Fears of dollar collapse as Saudis take fright

[Fish]

Paul Kennedy

Sunday March 3, 2002
Observer
'By what right,' an angry environmentalist demanded at a recent conference I attended, 'do Americans place such a heavy footprint upon God's Earth?' Ouch. That was a tough one because, alas, it's largely true.
We comprise slightly less than 5 per cent of the world's population; but we imbibe 27 per cent of the world's annual oil production, create and consume nearly 30 per cent of its Gross World Product and - get this - spend a full 40 per cent of all the world's defence expenditures. By my calculation, the Pentagon's budget is nowadays roughly equal to the defence expenditures of the next nine or 10 highest defence-spending nations - which has never before happened in history. That is indeed a heavy footprint. How do we explain it to others - and to ourselves? And what, if anything, should we be doing about this?
I pose these questions because recent travel experiences of mine - to the Arabian Gulf, Europe, Korea, Mexico - plus a shoal of letters and emails from across the globe all suggest that this American democracy of ours is not as admired and appreciated as we often suppose. The sympathy of non-Americans for the horrors of 11 September was genuine enough, but that was sympathy for innocent victims and for those who had lost loved ones - workers at the World Trade Centre, the policemen, the firemen.
There was also that feeling of pity that comes out of a fear that something similar could happen, in Sydney, or Oslo, or New Delhi. But this did not imply unconditional love and support of Uncle Sam.
On the contrary, those who listen can detect a groundswell of international criticisms, sarcastic references about US government policies, and complaints about our heavy 'footprint' upon God's Earth. Even as I write, a new email has arrived from a former student of mine now in Cambridge (and a devoted Anglophile), who talks of the difficulty of grappling with widespread anti-American sentiments. And this in the land of Tony Blair! It's lucky he's not studying in Athens, or Beirut, or Calcutta.
Many American readers of this column may not really care about the growing criticisms and worries expressed by outside voices. To them, the reality is that the United States is unchallenged Number One, and all the rest - Europe, Russia, China, the Arab world - just have to accept that plain fact. To act as if it were not so is a futile gesture, like whistling in the wind.
But other Americans I listen to - former Peace Corps workers, parents with children studying abroad (as they themselves once did), businessmen with strong contacts overseas, religious men and women, environmentalists - really do worry about the murmurs from afar. They worry that we are isolating ourselves from most of the serious challenges to global society, and that, increasingly, our foreign policy consists merely of sallying forth with massive military heft to destroy demons like the Taliban, only to retreat again into our air bases and boot camps.
They understand, better than some of their neighbours, that America itself has been largely responsible for creating an ever more integrated world - through our financial investments, our overseas acquisitions, our communications revolution, our MTV and CNN culture, our tourism and student exchanges, our pressure upon foreign societies to conform to agreements regarding trade, capital flows, intellectual property, environment and labour laws. They therefore recognise that we cannot escape back to some Norman Rockwell-like age of innocence and isolationism, and fear we are alienating too much of a world to which we are now tightly and inexorably bound. After my recent travels, this viewpoint makes more and more sense to me.
So what is to be done? One way to clearer thinking might be to divide outside opinion into three categories: those who love America, those who hate America and those who are concerned about America. The first group is easily recognisable. It includes political figures such as Lady Margaret Thatcher and Mikhail Gorbachev; businessmen admirers of US laissez-faire economics; foreign teenagers devoted to Hollywood stars, pop music and blue jeans, and societies liberated from oppression by American policies against nasty regimes. The second group also stands out. Anti-Americanism is not just the hallmark of Muslim fundamentalists, most non-democratic regimes, radical activists in Latin America, Japanese nationalists and critics of capitalism everywhere. It also can be found in the intellectual salons of Europe, perhaps especially in France, where US culture is regarded as being crass, simplistic, tasteless - and all too successful.
Since there is little that can be done to alter the convictions of either of those camps, our focus ought to be upon the third and most important group, those who are inherently friendly to America and admire its role in advancing democratic freedoms, but who now worry about the direction in which the US is headed. This is ironic, but also comforting. Their criticisms are directed not at who we are, but at America's failure to live up to the ideals we ourselves have always articulated: democracy, fairness, openness, respect for human rights, a commitment to advancing Roosevelt's 'four freedoms'.
Three times in the past century most of the world looked with hope and yearning toward an American leader who advocated transcendent human values: for Woodrow Wilson, Franklin D. Roosevelt and John Kennedy made hearts rise abroad when they rejected narrow 'America First' sentiments and spoke of the needs of all humankind.
It is a return to this tolerant and purposeful America that so many worried and disappointed foreign friends want to see. Unilateralist US policies on land mines, an international criminal court and Kyoto environmental protocols fall well below those expectations. Underfunding the United Nations seems both unwise and contrary to solemn pledges. Committing an extra $48 billion to defence, but not committing to amounts or percentages for next month's Monterrey conference on financing development looks hypocritical. In fact, a few of these US policies (for example, on the early Kyoto proposals) can probably be well defended. But the overall impression that America has given of late is that we simply don't care what the rest of the world thinks. When we require assistance - in rounding up terrorists, freezing financial assets and making air bases available for US troops - we will play with the team; when we don't like international schemes, we'll walk away. My guess is that every American ambassador and envoy abroad these days spends most of his time handling such worries - worries expressed, as I said above, not by America's foes but by her friends.
Finally, individual policy changes matter much less than the larger issue. There is a deep yearning abroad these days for America to show real leadership. Not what Senator William J. Fulbright once termed 'the arrogance of power', but leadership of the sort perhaps best exemplified by Roosevelt. This seems to be what EU external affairs commissioner Chris Patten wants when he voices his worries about America shifting into 'unilateral overdrive'.
It would be a leadership marked by a breadth of vision, an appreciation of our common humanity, a knowledge that we have as much to learn from others as we have to impart to them. It would be a leadership that spoke to the disadvantaged and weak everywhere, and that committed America to join other advantaged and strong nations in a common endeavour to help those who can scarce help themselves. Above all, it would be a leadership that turned openly to the American people and explained, time and time again, why our deepest national interest lies in taking the fate of our planet seriously and in investing heavily in its future. Were that to happen, we would fulfill America's promise - and probably get a surprise at just how popular we really are.

· Paul Kennedy CBE, Professor of History and Director of International Security Studies at Yale University, is the author of The Rise and Fall of the Great Powers

http://observer.guardian.co.uk/print...110490,00.html

[Skybird]

Originally Posted by Fish

Haven't I said that guy is clever!?

[mookiemookie]

I once worked for a money manager who had been in the business for 50-some-odd years and the best piece of advice he gave me was that "it's never as bad as they make it out to be, and it's never as good as they make it out to be." I think a lot of the financial media gets wrapped up in these doom and gloom predictions in order to sell papers. But that's just me.

Here's a viewpoint I read the other day that I put some faith into. It makes the case that sure, the dollar is weakening versus other currencies, but who's there to replace it? No one, yet.

http://blogs.telegraph.co.uk/busines...arcollapse.htm

There's another one that tempers some of the "Chicken Little" feelings here, as well. It makes the case that economic health and currency strength aren't as correlated as you'd think: http://www.timesonline.co.uk/tol/com...cle2062059.ece

[SUBMAN1]

Skybird - you are living in fantasy land. Smart people write smart documents that describe the state of things in exact detail to a fine hair, yet you have this other worldly ideas that don't originate on planet Earth that have no bearing on what is real! How can you discount what is reality with all that fantasy about how you see things? It doesn't work. Come down to Earth for once and give some fact, not opinion. We all have our opinions.

Thanks,

-S

[Letum]

Originally Posted by SUBMAN1

Skybird - you are living in fantasy land. Smart people write smart documents that describe the state of things in exact detail to a fine hair, yet you have this other worldly ideas that don't originate on planet Earth that have no bearing on what is real! How can you discount what is reality with all that fantasy about how you see things? It doesn't work. Come down to Earth for once and give some fact, not opinion. We all have our opinions.

Thanks,

-S

It might be more constructive to point out where you think some one is wrong rather than just saying you think they are.

[SUBMAN1]

Originally Posted by Letum

It might be more constructive to point out where you think some one is wrong rather than just saying you think they are.

I did - its pure opinion and I stated that above - maybe I wasn't clear on that point? Give me some facts instead of stating this is true because I said so. Give me some alternate sources. We all have our opinions here and I don't need to see opinions. That is the point.

-S

[Letum]

Originally Posted by SUBMAN1

I did - its pure opinion and I stated that above - maybe I wasn't clear on that point? Give me some facts instead of stating this is true because I said so. Give me some alternate sources. We all have our opinions here and I don't need to see opinions. That is the point.

-S

But you haven't backed your self up with any reasoning. You have just presented a......errr....opinion!
It's hipocracy in the extreme!

[SUBMAN1]

Originally Posted by Letum

But you haven't backed your self up with any reasoning. You have just presented a......errr....opinion!
It's hipocracy in the extreme!

Seems you have failed to read the whole thread. Go back and re-read.

-S

[Etienne]

And suddenly, working for a foreign company (They generally pay in USD) is a LOT less attractive.

The canadian dollar is probably going to reach the USD soon anyway... Scary.

[SUBMAN1]

Originally Posted by Etienne

The canadian dollar is probably going to reach the USD soon anyway... Scary.

It has - it is 1:1 right now.

-S

[Heibges]

They said the same thing when the Europeans stopped buying our debt 20 years ago.

[Skybird]

Whatever, Subman. When the euro was introduced you also said (I think it was you), it would never make it to the 1,40 mark and would always remain to be weak and unattractive. Currently it is pulverising your mark, is predictet to reach 1,60 within one year, and in Asia, Arab nations, and southern America the yearning is strong to jump from dollars to Euros.

All as I predicted by using my often mocked crystal orb, if I may add that in all modesty.

The US capitla market is living on tick. And now that even the major leading european banks like the Detusche Bank admitted to have spöeculated in high risk operations connected to the mortgage crisis, banks and investment funds from Asia and Europe will be far more hesitent and careful to inject their money into you again so uncritically. Consequences: for your deficits, national investements, jobs. It unfolds slowly, but constantly.

But don'T worry, I am just off reality and living on another planet, so what do I know. Two international top investement advisors from Switzerland, and America, in past weeks had said the same like I did and even admitted to have sold their portfolios for that reason. Random chance only, so party on.

[flyingdane]

Originally Posted by Rockin Robbins

Europe is no place to look for economic widsdom. What they mistake as a M.A.D. strategy is in reality co-dependency, which operates for the good of all. The presence of defects does not invalidate a process. There were plenty of defects in the German WWII submarine plan. The process was brilliant. The execution was admirable. It's defects were fatal.

A capitalist economy, because it relies on the interdependence of people operating in their own self-interst is resilient, simply because it has so many independent contributers to the system. It is loss-tolerant, operates above logic (what works, works, almost randomly tried), optimizes allocation of resources and allows universal opportunity to leave class boundaries because it is a meritocracy. In the US, we are learning how much stronger and more beneficial is the private economy than government manipulation. So long as government confines its actions to eliminating fraud, ensuring that opportunity is not denied for reasons of race, creed, or religious belief, runs the police force and the military, it is doing its job. Competing or eliminating business is just tyranny. Economic rights are as important as personal rights. Individual rights to life, liberty and property are the center of public good.

Well said!!..

[flyingdane]

Originally Posted by Rockin Robbins

The strength of the American economy is much more than the strength of the American government. Also the interdependence of world economies makes such offensive economic warfare more dangerous and costly to the attacker than the defender. America can afford losses on a scale unimagined by the world. That was the lesson of WWII. Pity it has been forgotten.

Wishing for the weakening of the US is understandable. Actually working to produce it is working against one's own best interest.

Amazing insight Fantastic stuff.

[Von Tonner]

Skybird, economics is not a forte of mine but I have a question. Would not the reintroduction of the gold standard help to bring some sanity and what would this do for SA if this happened?