WASHINGTON -- We hear about record breaking declines in the value of the dollar, rising U.S. trade deficits and a retrenchment of inward investment flows. Cassandra-like voices point to the war-caused budget deficit, foresee a growing U.S. dependence on the mercy of foreigners and predict the imminent collapse of the global economy.

Although these advocates of negativism are sadly mistaken, it is appropriate to review the key effects of dollar-value changes together with an outlook of likely developments in 2004.

Many numbers are bandied about when it comes to the decline of the dollar. Most frequently cited is dollar depreciation against the euro with claimed declines between 17 and 40 percent, depending on the timing of the crest and trough measurements.

Here is the reality of change: When the currency under comparison is less than five years old (the euro was introduced in 1999), everything tends to be a "historic" first. The euro, introduced at an exchange rate of 1 to $1.18, was trading last week at about $1.25. The historical shift in value thus amounts to 6 percent.

This decline of the dollar has not been uniform against all currencies. It has been highly selective against the yen, pound and euro. Against most other currencies in Asia, Africa or South America, there has been little change.

Theorists argue that currency shifts will alter the global flow of trade and investments. Such adjustments have been very limited for several reasons: For one, between trading partners where there have not been major currency shifts, there has been no reason for adjustment since tied currencies have kept trade and investment relations the same.

Second, many firms in the countries exposed to the currency changes have multiyear contracts and plans that take time to adjust. Many of their arrangements are with captive suppliers, meaning with plants abroad that either belong to them or to contractors with long-term agreements. Therefore, even if the currency values change, suppliers do not.

Goods are often distributed by independent wholesalers, dealers and retailers. They determine the price of any good by choosing how much of a possible price change to "pass through" and how much to keep or absorb. Currency declines expected to lead to lower prices abroad might lead to higher profits for middlemen, while currency increases might lead to a reduction in their profits. In both cases, sales volumes might be relatively unaffected.

Most important are the decisions of customers. Buyers decide when and why they want a product, and price may only be a minor issue. In the United States, continued strong consumer demand, which is not particularly driven by any "made in the USA" sentiment, accounts for strong sales of global products. In addition, significant brand preferences keep customers focused on products with only limited sensitivity to prices. If people really made purchases based mainly on price, we would see a major switch of car purchases from Mercedes and Infiniti to brands made in Argentina and Malaysia, reflecting the changes in exchange rates.

So if trade and investment flows have not changed in the past 12 months, will the big shift come now? A quakelike shift of economic planes is unlikely. There will be an increase in U.S. exports and a stabilization of U.S. imports. Investment decisions may be hastened or delayed. The flexibility and adjustment of economies will be important, but the values of relationships that have been built up over decades often make the cost of switching too high.

There always is a supply-and-demand side to these flow equations. Central banks and other reserve institutions still prefer holding two-thirds of their currency reserves in dollars rather than in yen or euros. The U.S. economy is growing fast. Stocks are rising rather sharply, business returns are comparatively solid and, most importantly, the expectation and the vision are uniquely optimistically American.

When it comes right down to it, money is just a piece of paper. What really matters is the psychology behind it -- the trust, outlook and confidence in the government that has issued the money. An old saying of traders is that "the dogs bark but the caravan keeps moving." The dollar avalanche predictors should know that there may be ups and downs, but at the end, we'll be on firm territory again.