dollar depreciation has definitely helped to stem runaway production costs that had taken place recently. “The most dramatic development has been the change in the value of the [U.S.] dollar versus the Canadian dollar,” said one observer, noting that he was not discounting the effect the dollar has had on Europe and other areas that are linked with the euro. “I’ve been told that foreign commercial producers in Germany, Japan, and all across Europe have come here to shoot because of the weak dollar. Producers of all types are always looking to where it will be most cost-effective,” said a former executive of the U.S. Association of Independent Commercial Producers, in a published interview. For those in Europe who now appear to be “crying wolf,” Numis Securities Limited analyst Lorna Tilbian has some calming words. For British and European companies with the right business model, exposure to the dollar isn’t necessarily a bad thing, said Tilbian. She said that European media firms Pearson, Reed and Thomson were among the most resilient in their sector, despite doing most of their business in dollars. Pearson, the education and publishing company, generates about two-thirds of its sales in America and, according to its last trading statement, each five-cent change in the average pound/dollar exchange rate for the full year would have an impact of about one pence on adjusted earnings per share. “We can live with the dollar exposure. It’s the lesser of all evils,” she said. Then, of course, there has been the benefit of a reduced trade imbalance. The U.S. trade gap shrank 0.6 percent to $56.5 billion in November 2007. That’s still a lot of money, but it’s the smallest deficit since May 2005. The numbers may help explain why the Bush Administration doesn’t seem too bent out of shape over the falling dollar, which has recently been hitting new lows on a nearly daily basis against the euro. In fact, analysts are predicting that the euro will head to $1.70 in the coming months. In a recent television interview, German chancellor Angela Merkel said: “We are pleased that Europe has a strong currency, but this obviously also creates problems for exports.” “Implicitly, the Federal Reserve is happy with a gradual fall in the value of the dollar,” said Nouriel Roubini, an economist at New York University and president of Roubini Global Economics, a consulting firm that also operates a popular economics Web site. “They’ll never say they favor a weak dollar, but the benefits to the U.S. in terms of competitiveness are significant.” Some European officials, though, are worried that the soaring value of the euro will hurt European exports. In this respect the U.S. silence has been thunderous. “I would like very much to hear U.S. Treasury Secretary Henry Paulson repeat loud and clear that a strong dollar is good for the American economy,” said Christine Lagarde, the French Finance Minister, in a published interview appearing in the financial daily, Les Echos . Rate cuts expected from the U.S. Federal Reserve, the Bank of England and the European Central Bank are likely to put further downward pressure on the dollar. “Predicting the bottom is very hard. I can’t see an end to it. It doesn’t look like there is anything holding it up,” said James Hughes, an analyst at Londonheadquartered CMC Markets. “It’s unbelievable,” he said. There are those who will say that the U.S. is purposely manipulating the dollar exchange rate for its own economic selfinterest, and are therefore introducing protectionist measures. However, if Europe deals with the strong euro by imposing specially crafted protectionist measures, it will lead to acrimonious trade disputes. In the final analysis, with the dollar being the world’s reserve currency, the U.S. seems well equipped to minimize the negative consequences of a sharp devaluation of its currency while taking immense advantage of the opportunities it creates. A big factor in this is the flexibility and adaptability of the U.S. economy, particularly of a private sector that is less fettered by regulations than its European counterpart. V I D E O • A G E AP R I L 2 0 0 8 20 D o l l a r s a n d S e n s e s Cheap U.S. Dollar A Bonanza For Hollywood Christine Lagarde, French Finance Minister “ “With a cheaper dollar there exists an increased appetite for more co-ventures, as well as licensing deals and cheaper coproductions.” In other words, said Moisseyev, American product can be obtained at a lesser cost to nonAmerican partners BY STEVEN M. SCHIFFMAN, ESQ. Since last year the euro has consistently gained against the U.S. dollar. The value of the U.S. dollar is a global bonanza for both Europe and Hollywood. The situation is a no-brainer, noted international European economist, Andrey Moisseyev. “With a cheaper dollar there exists an increased appetite for more coventures, as well as licensing deals and cheaper co-productions.” In other words, said Moisseyev, American product can be obtained at a lesser cost to non-American partners. Consequently, said Moisseyev, in terms of the weak dollar, American media companies have benefited twice: more sales and, for those who have foreign activities, more revenue on the books (when converting to U.S. dollars). A look at Hollywood’s foreign box office numbers clearly reflects the accuracy of Moisseyev’s statements. Some of the summer’s most staggering business took place overseas, with box office in international territories up 20 percent from last year, 30 percent ahead of 2005. And as much as moviegoers seemed to crave Hollywood product, studios benefited because of the weak dollar. The euro’s value against the dollar grew by seven percent over the past 12 months. That meant more money for studios when dollars were translated from local currencies. The cheaper dollar offers a lift to American exporters by making their products more competitive in many parts of the world. And while a weak dollar usually makes imports more expensive, import prices have climbed far less than other currencies so far because foreign producers have kept prices low in order to preserve market share in the United States. Another result of the weak dollar has been an increase in the number of foreign commercial producers coming to the U.S. to take advantage of the comparably low prices. Indeed Canada, a major film haven in recent years, has experienced its first drop in domestic production in more than a decade. The German chancellor Angela Merkel
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