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by
Seth Sandronsky
May
27, 2003
Treasury
Secretary John Snow recently talked about the high market value of the
dollar. And the currency market
continued to walk away from the greenback.
Snow
had suggested that the Bush White House is no longer wedded to the dollar’s
high-value versus the euro and the Japanese yen. In contrast, the Clinton White House had backed a strong
greenback under Robert Rubin and Lawrence Summers, treasury secretaries between
1992-2000, respectively.
The
value of the euro has been steadily climbing versus the dollar during the past
year. Snow’s remarks, though later
countered by chief Treasury spokesman Rob Nichols and White House spokesman Ari
Fleischer, could hasten this trend.
Well,
is the declining dollar useful? That
depends on whose ox is being gored.
A
continued fall in the value of the dollar could help American
manufacturers. The strong dollar has
driven up the cost of U.S.-made goods around the world, slicing the market
share and profits of affected American corporations.
This
has also harmed U.S. workers. A total
of 95,000 manufacturing jobs disappeared in April, according to the Labor
Department.
For
the previous 12 months, there was an average monthly loss of 40,000 jobs in
America’s manufacturing sector.
Typically, such employment is high-paying and unionized.
Crucially,
American manufacturing workers are competing in a world market glutted with an
over-supply of cars, coffee, computers, and much more that can’t be profitably
sold. Politically, the Bush White House
no doubt plans to seek support from those manufacturing workers who might
benefit from a weaker dollar.
But
under a market economy, nothing is certain for such employees except that their
employers everywhere and all the time try to grow by squeezing consumers and
workers.
“To
a some extent, the corporations will take advantage of the falling dollar by
raising prices, rather than raising employment or wages,” noted James Devine, a
political economist at Loyola Marymount University in L.A.
What
about other U.S. job sectors and the falling dollar?
“There
are major parts of the economy i.e., services which will not benefit from
the falling dollar since their products aren’t sold internationally,” Devine
added.
Moreover,
service workers are less likely to be in trade unions than those who work in manufacturing. Bush’s 2004 re-election campaign is surely
aware of this as it seeks the blue-collar vote.
Meanwhile,
the world currency market shifts from the dollar to the euro, as foreign
capital continues to flow to the U.S. to the tune of $1 billion-plus per
day. This large flow of foreign funds
into America is connected with the greenback’s rise and fall.
Lured
partly by the strong dollar, this financial process helped to lubricate the
credit boom of the 1990s, which, in turn, inflated the dot-com and stock
markets. President Clinton took the
praise for both bubbles, now burst.
It
is worth noting that in 2003, America continues to greet foreign lenders with
open arms. In contrast, some foreign
visitors are less welcome, and soon will be scrutinized with new identity
technology as they cross U.S. borders.
In
the meantime, the bloom may soon be off the rose of the current high debt loads
for U.S. consumers and corporations, fueled by foreign lenders. Why?
Consider
the process of economic growth based on structures of debt (private and public)
that must increase for the American economy to continue being the leading buyer
of other nations’ goods and services.
The IMF has warned that this trend is not sustainable for America, hence
the world.
This
makes foreign lenders holding dollar-based investments (bonds and loans) a bit
nervous. Snow’s recent dollar remarks
confirms what the IMF has publicly stated.
What’s
at stake?
“A
lot of observers point to the need for the recovery of the economies outside
the U.S. in order to push the world economy upward,” Professor Devine
noted. “The U.S. role of stimulating
the world economy through tremendous spending and borrowing seems to have run
its course, as indicated by the falling dollar.”
He
doesn’t expect that the dollar’s drop will stimulate the global system.
Against
this backdrop, Snow’s comments about the administration’s new dollar policy
flows from imbalances in the world market.
This
lack of balance is “natural” to markets for currency and other
commodities. Market instability is a
term used to say that nobody is really in control.
Seth Sandronsky is a member of
Sacramento/Yolo Peace Action, and an editor with Because People Matter,
Sacramento's progressive newspaper. Email: ssandron@hotmail.com