The United States has a strong military and its economy is growing faster than most of its trading partners. But, its currency, the greenback, is getting mauled.
Over the past year, the dollar is down almost 22 percent compared to the euro and 12 percent versus the Japanese yen. Economists are most concerned about the rate of decline - the dollar started the New Year by dropping a full percent.
Such a steep drop, rather than a gradual decline, could prompt global investors to lose their faith in US financial markets. This could make financing the nation's the budget deficit more costly, and short circuit the robust rally on Wall Street.
It might also cause thousands of imports - from Dutch cheese to Japanese automobiles - to move out of many consumers' price range.
"There is a concern the dollar could fall completely out of bed," says Jay Bryson, an international economist at Wachovia Corporation in Charlotte.
There is no indication yet that the falling dollar is causing any serious problems. The stock market has risen nearly 25 percent over the past year and has started the new year off on an uptrend.
Bond-market analysts don't see any signs that foreign investors are jettisoning US bonds. And big holders of US dollars, such as members of OPEC, are grumbling but not demanding payment in other currencies.
US officials maintain there is no need for alarm. On Wednesday, US Treasury Secretary John Snow reiterated that the US policy was for a strong dollar. "A strong dollar is in US interest," he told a business group. Recently, Federal Reserve governor Ben Bernanke said he was not worried about the falling dollar since it was less severe against a wider basket of currencies, and the falling dollar had not rung any inflation alarm bells.
But not everyone is as optimistic. On Wednesday, the International Monetary Fund (IMF) issued a report that predicted a further decline in the value of the dollar because of the large trade deficit.
"Although the dollar's adjustment could occur gradually over an extended period, the possible global risks of a disorderly exchange rate adjustment, especially to financial markets, cannot be ignored," said the report.
The IMF is not alone. Many in the exchange markets expect the dollar to continue to fall. In a survey released Wednesday, Reuters found that many currency strategists expect the euro to strengthen above the $1.30 level compared to about $1.27 today.
However, the falling dollar is not all bad, says economist Mickey Levy of Bank of America Securities. "It won't materially affect the rate of economic growth," he says, "but it will affect the composition - it will help exporters, but hurt consumers."
Consumers are already starting to pay more. That's already starting to happen in the steel industry, where a combination of the currency and high ocean freight rates, are making it less profitable to ship to the US. This has given US producers some cover. Last week many of them announced price hikes of up to 20 percent on steel products.
"We are hearing some say it has become prohibitively expensive to ship steel to the US," says David Phelps, president of the American Institute for International Steel, Inc.
Yet other importers are absorbing the added costs in order to shield consumers. That's what's happening at New York's Fairway Markets, which imports from about 80 different small farmers in Europe. "We're losing a penny everyday," says Steven Jenkins, a senior manager at the store.
So far, Mr. Jenkins says he hasn't seen any significant price increases from exporters. "There are rivers of sheep's milk in Greece, Bulgaria, France, and they have to move it so they don't dare raise prices," he says.
But some importers are preparing to make adjustments. That's the case with Dan Slott, who imports and raises Icelandic horses, which already have a hefty price tag of $20,000 to $30,000 per animal.
Now, Mr. Slott anticipates raising prices about 15 percent to make up for the weaker dollar.
"Some will pay it, others won't," he says from Ancramdale, New York. "Basically, we are talking lower sales unless we get a really strong economy, which is possible."