Posted on 07/12/2002 10:59:14 AM PDT by madeinchina
The United States contributed tens of billions of dollars to International Monetary Fund bailouts in the 1990s, starting with the Mexican peso devaluation of 1994-95. When the Asian financial crisis hit in 1997, the Clinton Administration let Japan take the lead in bailing out Thailand, but joined the IMF interventions in South Korea, Indonesia, Brazil, and Russia. And in 1998, the U.S. agreed to a $17.9 billion increase in its contribution to the IMF.
Now it is the United States that is seeing its currency devalue on world markets, dropping 12% against the euro since January. Over the 4th of July weekend, when Americans were celebrating their supposed independence, Horst Kohler, the IMF's managing director, was suggesting "international co-ordination of exchange rates" if there was a run on the dollar. He expressed worry about "a widening current account deficit which raises concerns over the sustainability of capital inflows to the United States and the valuation of dollar assets."
The scandals rocking several major corporations would not cause the level of concern that they have unless the foundation of America's international financial position had not already been weakened. The damage was done under the Clinton Administration, but the Bush Administration has been slow to recognize the danger.
While discussing the Asian crisis in November 1997, President Bill Clinton said, "I made a decision...that we would do everything we could to leave America's markets as open as possible, knowing full well that our trade deficit would increase dramatically for a year or two." The idea was to help stricken economies export their way out of recession. It has now been five years, Asia is still stagnating and the U.S. trade deficit has tripled. In 2000, the U.S. current account was in deficit by $444.7 billion, to which the trade deficit contributed $375.7 billion. The net international investment position of the U.S. was then a negative $2.2 trillion, a little over a fifth of gross domestic product.
While the debate over U.S. trade policy has focused on lost jobs and plant closings, the aspect most important at the moment is that the massive trade deficit has to be financed. It is because the U.S. must cover such a large amount with foreign capital that economists worry about sudden, destabilizing events that could shift the financial flows away from the America market and send the dollar plummeting.
Rebuilding confidence in the future value of the dollar is more important than rebuilding confidence in U.S. bookkeeping because the stakes are higher and the problem larger. Yet, while President Bush made a much heralded speech in New York July 9 and signed an executive order creating a Corporate Fraud Task Force to root out white-collar crimes, he has not shown the same desire to come to grips with the country's vulnerability to international economic factors.
The administration's policy on the dollar was stated by President Bush on June 26 when he said that the dollar's value depends on market forces, including "whether our country can rein in spending, recover, and revitalize our manufacturing base." As a statement of principles, this is fine; but Bush has not yet completed the thought process by moving from principle to sustained action in accordance with a formulated strategy.
A strategy that redirected attention towards domestic economic growth, substituting American production for imports would meet two of President Bush's goals: a stronger recovery and the revitalization of the manufacturing base.
It would also be good for the stability of the global economy in the long-run. In his July 4 speech to the Treasury Select Committee of the British House of Commons, Horst Kohler argued "what is also needed to strengthen the global economy is more robust, domestic demand-driven growth in other advanced economies." He made this suggestion in the context of helping lessen the U.S. problem of financing its trade deficit with such large amounts of foreign capital.
Foreign governments are not going to voluntarily make the shift away from export-led growth strategies, with their cutthroat tactics against American producers and other trade rivals. And they are certainly not going to throw open their markets to higher imports the way President Clinton did. If change is to occur, it will have to come about through American pressure.
President Bush did act to slow the flood of steel imports, which was a needed corrective to President Clinton's policy of setting America up to take the hits from problems originating overseas. But he has weakened this response by granting hundreds of exemptions to appease foreign opinion and by portraying the steel case as an unique situation based on domestic politics, rather than part of a broader rethinking of past policies based on a more realistic international strategy. Bush needs to broaden his policy countermarch, not on an ad hoc basis of individual industries, but with an eye to righting the nation's overall trade balance. The United States must not allow itself to so vulnerable that a few mouse clicks by foreign investors could send the country into an economic crisis.
No one. ther is no gratitude. Plus our "bail outs" were mostly sops to banks.
WILL YOU PLEASE GO FU** YOURSELF.
Saudi Arabia?
As for extreme example, why can't a curency crash happen here? There is no guarantee that America has to be the world's preeminent economic superpower. If you were an investor and looked over our national balance sheet, would you invest here? Massive trade and budget deficits, huge piles of corporate and consumer debt and endemic corruption in the business and government. Looks like a sure sell to me. Esp. when I know that I can invest in markets which can still export to the US easily (that is everywhere) but I don't have to pay the inflated prices for equities that I do in the US.
The rest of the world doesn't have the oomph necessary to bail out America if we really need bailing out. The real question is "How long will the New Dark Ages last if America craters?"
You've just contradicted yourself. If there is an American currency crash, then the folks that export large amounts of stuff to America will also crash, and those securities will be worthless.
By contrast, assume the dollar rises to 110 yen. Now, in order to gross 10,000 yen, they only have to charge you 91 dollars.
Let's say that after Rome fell, Europe went into the Middle Ages that lasted for a thousand years. I predict that if America should fall apart in the similiar way of Ancient Rome, the Dark Ages will not last a thousand years but for ten thousand years.
By the way, have you read the Foundation Series?
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