The U.S. dollar still buys something back home, but the buck has lost much of its sizzle in the rest of the world. Just buy a cup of coffee in London and you will see that the dollar is worth half as much in Britain as it is in America. Since the beginning of the year, the dollar has dropped like a rock against the British pound, the euro and a host of other currencies. Even the Canadian dollar is now worth more than the greenback.

Economists have been warning for some time that the day of reckoning is coming – that the United States cannot keep on living beyond its means and that someday, the Chinese government, the rulers of the Persian Gulf, and other foreigners with cash to spare, will stop bailing out a profligate U.S. government and spendthrift Americans by refusing to lend them more money.

Things haven't reached that point yet, but some British foreign policy specialists are already beginning to talk about not just the decline of the dollar, but the decline of America itself. They predict that America's traditional self-confidence will crumble along with the fall of its currency. The same thing happened to Britain and its empire after World War II.

It's true that things have not been going very well for the United States in the past few years. It's not just the dollar that is in trouble. American troops are meeting resistance on both of the major fronts in the Bush administration's “war on terror.” Iraq has turned into a quagmire; Afghanistan is beginning to look like another long term problem. Pakistan, America's key ally in that part of the world, is looking shaky, and America's bete noir, Iran, is more defiant than ever. Meanwhile, China and Russia are rising.

But wait a minute before you conclude that the American empire is about to collapse. While it's true that America is, as the British say, going through a bad patch, it is not necessarily true that it is in terminal decline. It helps to step back and take a longer view.

I recall a day almost three decades ago when a hotel in Brussels refused to let me pay my bill in dollars. It was a weekend, and the cashier said the dollar was falling so fast he could not predict what it would be worth when the banks opened on Monday. In those days, Europeans called our sickly currency the “Carter dollar,” and it was so weak that it was even lampooned in newspaper cartoons. I recall one by the Washington Post cartoonist Herblock that showed a typical camera-toting American tourist in Paris shouting to his wife as he was being held up at gunpoint by a masked mugger, “I just found someone who will take dollars!” I laughed at it at the time, but it was no laughing matter when I went to the bank. On top of that, America was going through another bad patch in the Middle East. The Iranians had seized the American embassy in Tehran, and the Carter administration's efforts to rescue the American hostages ended in a fiasco. Things could hardly have been any worse, or so it seemed at the time. Pundits were talking about the end of empire.

As we all know, America and the dollar recovered. Communism and the Soviet Union collapsed, and the United States became the world's sole superpower.

So I suspect that another three decades from now, historians will look back on the first decade of the twenty-first century as a low point in America's affairs, but not as the beginning of a terminal decline. Things will get better – but not all at once, as some imagine, after the next American presidential election. The problems of the world do not disappear just because governments change. But eventually America's ability to learn from its mistakes, and the sheer weight of its economy, will restore its standing in the world. To paraphrase the old Civil War saying about the wartime currency of the Confederate States, “Save your American money, boys, the dollar will rise again.” And since I live abroad and have to exchange dollars to pay for my coffee, I can't wait to see it happen.