Dollar panic spreads to mainstream media

It’s one thing when I see far left–that is, still to the right of me–sources predicting currency collapse. According to the Independent, “just as it appeared that the dollar might have finally reached its floor, there was another warning that the sub-prime crisis is going to get worse. The US Treasury Secretary Henry Paulson, warned an international business summit in South Africa: ‘The sub-prime market, parts of it will get worse before it gets better.'” Paulson was referring to the subprime mortgage crisis, the depths of which may remain unplumbed, but the Independent goes on to quote an economist saying the dollar must decline simply because other economies have become more competitive. Officials in China–a major U.S. creditor–have indicated an interest in diversifying their holdings, which could cause the value of dollar-denominated debt to plunge and make it far more expensive for the U.S.–at all levels–to continue deficit spending.

Meanwhile, according to the Business, a British publication, “The dollar could collapse if Opec officially admits considering changing the pricing of oil into alternative currencies such as the euro, the Saudi Arabian foreign minister [Prince Saud Al-Faisal] has warned.” This was in response to “Iran’s call for oil cartel OPEC to recognise the currency’s relentless falls.” Forbes also quotes Saudi oil minister Ali al-Nuaimi saying, “We have concern for the continued depreciation for the US dollar and we want to instruct our finance ministers to safeguard our continued purchasing power and revenue.” And Bloomberg reports, “The falling dollar will trigger a ‘review’ of the [United Arab Emirates’] dollar peg, [central bank Governor Sultan Bin Nasser] al-Suwaidi said in an interview in Gwacheon, South Korea, today, signaling the emirates may drop the dirham’s link to the U.S. currency. Policy makers are considering whether to shadow a basket of currencies consisting mainly of dollars, he said.”

Kuwait has already dropped its dollar peg, and, having been antagonized by the U.S., Iran and Venezuela are already pressing for payments in alternative currencies. The Independent quoted “Chinese central bank vice-director, Xu Jian, who said the dollar was ‘losing its status as the world currency’.” If in order to purchase oil, U.S. importers must sell dollars to purchase an alternative currency first, this will tend to raise the value of the alternative currency and lower the value of the dollar.

It has been argued that due to globalization, the U.S. is so heavily dependent on imports that the weaker dollar’s boost to domestic manufacturers will be substantially outweighed by increased costs for foreign goods. While that boost may have narrowed the trade deficit, it was still at $56.5 billion for the month of September.

It becomes harder to see how the doomsters on the left (but still to the right of me) who have predicted a dollar collapse, accompanied by high inflation, are wrong. And, as usual, this development will disproportionately impact those who have the least ability to revalue their assets in alternative currencies. The rich, who have profited from bubbles past and present, can take those profits overseas. The poor, who are stuck dealing with dollars, are helpless.

Author: benfell

David Benfell holds a Ph.D. in Human Science from Saybrook University. He earned a M.A. in Speech Communication from CSU East Bay in 2009 and has studied at California Institute of Integral Studies. He is an anarchist, a vegetarian ecofeminist, a naturist, and a Taoist.

Leave a Reply