This week, I’ve been treated to a visceral experience of the upside of a downside. Driving with my family through the Tetons and Yellowstone National Park, I have sat behind endless lines of RVs and assorted SUVs depositing masses of people who are swarming the parks, descending on Old Faithful concession stands, and snapping endless digital photos to be sent over Androids, iPhones and even Blackberries. From one perspective, that’s an experience of crowds and Americana. From another, it’s a living example of how a weak dollar is helping the U.S. economy. It’s also proof that for a nation that is suffering, we still have an astonishing capacity to take vacations and spend.
There’s been quite of bit of hand wringing of late about the continued weakness of the U.S. dollar. You’d have thought that the crisis in Greece would have led to a flight to dollars and out of euros, but no. The dollar has remained on the floor, hovering between $1.45 and $1.40 to the euro. Remember, there was a time not long ago when the euro actually was less worth than a dollar. Domestic critics see the poor performance of the dollar as a sign of America’s economic trouble, and foreign critics (read: China) point to it as proof that the U.S. currency is manipulated by Washington, carefully calibrated to ease the problems of foreign debt and trade deficits.
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To be sure, the risks of a weaker currency are real, in the form of waning confidence and tempting the inflation gods. But amid the snowy peaks of Wyoming and the redwoods of California, it becomes clear that there is at least one striking upside of our down-in-the-dumps dollar: domestic tourism.
Flat wages and costly foreign exchange are disinclining Americans to travel abroad. But domestic tourism is booming. Numbers flocking to marquee national parks such as Yellowstone and Yosemite are up in the past three years even as foreign travel has fallen from its pre-financial crisis peak. There were 3.1 million visitors to Yellowstone in 2007, and 3.6 million last year. There were 3.5 million to Yosemite in 2007 and 3.9 million last year.
And it’s not just parks. According to the U.S. Travel Association, a total of $704 billion was spent on travel in the United States in 2009, of which $610 billion was spent by U.S. residents; in 2010, about $760 billion was spent, $656 billion by U.S. residents. Foreign tourism to the U.S. has been undermined because of stringent visa requirements, but Americans traveling and spending inside the U.S. has increased. And that also supports and creates a substantial number of jobs.
The level of domestic tourism somewhat belies reports that there has been a sharp change in the way we manage our money, namely an increased tendency to save and the wariness to spend. Yes, the savings rate is up, confidence is down, and tens of millions are struggling to get by and not likely to be among the throngs in Yellowstone this summer. But one of the unintended by-products of less spending on foreign travel is more spending on domestic. In short, Americans can simultaneously pare back their individual spending (by not checking out the Eiffel Tower – and indeed, U.S. travel to France is off significantly since 2007) and increase their domestic spending. They can, in effect, spend less and yet, for the purposes of how we assess and calculate domestic consumption (GDP), spend more.
The weak dollar is a major spur to that trend. It also makes American goods less pricey abroad and in theory makes the U.S. a more attractive place for foreign tourists to visit – if visa restrictions don’t scare them off. But the boom in domestic tourism and travel, and avid domestic spending while on those vacations, is a sign that what is going on in the U.S. economy is not a simple story of frugal consumers. It is one of shifting patterns of spending, of where that money is spent and how, and of the unintended upsides of downsides. Weak dollar, here we come.