One of the most contentious economic issues between the United States and the rest of the world is the parity of the U.S. dollar. Historically, the United States has not included the value of the dollar as a strategic element of its international strategy and leadership. In so doing, the country is missing an important way to create solidarity and loyalty among our trade partners and fair treatment for our creditors.
The U.S. Treasury does regularly declare that the United States prefers to have a strong currency. These statements are merely aimed at reassuring the foreign holders of U.S. debt. But fundamentally, the Treasury or the Federal Reserve could not care less. The presiding rationale is that we manage ourselves and it is up to the rest of the world to adjust to the risks.
There are four reasons for this.
First, every country in the world has a responsibility for its international balance of payment and the treatment of its currency. It is paradoxical that U.S. administrations have repeatedly tried to push some countries (especially Japan and China) to "act responsibly" and revalue their currency to reduce the trade imbalance with the United States while the U.S. has never accepted the same from its trading partners.
Second, and increasingly important, the dollar is important for our foreign trade. This helps the U.S. to manage its significant foreign debt. Now more than ever, the U.S. needs to count on the goodwill of our foreign creditors to finance the explosion of our fiscal deficit, especially the recent expenses to support the financial system. When a country owes $3,380 billion to its foreign treasury holders, it is more than an embarrassment that the U.S. dollar has depreciated by approximately two thirds vis-à-vis the Euro since its was launched in 1999.
Third, as the most important economic power in the world, the United States, has a responsibility for the good functioning of international trade and capital markets. Its leadership has been affected by the financial crisis that originated in the United States and a "laissez faire" attitude of the Bush Administration, corresponding with a period of dramatic weakening of the U.S. dollar. The ability of the United States to exercise its leadership in the free world is completely correlated to its willingness to act responsibly in its monetary and fiscal policy.
Fourth, the price of oil and commodities is generally denominated in dollars, often giving the illusion that the U.S. dollar is the standard. In fact, the demand for those products comes from countries in various monetary zones. What happens, in reality, is that the dollar price for oil generally increases when the dollar drops and decreases when it increases. This makes the cost of these commodities higher for U.S.-based industries than for European and Asian competitors. The hike of the price in 2008 coupled with a weak dollar is one of the factors behind the petrol price hikes that we all experienced.
The reality that all of this creates -- the Euro bond market has now exceeded the U.S. bond market offering foreign countries a really liquid alternative for the first time. The fact that the United States allowed its currency to drop creates a problem for our trading partners as well as for our creditors. That situation does not create the right atmosphere for international trade talks.
As the United States is engaging in a more constructive dialogue with the rest of the world, it is essential that a realistic currency policy be part of these conversations. After all, caring about the status of the dollar is in the U.S. own best interest.
Foreign aid is less than 1% of our discretionary outlays, look at the size of the state department (where all foreign aid comes from, in addition to all embassies, guards and staff for same, and lots of other stuff) compared to the military.
We spend millions (with an M) on foreign aid for a nation, and billions (with a B, 1000 times as much as a million) on a fighter that can't fly near navy ships, other planes, or above a microwave oven...
Get is straight.
Last week Central bankers met in Jackson Hole to celebrate Greenspan, the man more responsible for the current economic meltdown than even Bernanke, Geithner or Paulson, three major players.
If you think our Government let alone the 80% privatized Federal Reserve, is any longer of, by or for the people you are an ignorant fool. Human beings are merely fodder for Corporations. Unless you happen to have been born a Rockerfeller, Rothchild, et al. Our Founding Fathers are rolling in their graves.
Yet of all the things you mention in this article Interest is the one thing that is most destructive.
Interest paid to the Central Banking System when the USA can issue all the Interest Free Debt and increase or decrease the money supply to control inflation.
Those who would have a one world Government and destory the U.S. Constitution, Bill of Rights and take away the independence of the United States for a place in the North American Trading Block .
Please do not expect us to help you and the Central Bankers bury our Flag for a government run of the Bankers by the Bankers for Private Profit. Economic Slavery is not in my countrys future.
Devalue the Dollar if they will not increase value of their currency to balence the trade. See if they like that policy.
In the end who really cares the Federal Reserve Dollar does not repersent true value in the USA it is a Fictional thing with Fictional value.
How about Robert Rubin destabilizing the Peso, for fun and financial gain, as a sign of our financial responsibility? WE have not reformed our banking practices, ..... no wonder the influence of the dollar is practically in free fall.
Anyway, the nature of the beast is that salaries model productivity, and that as our ability to produce goods fails to increase as quickly as other nations labor productivity, we will get less stuff per dollar. Whether that occurs by stagnant wages or by inflation only matters to the rich and those in debt. The former hate inflation, the latter love it.
There is no parity for the dollar. The game has been fixed since the end of WW2.
If there were free trade, currency valuations would adjust and wipe out trade deficits, right? The game has been fixed for a long long time. It has no reflection to theory which is mostly realized as modern propaganda and as the foolish enablers watch the chickens come home to roost we may get to experience the pinch of a bananna republic. (I think that permitting OPEC to extort U.S. dollars from around the world has been our biggest crime and you can figure out who has shared in this)