The front page of the Independent is positively hilarious this morning. The headline is: "The dollar's decline: from symbol of hegemony to shunned currency". The article is basically a tub-thumping opinion piece on the brilliance of the Euro because the US dollar is experiencing a downturn. I'm not sure how many times I've read these types of stories in the past few years, but whenever the dollar has had a slide there is talk, usually from the pro-euro press in the UK, about how it represents the end of the Greenback's global hegemony and the beginning of the Euro's rise to dominance.There's no doubt that the US dollar is not a currency that you would take out of choice right now. However, as I alreayd said, there have been a number of stories over the past number of years where there is talk of the USD losing its reserve currency status. I even thought it might be possible at first, then I got with reality. Sure, the US economy is reeling from the credit crunch. I see the Indy has also mentioned the hip hop star using Euros in his latest music video. Who'd have thought an anti-establishment US rapper would be so... errr... anti-establishment.
7 comments:
At $2.11 to the pound the dollar was a great buy. Wish I'd had the facilitiy to buy it.
Personally I think the Euro is only rising becuase the pound and dollar are weak (the dollar almost certainly intentionally), shame that can't be said of the pound.
The Dependent on Press Releases is a great one for taking a downturn and spinning it into a fundamental change. Next it will be 'oh it's sunny today, oh no Global Warming'.
The Mighty Boosh has had the Euro as the currency of choice for years. Where's the story?
The US dollar is the only currency in general decline at the moment. All the other currencies by and large seem to be maintaining parity with eaxh other at what they have been for the past several months. There really is nothing special about the euro per se. Swiss francs are just as good (if not better) as a currency to be paid in.
Somebody from overseas mentioned elsewhere (sorry I can't recall on whose blog I saw it)that the BBCWorld TV business correspondent or editor(?) mentioned the story of this singer demanding to be paid in euros. She ended her report with "What a good idea! Perhaps we should all be paid in euros". The commenter wonder whether she (or the BBC) were trying to tell us something.
The BBC was lapping it up on Radio 4 this morning. Supermodels and even a pop star have asked to be paid in Euros, shunning the dollar they reported excitedly.
The BBC speculation was whether the dollar could ever recover and if the Euro was now the global currency.
Like you say Dizzy, there is a downturn. But the USA market produces goods and and services Europe is trying to hard to mimic - at great cost to the taxpayer. The blip is temporary. The US economy is more sustainable and robust than the European economies once you exclude the subprime issue.
It was just another example of the BBC promoting its worldview of Europe - good, US - bad. It is all very sad really.
The dollar fall is caused in large part by the trade deficit. Since the Chinese refuse to remove the Yuan peg, instead of the Yuan rising the pressure is on the dollar to fall against all currencies.
Essentially the US government is refusing to prop up the artificial exchange rate with the Yuan.
The medium term result will be that the US trade deficit heads down.
The reason that the Chinese are trying to sell dollars is not some complex plot against the West, but trying to get their assets out before they fall further.
The reason that they are trying to keep the Yuan peg is that if exports to the US fall, the Chinese economy is in trouble. Lots of middle class people will be out of work. Historically that is the road to Bad Things for the government. The Chinese government want to hold onto the trade deficit until the Chinese economy has developed far enough that domestic demand can pick up the slack.
Oil is effectively priced independently of the dollar and has been for years, by the way. The dollar falls, and the price rises.
Legendary investor Jim Rogers has urged dollar dumping.
But maybe he's just been caught short.
He also dismissed Fed chief Bernard Bernake as a "total fool".
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