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Pop Culture Gives Weak Dollar a Bad Rap
Source: AP
Posted on: November 16, 2007 06:46 MST
Filed under: Rap, R&B, Pop, Rock, Celebs

jay-z

NEW YORK (AP) -- When people start talking about rappers and supermodels shunning the dollar, you know there's a problem.

As the greenback recently hit historic lows against other major currencies, rap mogul Jay-Z released a new video in which he flashes euros, not dollars. It was also widely reported last week that one of the world's richest supermodels, Gisele Bundchen, opted to be paid in euros because of the dollar's weak outlook. Her spokeswoman has denied that the model was spurning the dollar, saying Bundchen is paid in the currency of a job's location.

Nevertheless, the euro bought an all-time record $1.4752 on Friday and the British pound has also been trading at its highest levels against the dollar since the early 1980s. The Canadian dollar, often called the "Loonie," reached parity with the dollar in September for the first time since 1976, and has climbed steadily since.

While investors, multinational businesses and travelers have been witnessing the dollar's slide for years, pop culture is new territory.

Jay-Z's "Blue Magic" video seems to have been an attempt to acknowledge the dollar's decline in an ironic way and to paint the artist as an international superstar who is smarter than those accepting greenbacks.

"It is probably a particularly good strategy as the 'image of the dollar' loses its 'currency' as an emblem of extravagance and success," Steven Tepper, associate director of Vanderbilt University's Curb Center for Art, Enterprise and Public Policy, said in an e-mail. "So, you have the combination of a weakening visual icon -- the dollar -- and a growing international audience that will understand and connect to the image of the euro."

As for Gisele, she would not have been the first to favor contracts in other currencies -- others include billionaire investor Warren Buffett and PIMCO Managing Director Bill Gross.

"Any international business person that is moving assets around the world will want to do as many deals in the strongest currency available, which is certainly not the dollar these days," Tepper added.

The dollar's decline represents expectations the U.S. economy will slow relative to other economies. Recent cuts to the Federal Reserve's key interest rate have also weakened the dollar, as investors transferred funds to countries where they can earn higher returns.

A weaker dollar also makes U.S. goods cheaper and more competitive in foreign markets, tightening the trade deficit. It helps some U.S. companies with operations abroad whose profit is greater when converted into dollars. But at the same time, a cheaper dollar makes foreign goods and travel more expensive.

Although pop culture preferences are not the most important factors in the equation, some say they can have enough of an impact to support the dollar's decline.

"Obviously a supermodel changing preferences is not going to rock the markets overnight," said Axel Merk, manager of the Merk Hard Currency Fund. "This is just a symptom. But sure, yes, it does have an impact and that's going to happen more and more."

Recent hype about Jay-Z and Bundchen, U.S. travelers' tighter budgets and hordes of foreigners flocking to the U.S. for holiday shopping may have pushed Americans to the "point of recognition," at which they realize the dollar has lost its dominance. If so, the most significant effect will be felt by those who weren't aware of its rapid decline, said Kathleen Vohs, an assistant professor at the University of Minnesota who has researched the psychology of money.

While economists and market watchers can debate the economic pros and cons of a weaker dollar, its decline will whittle away at national pride, according to Vohs, making it harder for the dollar to regain its footing.

"A strong national currency is in some ways signaling the strength of the nation," she said. "You can see that when the home currency is weak, people just have this sense of inferiority in the world."

Vohs cited Canadians' one-time complex about the Loonie, which remained weaker than the dollar for 31 years. Now the tables are turned: Americans are the ones getting ribbed by their northern neighbors. But not everyone agrees on whether such an atmosphere will affect the currency's direction.

"I don't know how important it is that Jay-Z is flashing euros," said Marc Chandler, head of currency strategy at Brown Brothers Harriman.

Americans dealt with an opposite currency issue in the 1980s, as fuel-efficient vehicles from Japan gained popularity in the states and Japanese were buying up U.S. companies and real estate. A backlash ensued, with Americans blaming foreign interests for the loss of jobs and U.S. politicians demanding that Japan either strengthen the yen, or face trade sanctions.

Chandler expects a less dramatic outcome, with the dollar bouncing back next year against other major currencies as other central banks lower interest rates.

For now, online chatter indicates that some fans and commentators are treating the incidents with a humorous bent, sensing that it was only a matter of time before the dollar's decline hit BET and the fashion runways.

One observer speculated that the rapper 50 Cent might soon change his handle to 34 Pence.

Others suggested that celebrities give up on currency altogether, instead favoring gold, whose value surged to decades-high levels last week. One advised that "any real gangsta hedging against recession" should be "flashing gold chains, not dabbling in fiat currency."

But in a melancholy turn, another noted altering the hook to a famous Wu-Tang Clan tune -- to say "Euro, Euro bill, y'all" instead of "Dolla, dolla bill, y'all" -- just wouldn't have the same ring to it.

 

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