Submitted by Steven Gruber, Jul 19, 2007 10:25

Frankly, it remains rather unclear what effect our depreciating currency has on the average American family. Since we are living in a dollar-denominated economy, are paid in dollars, and purchase housing, food, and medical care from dollar-denominated sources (with clothing and non-essentials from low-wage China), most Americans are insulated from the worst effects of currency depreciation. (Those with a thirst for imported luxury goods are another matter.)

Energy would appear to be our only imported necessity and there, of course, we generally feel the full brunt of depreciation. This is in spite of the fact that crude is generally denominated world-wide in dollars, as price changes are often more a reflection of the dollar's worth than a reflection of the cost of production or political risk. (It is more useful to think of the "price" of a barrel of oil as a reflection of the dollars worth, as we do with gold. In other words, commodities can tell us what our currency is worth). This being said, we do, in fact, have substantial domestic energy reserves for which there is no absolute economic necessity to match OPEC prices.

Therefore, in the US, in spite of much talk to the contrary, it is still possible to live remarkably disconnected from the world economy and its currency fluctuations, as we have been doing for the past half-century.

Two other quick observations: After WWII, one pound sterling fetched more than $4.00US, far more than today's "high." Also, Japan's "lost" decade of the '90's, when international investors lost their shirts in Japanese equities, caused little change in the Japanese domestic standard of living. Perhaps the motto of your story ought to be "buy American" and diversify your investments internationally.

Note: Comments are screened, and in some cases edited, before posting. We reserve the right to reject anything we find objectionable.