Dollar's Fall Is Felt Around The Globe-Weakening U.S. Currency Harms Overseas Markets

[babylonsister]

Dollar's Fall Is Felt Around The Globe
Weakening U.S. Currency Harms Overseas Markets

By Anthony Faiola
Washington Post Staff Writer
Monday, December 24, 2007; Page A01


The sharp decline of the U.S. dollar since 2000 is affecting a broad swath of the world's population, with its drop on global markets being blamed at least in part for misfortunes as diverse as labor strikes in the Middle East, lost jobs in Europe and the end of an era of globe-trotting rich Americans.

It marks a shift for Americans in the global economy. In times of strength, a mightier dollar allowed Americans to feed their insatiable appetite for foreign goods at cheap prices while providing Yankees abroad with virtually unrivaled economic clout. But now, as the United States struggles to fend off a recession, observers say the less lofty dollar is having both a tangible and intangible diminishing effect.

"The dollar was the dominant force in world economics for 100 years -- we had no competition," said C. Fred Bergsten, an American economist and director of the Washington-based Peterson Institute for International Economics. "There was no other economy close to the size of the United States. But all that is now changing."

The dollar is down more than 40 percent against the euro over the past seven years, taking a particularly sharp drop last month. Despite a bit of a rebound in recent weeks, the dollar is still off nearly 12 percent since Jan. 11, when it hit its peak for 2007.

For now, that drop is allowing the U.S. economy to reap rewards. American products have become exceedingly competitive, boosting exports ranging from Caterpillar tractors to Boeing jumbo jets that are now relative blue-light specials in the global marketplace. Using the same logic of chasing cheaper local production costs that has driven many U.S. factories to China, a few iconic European companies, including Airbus, are set to shift some manufacturing lines to the United States.

But for untold millions worldwide, the weak dollar has emerged as a troubling dark spot. Take Ngengi Mungai, a Nairobi coffee exporter trapped between the weaker dollar and the rapidly appreciating Kenyan shilling -- which gained as much as 12 percent against the dollar this year amid an export-driven economic surge across much of Africa. His coffee sales overseas, as with the bulk of global commodities, are priced in weaker dollars. But he must then convert them into stronger shillings to cover his local costs for local labor, materials, even the clothes on his back. It has cut sharply into his annual income.

"Basically," Mungai said, "it's bad."

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http://www.washingtonpost.com/wp-dyn/content/article/2007/12/23/AR2007122302441.html?hpid=topnews

[lisainmilo]

1. America for sale: as our government careens towards bankruptcy

http://www.thefreelibrary.com/America+for+sale:+as+our+government+careens+toward+bankruptcy,...-a0151661787

"We begin with a parable: Driven to the streets after a run of relentless misfortune, a man took up station on a street corner holding a hand-lettered sign stating: "Will work for food."

Most pedestrians and motorists passed the desperate man without so much as a second's worth of thought. One exception was a well-dressed businessman, who read the sign while waiting for the street light to change. But burdened by thoughts of his own concerns, the businessman gave in to a moment of imprudent sarcasm.

"You 'work for food'? I work for Visa!" he exclaimed to the sign-bearing man. "I'm working for food I ate years ago!" After getting the green light, the businessman launched one last unworthy gibe:

"You're not broke--you're even!"

The homeless man eventually found a steady job paying just enough for him to get by and save a little money. His employer, a large and amoral conglomerate paying most of its employees subsistence wages, used its workers' savings (which the conglomerate controls) to make loans to spendthrifts' like the heavily leveraged businessman--people who continued to live well beyond their means by stretching their credit lines well past the breaking point. At the same time, the conglomerate quietly used its' expanding financial holdings to buy up practically everything in sight.

Eventually, the loans were called in, the debtors were unable to pay, and the businessman found himself--along with many of his fellow spendthrifts--working for that same predatory conglomerate. His earnings and standard of living were "harmonized downward" to those of the homeless man whose plight he had once mocked."

"Adapted from a stand-up routine broadcast on Comedy Central about a decade ago, this parable is not intended to inspire mockery of the homeless or other unfortunate people. It's intended to encourage a realistic appraisal of our national economic condition. Think of the homeless man as symbolizing the poor but industrious Chinese population, willing and eager to work for a fraction of what Americans earn, and the businessman as a stand-in for an American population whose prosperity is largely a debt-enhanced illusion.

The conglomerate, of course, is the entity upon which our nation and our government have become increasingly dependent to underwrite that pseudo-prosperity: the Communist Chinese regime, which is rapidly acquiring the means quite literally to buy our country out from underneath us.

Indeed, the process of selling off public assets to foreign interests is already underway.

In June, for example, a Spanish-Australian conglomerate paid $3.8 billion to lease the Indiana Toll Road. Transfer of electronic tolling equipment began in August, and by fall it is expected that the new foreign owners will be collecting tolls once paid by Indiana residents to their own state government. And similar deals are being struck by states and municipalities across the country.

"Roads and bridges built by U.S. taxpayers are starting to be sold off, and so far foreign-owned companies are doing the buying," reported the Associated Press on July 15. At present the main foreign players in these deals are companies based in Australia and Spain. But as China accumulates ever-increasing quantities of depreciating dollars, it will start looking for tangible goods in which to invest those dollars. And as we will see, some analysts in this country are suggesting that we should welcome Chinese "direct investment" in our country as a way of closing our imponderably huge "fiscal gap."
""Without Chinese support, the dollar would have already collapsed, bond yields would have soared, and the U.S. economy would already be in a recession, if not a depression," observe Bill Bonner and Addison Wiggin in their study Empire of Debt: The Rise of an Epic Financial Crisis. "Where does the money come from? The Chinese get the dead presidents from selling products to live Americans, who seem ready to consume anything that comes their way. First, the dollars come rolling off U.S. printing presses, then they make their way into the hands of Chinese and other manufacturers, and finally, they are returned to their birthplace as loans. China is fast becoming America's 'company store,' to whom we owe our standard of living and maybe even our soul."

We have been sold, we must change our ways. As I have said in other post, we are at a crossroads, forced into by policies and administrations past. We must reclaim our economy, corporate American has not been good to us. John Edwards time has come, we need him more than ever.