When a Dollar's NOT a Dollar

To be frank, I resent the fact that a dollar is still just a dollar in the US, while here in Europe a dollar is only about 0.68€ cents and going down... fast!

At the end of June this year were were able to close our fiscal year with $1 equalling 0.76€ cents. How far the dollar has fallen since then! In fact, the biggest drop has happened in just the last two months. The all-time low was hit just last Saturday (rates according to Oanda.com):

Saturday, November 10, 2007
1 US Dollar = 0.68065 Euro
1 Euro (EUR) = 1.46918 US Dollar (USD)

Now when you're talking in one and two dollars, a few cents may not seem like a big deal. Well, let me put it into more noticable terms:

$100, still worth $100 of buying power in the US... but worth only €68.07 here

$500, worth $500 of buying power in the US... but worth only €340.33 here

$1000, worth $1000 of buying power in the US... but worth only €680.65

Let me flip this a little bit so that you can see what it means in terms of budgeting (especially if your books are in USD but your live and work in Europe):

Say in June you set your budget based on a higher than market rate ($1=€0.7353)... but as the year goes on and the dollar drops, this is what happens...

€500 rent budgeted for in June at $661.20 is now hitting your budget at the market rate value of $734.59. An increased hit on your budget of $73.39.

€25 phone bill budgeted for $33.06 is now hitting your budget at the market rate value of $36.73. An increased hit on your budget of $3.67.

€50 utilities bills budgeted for at €66.12 is now hitting your budget at the market rate value of $73.46. An increased hit on your budget of $7.34.

The €45 to fill up your gas tank (Unleaded) is now hitting at $66.11 when it would have only been $59 a couple months ago. An increased expense of $7.11.

Now these are just a few minor examples of every-day budget items. Looking at it, any one line item in itself may not seem like a big deal; however, when you add them up and over a period of time, the results are significant. In some cases it can mean thousands of dollars in less buying power for your budget.

Then there is your US bank account that you use to have money transferred here or withdraw money from an ATM. Each month that USD is decreasing in it's Euro value.

Say you have $1000 in your bank account. Well, back in June that was worth €756. That same $1000 today is only worth €680.

Or what if you're a business/NGO or other organization who has a US bank account, but keeps it's books in Euro? Well, that can result in huge losses on your trial balance as a result of revaluation each month as the dollar declines. For instance:

Say you have $100,000 in your US bank account....

In June it would have been valued at €75,620 on your trial balance.

In July that same amount would have been valued at €73,239. A loss of €2381.

In August that 100K would have been valued at €73,285. A slight gain of €46.

In September it would have been valued at €70,117. A loss of €3168.

In October the value would have been €69,396. A loss of €721.

If November were to close today, the value would be €68,265. A further loss of €1131.

Now if you add all those losses together, the resulting hit against your budget would be €7355. Or $10,805 less of your budget to spend.

Now, let me take this ranting of mine one step more personal. Say you get paid $900* a month. In June you would have had €680 for living expenses, savings, tithe, etc. This month, however, you would have €612. That hurts. Especially when you're trying to save for vacation and all nearby options use Euro...

So will the dollar EVER come back? Or will it continue to decline to the point of oblivion?

Thus I come to the end of this tale of woe of when a dollar is not a dollar.

*This amount is for example purposes only and it not necessarily a real amount.