It seems like the devaluing of the dollar is hurting other countries that rely on exports.
Yukitoshi Funo, executive vice president of Toyota City, Japan-based Toyota Motor Corp., the nation’s biggest automaker, called the yen’s strength 'painful.' Fabrice Bregier, chief operating officer of Toulouse, France-based Airbus SAS, the world’s largest commercial planemaker, said on Oct. 8 the euro’s 11 percent rise since April was 'challenging.'It is in the best interest of the world economy that barriers to trade be eliminated and that every country does well. A global currency was seem to help solve this problem as I will discuss below.
An undeniable result from the decline of the dollar is stated by Fiorini, "'The diversification out of the dollar will accelerate,' said Fabrizio Fiorini, a money manager who helps oversee $12 billion at Aletti Gestielle SGR SpA in Milan. 'People are buying the euro not because they want that currency, but because they want to get rid of the dollar. [In the long run, the U.S. will not be the same powerful country that it once was].'" I don't think this is really news to any of us. The world economy and the world power structure are in the process of being rebalanced. I don't think this is necessarily a bad thing.
Maybe the trend of dumping the dollar is temporary, "Central banks’ moves away from the dollar are a temporary trend that will reverse once the Fed starts raising interest rates from near zero, according to Christoph Kind, who helps manage $20 billion as head of asset allocation at Frankfurt Trust in Germany." There seems to be other signs that things are not all that bad.
The article goes on to state that the US economy is expected to grow by a larger percent that other economies of the world in 2010, "America’s economy will grow 2.4 percent in 2010, compared with 0.95 percent in the euro-zone, and 1 percent in Japan, median predictions show. Japan is seen keeping its rate at 0.1 percent through 2010." The value of this 2.4 percent depends on what percentage the economies have shrunk due to the recession. I don't know what this percentage is.
This article from World Net Daily seems to indicate that there is an active attempt to bring about a new global currency and that this would not be a bad thing. This statement is from the economics professor who helped to create the Euro and is currently advocating a new global currency.
Mundell has argued for decades the proposition that nation-state currencies, including the dollar, need to give way to a new official world currency. According to Mundell, an "optimal currency area" is best defined by international free-trade areas and regional markets, not by nation-states such as the United States of America. Mundell's argument was that nation-states are not optimal currency areas because nation-state borders are artificial constraints imposed on the globe to create ethnic or historical divisions that do not necessarily represent how international markets operate. To understand the concept, Mundell cites former Federal Reserve Chairman Paul Volker's frequently quoted dictum, "[A global economy needs a global currency].'The benefits from a world currency would be enormous,' Mundell argues on his website.From the above article, it seems that a global currency makes sense in the global economy and will solve some issues of free trade by eliminating "artificial constraints" to world trade.
Some would state that a plan to create a one-world currency is some conspiracy, "Appearing on Sean Hannity's Fox News Channel television show, political consultant Dick Morris and Hannity agreed the decision by the G20 proved the 'conspiracy theorists were right' and there is now clear evidence of a plan to create a one-world currency." I don't see that as some "conspiracy" but just the natural course of the development of human civilization. Globalization is here to stay and will only become more pronounced in the future. This would be a necessary development towards a one-world government that WND makes a big deal out of--I disagree with this being made out to be some conspiracy and some bad thing. It would depend on who is in charge of this government. But I don't see a truly one-world government coming about any time soon; the world is still very divided and will not likely be able to come to any major agreements. Maybe if there is some world wide crises such as an economic crises or some war, this would cause the world to unite and form some temporary agreement by electing some unified government or some type of alliance.
It seems inevitable that some form of a new global currency will come about some time in the future, and the current developments in the world economy and the decline of the dollar is helping to bring this about by illustrating a need for such a currency, and these developments are acting as a catalyst to help bring this about. This would be a shift of power that is currently held by America and other nations to an international body. From what I understand, the dollar is currently acting as a form of a global currency and that it is in the slow process of being replaced by an international currency. The world will only become more interconnected and interdependent due to globalization, and this development will create a need for a global currency. Many of the world trade export and import issue seem to me to be caused by the world using different currencies. While there are definitely some negative effects for America in the short term due to the dollar being devalued, it seems like these negative effects could be temporary and is helping to bring about the inevitable necessity of re balancing the global economy. I still have a long ways to go to understand what all of this really means.
In addition to admitting that I don't know nearly enough as I should about this, it seems to me that some of this is at least wishful thinking on the part of many nations in the world that this change to a global currency would somehow knock the US down a peg in the world, and they get some kind of thrill over that. I think, when push comes to shove, the producer nations (who have not yet pushed their populations, or paid their populations enough to make them consumer nations) will see that, as the Bible says "Pride goeth before destruction, and an haughty spirit before a fall." From what I hear, the trade imbalance in the US has shown positive movement already. With a switch to an international currency, the US may be in even better trading/producing position.
ReplyDeleteI say, go ahead, make our day. Then, once the economies of Japan, China, India, and Germany have tanked, and the US is chugging along nicely (relatively), they may see the error of their ways.
Now, I'm getting in almost Obama-like fantasy land, but, as we know, this currency change would likely increase the cost of oil, so possilby will force us to produce more at home. Double benefit. But, I may be way off base there.
There will be some benefits to a weaker dollar. Companies that do business overseas will benefit,and of course anybody that invests in those companies will also benefit; although, the average American will be hurt by inflation and the devaluing of the dollar. From what I have read the dollar being devalued will lead to a weaker and less influential American on the world stage. The JOE states the same thing. I do think America will still remain a super power, just not to the extent that it is now.
ReplyDeleteIt is in every nations interest that all of the major economic power's economies are doing well. Like the article stated, "According to Mundell, an "optimal currency area" is best defined by international free-trade areas and regional markets, not by nation-states such as the United States of America. Mundell's argument was that nation-states are not optimal currency areas because nation-state borders are artificial constraints imposed on the globe to create ethnic or historical divisions that do not necessarily represent how international markets operate." So maybe some new form of an international currency might facilitate free trade which is in every nations interest.
I don't know if it is the world trying to bring America down since they are only responding to the dollar being devalued by our own government policy. I think they are just reacting to what our own government is doing. I can not really blame the world for reacting the way they are. I am sure that our enemies are taking advantage of it.
About oil potentially not being traded in dollar starting in about a decade, it would increase the cost of oil for America and just about everything else. This would compound the inflation that is already coming. One thing we do know is that the market can not sustain four dollar gas; so this might force more domestic oil production if the environmentalist interest can be defeated. Maybe after Obama is out of office domestic oil production can take place.
Overall, I think the push for an international currency illustrates that with globalization the nature of the world is changing. To go along with this change, a re balancing of world powers and a new economic structure to include an international currency of some form is necessary. I think this development also shows the need and fact that the world needs to eliminate artificial barriers to world trade and the need for the world to become more interconnected united. A new world order is in the slow process of being made--Obama talked about this new world order in his latest talks at the UN at the last world gathering. I don't see this as a bad thing.