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Reality can really bite you in the ass sometimes and I think that a lot of people in the United States are about to find that out ... and it's going to hurt. For a long time America has lived the good life based on the high value of the United States dollar in comparison to many other currencies but that's all changing.

Actually it's been changing for a year or more but then it's probably been quite hard to notice it. Sure costs might have been increasing over there but probably not at the rate they should have been. Many overseas suppliers have been reducing their profit margins in an effort to stay within the pricing structure that their United States clients have expected and that has kept the prices down.

Often that profit margin is worked out solely on the basis of the positive exchange rate and now that the positive exchange rate is disappearing the profit margin is disappearing too and so prices will go up. In case you don't understand how it works let me explain it this way.

If I'm providing a product from Australia for $US10.00 per item it might actually cost me $A11.00 to produce it. Until recently I might have been able to exchange that $US10 for $A12.50 and there was my profit. But now, every time I exchange $US10, I only make $A11.19 and a 19 cent profit on each item I sell just doesn't cut it for me.

That means I'm going to have to increase my prices and so will everyone else who is selling into the US market and as more and more producers increase their prices the cost to the consumer in America is going to increase too. As I said a moment ago, many of us were absorbing the drop in income brought on by the falling US dollar but I think that suppliers just about everywhere are about to reach the point where they simply can't do it anymore.

And that's not just here in adult, it's right across the board in just about every industry. For example, the cost of heating your home in the United States ... if your heating is oil-fired ... is going to go through the roof this winter. Oil is something America imports and so it's going to cost more. Computer parts ... even those parts made in third world countries ... are going to cost more. Clothing will cost more and even those items that you buy that are made in the United States will cost more because the cost of production will increase.

Of course there are those who think that it's just a matter of sourcing products from third-world countries that still have a more favorable exchange rate with the United States but the reality is that there aren't many of those anymore. Every time the United States dollar drops in value the exchange rates of those third-world countries goes up, their profit margins go down and so they have to increase prices too.

It's not a pretty picture but it is the reality that you need to be preparing for. The world's economic focus is beginning to shift away from the United States and the producers of many varied items aren't seeing the United States as their only market any more. Even within the United States there are producers who are turning away from the local market and looking overseas to sell their product.

But don't expect that the high cost of imported goods will mean that industry will return to the United States in the short-term either and even when it does the demand from other places may still keep prices up on the home market. The start-up time for any major industry is measured in years, not months, and most manufacturers within the US might be interested in selling overseas where they can make more money rather than satisfying a depressed market within the United States where people no longer have the money to spend that they once did.

To survive this situation we're all going to have to be more creative and even more innovative. To meet the increased costs of living you're going to have to be making more money. For some that means working smarter rather than harder while for others it means looking at doing new things both within the United States and overseas.

You're also going to have to realize that while your $US10 is still worth ten bucks in the United States, more of that ten bucks is going to be eaten up in living costs than might have been the case a few months ago.

When you understand that you may wake up to the reality that all of us are facing. It's a challenge we all have to meet and overcome. It's a challenge that I personally find exciting because there may be gloom and doom but if you stay positive then you will survive.

The industry won't go away, it may change and it will have to deal with some interesting economic situations but if you want to take on the challenges you'll still be here when the good times come back ... as they surely will.