Is the fall of the U.S. dollar good or bad for L.A.'s economy? In theory, it should be a little bit of both. After all, a weak dollar makes American-made goods cheaper overseas, thereby providing a boost to the manufacturing sector.

On the other hand, imported goods and foreign travel are more expensive, and with shoppers still looking for bargains, businesses get squeezed.

In truth, the dollar's fall is a bit like unemployment. The numbers have little meaning until they hit and then the impact can be overwhelming.

Ask the legions of workers in the entertainment industry. With the U.S. dollar sagging against its Canadian counterpart, runaway production has suddenly come to a halt. Shooting days in Los Angeles have hit records, bringing lots of people home with fat paychecks.

Since the beginning of 2002, the dollar has lost roughly 20 percent of its value against a broad basket of currencies and nearly 50 percent of its value against the euro.

Despite some predictable effects, the dollar's fall hasn't gone quite according to form. The expected manufacturing boost is lessened because so many American goods are made in China and other points overseas.

Domestic manufacturers, in fact, complain that their costs have become so high here they still aren't competitive with other countries.

Then there's the issue of China's currency, which is kept artificially low by its peg to the U.S. dollar. China has resisted freeing the yuan thus far, although lately it's hinted that it might turn to a basket of currencies instead.

To date, the dollar peg has meant that the benefits of a falling greenback haven't been felt in the overall U.S. trade relationship with China. The rapidly developing country continues to flood the U.S. with inexpensive goods, feeding a massive trade imbalance that, in turn, is sending the dollar even lower.

(At the World Economic Forum that was to be held in Davos, Switzerland last weekend, the weak dollar and soaring U.S. trade and budget deficits were expected to be the main topics of discussion and could provide some hint toward how the dollar-yuan question will be resolved.)

In Los Angeles, apparel workers, importers and manufacturers of all stripes in Los Angeles have been hardest hit by China's manufacturing dominance.
Many apparel manufacturers fear that a new surge of cheap imports from China will flood the region due to the expiration of trade quotas on Jan. 1.

But Los Angeles has also benefited from the explosion in cheap Chinese imports. The ports of Los Angeles and Long Beach are doing record volume, and the construction of warehouse and distribution facilities in the Inland Empire has extended the regional economy in terms of housing, land prices, jobs farther east.

There are also benefits for U.S.-based multinational corporations, which have reported strong earnings in the past year propelled by the declining dollar. An estimated one-third of all companies in the Standard & Poor's 500 Index got a one-time earnings boost from sales in overseas markets in 2004, according to Thomson Financial.

"Not only are you selling cheaper goods overseas, you're defending yourself from European companies expanding into the U.S. market," said Jim Griffin, vice president and co-foreign exchange manager at Union Bank of California.

On the other hand, multinationals can be so complex that a currency fluctuation that benefits them in one area can harm them in another.

That's what happened to Ford Motor Co., which is having trouble expanding its U.K.-based luxury car division in the U.S. because of the weak dollar. Last week, a Ford executive warned that the U.S. auto industry was at risk in Western Europe because of currency issues and competition from China and India.

General Motors Corp. issued a warning last month on its Swedish subsidiary Saab, which got hurt by the strength of the Swedish krona.

Despite the dollar's fall, Americans still spend roughly $3 importing goods and services to every $2 of U.S. goods and services sold abroad.

The U.S. trade deficit, the measure by which imports exceed exports, widened to $60.3 billion in November, and is now 6 percent of gross domestic product.

Many experts say that U.S. appetites are still the biggest problem.

"The dollar is in big trouble and it's not going to change the inherent structural problems in the U.S., which is that we're spending too much," said Axel Merk, president of Merk Investments, an investment advisor in San Francisco. "The one thing that keeps the dollar from plummeting is that it's in everybody's interest to keep it propped up."

One big concern is that foreign investors, fearing a rapid plunge in the dollar, will lose their appetite for U.S. assets. Those investors have provided much of the money the U.S. government has borrowed to cover its $413 billion budget deficit for the fiscal year ended Sept. 30.

Fueling that concern are still-low interest rates. While the Federal Reserve raised short-term rates last week a quarter of a point, to 2.5 percent, the levels remain below historical averages, leaving foreign investors less interested in U.S. paper. Whether the rise in rates, the sixth since last June, will stimulate more interest in the dollar remains a debatable point among investors.

The issue extends to the U.S. stock and real estate markets, where there has been concern over a resistance by foreign investors. Without any strategy for reversing the dollar's decline, the Fed's rate-hiking moves notwithstanding, there are signs that this money flow could be ebbing.

In the property sector, many foreign investors that poured money into U.S. real estate investment trusts the last few years are pulling back, although the Japanese are testing the waters after a decade-long hiatus.

"There are a lot of people who have different views on the subject of the dollar and the real question is whether the markets lose confidence in our policies," said Edwin Truman, a senior fellow at the Institute for International Economics in Washington and a former Assistant Secretary of the U.S. Treasury. "We're not there yet."

Here are some examples of how the falling dollar has affected a variety of businesses in Los Angeles:
- The Exporters
- The Importers
- The Retailers
- The Hoteliers
- The Real Estate Investors
- The Manufacturers

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