I get this guys columns via email 3 times a week or so. A lot of them are hard to understand because they refer to local Philipino controveries and personalities that I'm not knowledgeable about, but he also talks a lot about the impact of globalization on the Phillippines. Here's his column for next Wednesday's Manila Tribune edition, Robert Waldrop, OKC, new edition better times webzine

A Dollar situationer. (Herman Tiu Laurel/ Diehard III/ Tribune column for 8-15-2001 Wednesday)

Currencies have risen against the US $. The Indonesian Rupiah rose from lows of R11,000 to R8,300 as of yesterday, is it due to Sukarnoputri good news?. But the Taiwan dollar has risen from around NT 36 to NT 34 despite its beleaguered export sector. The Euro has bounced back from a low of $ 0.83 to almost $ 0.90. Even the Yen has strengthened despite its recession. BSP chief Buenaventura crows that it’s “fundamentals” pushing up the Peso, but that is a facile fiction. It is more plausible that the US is allowing a weakening of its dollar.

Two weeks ago we read reports that the American automobile giant General Motors was lobbying the U.S. government to weaken the dollar. On July 30 the New York Times reported that, "On July 19, President Bush pointed out that the dollar's high value relative to other currencies had dampened demand for American exports and hurt corporate profits, suggesting the need for corrective action." While this went on, U.S. Treasury Secretary Paul O’Neal has kept the world off-balanced it by continually asserting that the “strong dollar policy” stays.

Secretary O’Neill’s firm announcements are meant to rein in speculation that the weak dollar talk may trigger. But there’s no question anymore that a weakening of the dollar is seriously being considered. I am of the view that they are already implementing a program to do a “controlled” weakening of the dollar, and the worldwide realignment of currencies is the effect of that. However, this will not change the fundamentals of the world economy and, therefore, it will not reverse the trend towards global economic collapse that the era of “globalization” has ushered in.

The U.S. would weaken the dollar for only one reason: to increase its exports. But to whom will it export? The vast majority of countries in the world are deep in recession or depression, caused by four decades of globalization. Third World countries like the Asia and Africa are complete impoverished. They’ve been after almost half a century of continuous devaluations of their currencies and usurious debt payments. Japan has been in recession for ten years, Europe unsure it’s out of the doldrums. And unless it’s hi-tech goods, the parsimonious Chinese won’t buy much.

Fears also haunt international finance bosses that the dollar may “careen out of control, once it begins to fall”. Former Treasury Secretary Rubin believes the strong-dollar is still the safest policy, but Goldman Sachs chief economist William Dudley says, "The time has probably come to scrap the so-called `strong dollar' policy. To fail to do so now, when the demand for dollars is still strong, heightens the risk of a sharper adjustment later.” Paul Volcker, the ultra-globalist, said to a Congressional hearing that stability might need "some strengthening of the euro and the yen relative to the dollar."

The EIR, from where I culled these information, reports on the Economic Strategy Institute debate on the dollar. "Is the value of the dollar harming the global economy?" was the theme of the debates. There are those who say that, “businesses are suffering from the strength of the dollar, and those who say without a strong dollar, you cannot finance the accounts deficit.” The question is asked why the dollar is still strong despite the U.S. current accounts deficit and stock market collapse. One reason is the large number of financial instruments that are denominated in dollars.

Moussa from the IMF, off the record, said that if the dollar weakened too fast, “…it would create inflationary pressures and undermine capital flows." But Bear Stearn's David Malpass says he's "trying to find a third way.", which may be the “controlled weakening”. By July 31, Bloomberg warned of a dollar fall. According to some European analysts the Euro is the choice to go to. However a Danish newspaper analyst says a fall "will totally destroy the already weakened world economy". How Europe will fare when the world economy goes into its final collapse with a dollar fall?

Imagine where the rest of the world will be, except in the exceptional economy of China. The Philippines will be particularly hard hit, being import dependent with very little to export and no more US market to export to. Which way will the peso will go? Find out in our next columns. (My e-mail: htlfam@pacific.net.ph ; tune to 558 AM Saturday 9pm economic analyses , Sunday 10pm media critiques) ###

-- robert waldrop (rmwj@soonernet.com), August 14, 2001

Answers

Confusing situation, and here's a parallel that only makes it more confusing. In 1986 the dollar was even stronger than now. Difference was that, world-wide, economies were much stronger than they are today. This led to the big Oct., 1987 stock market collapse, when the Dow fell 23% in one day. But, it made little difference because other world economies were strong enough to take the punch and recover. They acutually helped the U.S. bounce back quickly by being able to cover its enormouse trade imbalance with more exports. Now, the cupboard seems bare.

Who knows for sure? It's a gigantic crap shoot out there. As far as the outcome, go figure.

-- Billiver (billiver@aol.com), August 14, 2001.