After decades of relative strength and stability, the US Dollar has lately been in a steady state of decline. No one has felt the effects of this fall more acutely than average American consumers, who have seen the purchasing power of their paychecks dramatically decrease both at home and abroad. While these consumers have suffered the fallout of the Dollar’s demise, even the most financially savvy among this group often fail to realize that their spending habits can affect the currency markets nearly as much as any other factor.

American consumers have as much at stake as anyone when it comes to fluctuations in the Dollar’s value, but they also play a huge role in its valuation, though often unwittingly. The falling Dollar has made the everyday life of the average consumer more difficult as his budget is stretched because of a currency that is worth relatively less than it used to be. But some of the blame for the Dollar’s fall in the currency markets must be placed squarely on the shoulders of American consumers, even those who have no idea what forex is. Here are four ways that US consumers have aided in the devaluation of their own currency; whether we want to admit it or not, we have no one to blame but ourselves.

1. Gluttons for gas: Americans are the most energy-hungry people in the world and have long sated themselves on cheap oil. Countries in Europe and Asia that did not have the same artificially low fuel costs sought and found alternatives to lower energy consumption, innovating towards efficiency rather than the American move towards simple extravagance. The recent dramatic increase in prices at gas pumps across the US has left American consumers with less money to spend on other goods and services. Worse yet, many Americans have gone into debt rather than alter their standard of living. The combined results of this hike in energy prices and Americans general unwillingness to adapt have negatively influenced the Dollar in the forex markets.

2. Decrease in spending: The first of two ways that Americans have chosen to react to having less expendable income is by decreasing spending on luxury items. While this might be viewed as a prudent and responsible decision for the individual consumer, it does not help out the American economy or the Dollar at all. Signs of consumer fatigue scare US economic policy makers into making moves that hurt the Dollar. Congress reacts with tax cuts and rebates that push the US further into debt and the Fed reacts by cutting rates. Both of these moves hurt the Dollar in the long run even if they give a limited short-term boost to the economy.

3. A dearth of savings: The other way that Americans have chosen to react to a decrease in purchasing power is to maintain their lifestyles by eating into their savings or taking on debt. In fact, the current era of easy money and rampant consumerism marks one of the first times in American history that the average family actually has a negative net worth. This tendency has contributed to a very strong economy in the short-term, but has left the US in a situation that could prove to be devastating in the long run.

4. Nobody buys American anymore: When Americans buy foreign goods (such as the bulk of items that line the shelves at Wal-Marts across the nation or big-ticket items like cars from Honda or Toyota) we contribute to an economy that supports more imports than exports. This trend has helped to create America’s ballooning trade deficit, one of the major factors that has led to a weakened Dollar.

by:Heather Johnson, a freelance finance and economics writer, as well as a regular contributor for Business Credit Cards and currencytrading.net

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