story about a Japanese car manufacturer and his company's decision to build more cars in the U.S. The Yen is strengthening, and a softer U.S. dollar makes it more feasible to manufacture the Japanese automobiles here. This made sense to us, because U.S. manufacturers historically looked for less expensive places to manufacture goods. Some places include Third World countries. Does this move by the Japanese car manufacturer mean the U.S. is becoming a third-world country? Not necessarily. It just means we'll pay more for foreign goods as the dollar weakens, including Japanese cars (unless they're manufactured in the U.S.).

Some people fear the dropping dollar because - for them - it represents a loss of power. Many wonder why Treasury Secretary John Snow isn't concerned. At the end of May, Snow stated he felt the drop in the dollar was "moderate." This statement seems feasible, considering the high rise of the dollar in 2001. However, he also made the comment that Washington would no longer value the U.S. dollar's strength by its market value against other currencies. This remark is a puzzle, because comparisons are built into Keynesian Economics, the World Bank, the IMF, and capitalism.

Comparisons are all we have, it seems. Without comparisons, we wouldn't need currency exchanges. These comparisons also extend to foreign investments. As the dollar weakens here, does that mean foreign investors will take their money and run to other, increasingly stronger, foreign markets? Or does it mean more investors will flock to a weak U.S. market, with expectations of profits as our economy increases in strength?

Much depends on how much further the dollar will drop, we decided. There are too many questions, and just as many opinions rendered in the answers. Next week we'll look into the historic impact of global exports and imports. Perhaps we'll find some answers there?

Until then,
Linda Goin