I thought maybe I was the only one on earth who noticed the dollar's decline. Then I read this:
At home, the End Times have already been clearly signalled by the triumph of the Anti-Christ, otherwise known as the Democratic Party, in the midterm elections. Abroad, the leader of the world’s sole superpower must hear the ominous clatter of horses’ hooves and the steady swish of their riders’ scythes through the burning fields of his foreign policy.How bad is it?
War in Iraq is melting down US resolve. In Lebanon, another assassination and another political crisis have highlighted America’s weakness and the ascent of its adversaries, Iran and Syria, in the struggle for power in the Middle East. On the streets of London, lethal radiation strikes down an enemy of Mr Bush’s old friend, Vladimir Putin.
And just when you think War, Death and Pestilence have the field all to themselves, along on the rails comes the fourth horseman — the nightmare of every beleaguered US president — a collapsing dollar.
The US currency has been in something of a crisis this week, falling by three cents against the once-derided euro and by almost seven cents against the pound. Measured against a basket of the world’s main currencies it is down by more than 2 per cent in a week. That may not sound like much, but when you consider it is more than the dollar has moved over the previous six months, it qualifies as an Event.
The last time the dollar fetched only 50 British pence for longer than a trading day or two was in the spring of 1981, when America was in its deepest recession since the 1930s, inflation was more than 10 per cent and the nation was still in shock from the attempted assassination of its president.The funny thing is, I find myself hesitating slightly to post stories like this...
What if the three people who regularly read my blog take this seriously? What if they tell their friends, thereby triggering a global economic meltdown? Would it be all my fault? Wouldn't we all be better just pretending that everything is fine?
If future generations are reading this, I am sorry. It's all my fault, obviously. Unless you want to blame the Chinese:
The dollar surely needs to keep on falling. What matters is that its drop is an orderly and stable one, not a sudden collapse.
So far the decline has been remarkably steady over the past five years, and there is no real reason to think it will not continue — thanks mainly to China. While private investors may have grown wary of the US, the Chinese Government has been doubling its bets there, investing in US official debt, keeping American interest rates low and the economy expanding, and at the same time ensuring that American consumers keep buying Chinese-made goods.
The Chinese understand that the dollar needs to fall much further; but a sharp and disorderly drop is no more in Beijing’s interests than it is in Washington’s. They can presumably be relied on to manage the dollar’s decline.
Uniquely in the modern history of international financial markets, the world’s most important currency is underwritten by the economic policies of another country. That may be uncomfortable for both of them. But it represents far from an Apocalypse for the US economy — more a kind of Revelation for a beleaguered president.