As we enter into the final week of 2007, one story is beginning to dominate U.S. business news. It’s a story of unique historical significance, with both positive and negative net effects for Americans.

That story is the decline of the U.S. dollar. Although not new to this year, 2007 has seen the most noticeable drop in the dollar since the decline began in earnest in 2000, and 2007 has also seen a noticeable acceleration of the effects of that decline. In short, economists and the general public alike are beginning to take a more careful look at what has become an alarming trend.

According to an article in today’s Washington Post, the dollar has declined “more than 40 percent” in comparison to the euro since that currency was rolled out to world markets between 1999 and 2002. The dollar has declined 12 percent in 2007 alone, the article also states.

Depending on your perspective, this is either good news or bad news.

For American manufacturers and exporters, it’s good news:

For now, that drop is allowing the U.S. economy to reap rewards. American products have become exceedingly competitive, boosting exports ranging from Caterpillar tractors to Boeing jumbo jets that are now relative blue-light specials in the global marketplace. Using the same logic of chasing cheaper local production costs that has driven many U.S. factories to China, a few iconic European companies, including Airbus, are set to shift some manufacturing lines to the United States.

… Rolls-Royce has proposed moving some operations from Liverpool to its factory in Mount Vernon, Ohio. Airbus has said it will shift more of its production to the United States, home turf of rival Boeing, to offset the cost of the stronger euro. As the dollar has weakened over the past seven years, Airbus has opened assembly lines and other operations in Wichita and Mobile, Ala.; as well as in Moscow and Beijing.

Unfortunately, it’s bad news for importers, and for Americans abroad:

In very real terms, [the weakening dollar] has forced Americans to rethink their lust for foreign goods. Sales of luxury, British-made Jaguars and Land Rovers, for instance, are declining in the United States because of the weak dollar, while fewer North American tourists — a 10 percent drop in the third quarter of 2007 compared with the same period last year — treated themselves to trips to England.

The chink in the dollar’s armor has dealt a blow to American pride — at least to the kind of pride that comes with buying power.

Nowhere is that more visible than with Americans overseas.

But whether this particular situation is good news or bad news for you personally, Americans can’t help but feel a certain unease at the big-picture implications:

With the exception of November, when the dollar dropped sharply after bearish remarks by Chinese officials, the fall has been gradual. It is unclear what will happen in the future. The dollar has fallen because of a combination of fears over the U.S. economy, including the subprime mortgage crisis that may worsen.

… It marks a shift for Americans in the global economy. In times of strength, a mightier dollar allowed Americans to feed their insatiable appetite for foreign goods at cheap prices while providing Yankees abroad with virtually unrivaled economic clout. But now, as the United States struggles to fend off a recession, observers say the less lofty dollar is having both a tangible and intangible diminishing effect.

“The dollar was the dominant force in world economics for 100 years — we had no competition,” said C. Fred Bergsten, an American economist and director of the Washington-based Peterson Institute for International Economics. “There was no other economy close to the size of the United States. But all that is now changing.”

… Although considered unlikely, analysts say a more rapid decline could prove disastrous. A global run on the dollar would force the Federal Reserve to hike interest rates to prop up the U.S. currency just as lower interest rates may be needed to stimulate the domestic economy.

What do you think? Is your business in a position to be harmed by a weakening dollar, or has it perhaps helped your bottom line? If you have comments to share, we’d love to hear them.

The original story by Anthony Faiola in today’s Washington Post offers much further detail and analysis. It’s an eye-opening read; click here to check it out.