Commentaries
Now raising intellectual capital
Don’t worry about the weak dollar
By John M. Berry
There’s no way to shut off the incessant warnings about a weak dollar from foreign officials and some economists, but it’s perfectly safe to ignore them.
You can also yawn the next time Treasury Secretary Timothy Geithner repeats the mantra, “It is very important to the United States that we continue to have a strong dollar.”
Everybody is blowing smoke. (more…)
Getting ready for the dollar’s fall
It just won’t go away, this needling worry about the U.S. dollar losing its coveted top-dog status.
No matter that there are plenty of reasonable arguments to support the dollar as the world reserve currency — namely there’s just no alternative — for perhaps decades to come.
Yet, in a world where once-rock-solid assumptions quickly turn to dust, investors should keep an eye on the dollar since changing perceptions are chipping away at its cherished status as currency to world.
Much of the debate so far this year has centered on creating an alternative to the U.S. dollar, championed by China and Russia as a way to wean the world off its dependence on the U.S. as well as buffer individual nations against the missteps of those in developed world. Most recognize creating a new currency will take years and the chances of an existing currency, like the yuan, usurping the dollar anytime soon are remote.
But that doesn’t mean big money isn’t starting to prepare for world in which the buck isn’t the currency of choice.
Curtis Mewbourne, a portfolio manager at PIMCO, has suggested that investors diversify away from the dollar and to move into other currencies, especially those in emerging markets.
“And while we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative,” he wrote in an article published on PIMCO’s website.
ohhh, the fortune that could be made if I knew where the dollar would be next year…
-
The Wall
Back in the early fifties, when America became the biggest Mercantilist beast on the planet (like China now), a deficit debt would have been a very dirty word. America has since moved into its final “huge deficit and debt” stage now and the only economic way that fits this outright consumer model is Keynesian. This has nothing to do with a script, and everything to do with economic survival. This last is certainly not a global tenet, but is a very individual tenet that applies differently to the varying economic needs of all countries. Therefore each country’s government must do exactly what it takes to survive economically, simply because that is, undeniably, the mandate of every government in the world today.
Deficits certainly do matter to some countries that follow these Keynesian deficit ways. But to newly Mercantilist countries such as China, Russia, India and Brazil, there is simply no need for deficits simply because they have their own massive savings. Why should such countries adopt huge deficits just to feed and waste their savings to support the Keynesian debts of western countries?
As I’ve said, the mandate of every government must be to ensure the economic survival of their own country. And herein lies the greatest fault with adopting huge Keynesian deficits — America for too long has been too dependent on foreign credit, to the extent that her own government has now completely forfeited her mandate for individual economic survival because of too heavy a reliance on these outside dependencies. The US government is not therefore fulfilling its economic mandate for survival, this control has been lost because of her loose Keynesian debt and deficit policies.
America, under the guise of modern leadership, has thus become nothing more than a weak banana republic, with no individual mandate or any control over America’s economic survival, no urgency, dwindling leadership, running on empty, even now going begging to the likes of China to buy more of her IOUs to support the American economy.
Regarding the author’s disgruntled description of China’s currency manipulation, I really think this is very amusing. For decades now, the US govt has been manipulated commodities like gold and oil for the sole benefit of propping up the dollar. And when this precedent was set so many years ago, is it any real wonder that China is only now doing the same. After all, it could be said that China has only learned all this from The Master.
So, concerning America’s laughable manufacturing as well export figures as perhaps the saviour of the US economy, can we perhaps have some real and valid reasons why a weak dollar is so good for America?