And For Those Who Believe Things Don't Or Cannot Change....
I present you with this little article I have saved for some time to post at what may be considered an appropo time.
An interesting read as we move forward.....enjoy-O!
April 25, 1995
CURRENCY TURMOIL: U.S. MUST RESCUE SPENT DOLLAR
The dollar's 20 percent slump against the yen and the turmoil it has
caused in financial markets will be the main topic of discussion during
a series of financial meetings of the G-7 and central banks beginning
today in Washington. A majority of analysts overseas commenting on the
Washington meetings did not hold out much hope that mere "deliberations"
would help the dollar's predicament. Rather, they said, it is up to the
U.S. itself to do something to shore up its ailing currency. Again,
observers were not optimistic, concluding that Washington would not take
strong action. The Clinton administration was criticized for being
short-sighted in its economic policies and more concerned with political
considerations and the upcoming presidential campaign. They saw
President Clinton and his advisors as being "indifferent" to the
downward spiral of the dollar. Some even contended that the
administration was not altogether displeased about the weakness of the
dollar, which, they pointed out, increases the international
competitiveness of U.S. exports. Pundits maintained that President
Clinton would not raise U.S. interest rates because it would slow
further economic growth in the U.S.--something which would not sit well
with American voters. A majority of media voices called on Washington
to address the root causes of the dollar's decline--huge federal and
trade budget deficits--and institute policies that would encourage
greater U.S. savings. Writers said only then would confidence in the
dollar be restored.
A number of critics were quick to point out that Japan must share
responsibility with the U.S. for the currency crisis. Labeling Tokyo's
efforts to stem the appreciation of the yen limited and "token,"
commentators argued that real positive results can be expected only when
Japan commits itself to opening its markets. Editorialists also pointed
to the lack of progress in U.S.-Japanese talks in Washington on
improving foreign access to the Japanese car market as adding to the
already tense atmosphere in the financial world.
Journalists in some countries--particularly in Asia--wondered if the era
of dollar dominance was at an end, and whether or not nations should
shift their exchange rate from the dollar to the yen. Some predicted
that a new regime is emerging where the three strongest currencies would
compete. China's official Shanghai Jiefang Daily observed, "In the
1990s, the U.S. dollar has become a spent force. With the quick rise of
the Japanese yen and the German mark, the financial domain which
dominated the world economy is facing reorganization. Some people claim
that a situation of tripartite confrontation among the three currency
systems which represent the old and new economic forces is being
formed."
This survey is based on 54 reports from 19 countries, April 17-25.
EDITOR: Diana McCaffrey
EAST ASIA AND PACIFIC
JAPAN: "G-7 Nations Must Show Resolve To Halt Dollar's Fall"
Top-circulation, moderate Yomiuri wrote (4/24), "At a series of
meetings on international monetary and financial issues in
Washington starting on Tuesday, the United States, Japan and
Germany, the countries with key currencies, must issue a message of
clear political will to stop the continuing downward trend of the
dollar.....
"So far, however, the United States has not responded to these
calls. In the United States, the cheap dollar increases the
international competitiveness of export-related companies, without
any efforts on the part of the firms, while the domestic stock and
bond markets continue their advance. A rise in interest rates in
the United States could dampen the smooth recovery of the economy.
"With the 1996 presidential election drawing near, it would be
difficult for the president to take measures for reducing the budget
deficit such as a tax hike and a cutback in expenditures. For him,
doing nothing would be the best policy.
"However, if the declining dollar is left unattended, it will
eventually pose problems for the U.S. economy. Some Americans are
beginning to express fears that the rising prices of imports from
Japan and Germany will trigger inflation. The pace of economic
growth in the United States has been slowing down. The stock and
bond markets could also suffer damage.
"Naturally, the responsibility of stabilizing the dollar does not
belong to the United States alone. Japan and Germany, which have
been rising in status as key currency nations, need to specify their
policy coordination aimed at rectifying their trade imbalances with
the United States, another basic cause of the cheap dollar."
"Dollar Slips To 79 Yen Level"
Yomiuri (4/20) opined, "The dollar slipped to the 79 yen level in
Tokyo on Wednesday following the unsuccessful conclusion of a two-
day vice ministerial meeting on autos and auto parts in Washington
and Commerce Secretary Brown's remarks suggesting possible U.S.
retaliatory measures against Japan.
"The present dollar-yen fluctuation is abnormal.... The stalemated
auto talks, if left as is, will not only have a negative effect on
the dollar-yen rate but also further aggravate the U.S.-Japan
economic relationship. Maximum efforts should be made by both sides
to find a solution to the auto dispute at a ministerial conference
scheduled to be held on the occasion of a Quadrilateral meeting in
Halifax in early May."
"Clarify Concrete Measures To Stem Yen's Rise"
Yomiuri opined (4/18), "The renewed appreciation of the yen against
the dollar in Tokyo on Monday indicated that the government's yen-
defense package, the lowering by the Bank of Japan of the official
discount rate and an APEC commitment to seek stabilization of the
dollar-yen exchange rate have not yet had their desired effects.
"The government's yen-defense package lacks concrete measures, while
the Bank of Japan's lowering of the key interest rate was apparently
anticipated by most market players both at home and abroad. Talks
between Treasury Secretary Rubin and Finance Minister Takemura held
Sunday...only served to make the U.S. lack of interest in combating
the dollar's plunge more apparent."
"Death Of Currency Mafias In Spring Of 1995"
Business-oriented Nihon Keizai (4/18) said, "The Rubin-Takemura
talks were far from successful. They only gave fresh impetus to the
upsurge of the yen and to the weakening of the dollar in trading
worldwide. The stabilization of foreign exchange rates should
always reflect the economic fundamentals of the nations involved.
Treasury Secretary Rubin turned down Finance Minister Takemura's
request that the United States issue yen-based bonds to make itself
more responsible for a foreign exchange risk. Takemura should have
known from the beginning that the United States would not comply
with such a request.
"Where have the currency experts who are known as 'currency mafias'
gone? In the first place, an accord should have been reached on
such a request at a working-level meeting of the 'currency mafias'
of both countries prior to a meeting of top finance officials.
Secretary Rubin's remarks at a press conference concerning Japan's
emergency yen-defense package were a little too hasty.
"His comment gave us the impression that it was more like a
'statement by a critic' than that of a treasury secretary. The
Rubin statement only cheered up exchange market speculators. It
seems that the so-called 'currency mafias' no longer exist in the
United States either."
AUSTRALIA: "U.S. Benign Neglect"
The business-oriented Australian Financial Review's Washington
correspondent said (4/20), "While arguably reasonable, (President
Clinton's ruling out short-term measures to boost the greenback)
risks being seen by financial markets as confirming that the Clinton
administration is prepared to pursue 'benign neglect' toward the
U.S. dollar as it pressures Japan to open its economy more to
imports. In turn, this risks adding impetus to the yen's rise and
choking off economic recovery in Japan, while spooking the U.S. bond
market with inflation fears."
CHINA: "Dollar A Spent Force"
The official Shanghai Jiefang Daily commented (4/19), "In 1949, U.S.
President Truman said to his aides that the United States had
completed the replacement of Britain and had obtained the dominant
position in the world. Therefore, the U.S. dollar would also enter
an era of comprehensively dominating the world economy.
"It can't be denied that Truman's prophesy was proven true in the
following 20 years. As a worldwide hard currency, the U.S. dollar
has indeed dominated the world economy. However, after entering the
1970s, Truman's prophesy was shaken. In the 1990s, the U.S. dollar
has become a spent force. With the quick rise of the Japanese yen
and the German mark, the financial domain which dominated the world
economy is facing reorganization.
"Some people claim that a situation of tripartite confrontation
among the three currency systems which represent the old and new
economic forces is being formed."
"Each Western Country Makes Its Own Calculations"
A commentary in official Shanghai Jiefang Daily (4/18) held, "The
only way to stop the fall of the U.S. dollar is for the United
States to raise interest rates and reduce the deficit.... The main
task of the U.S. Federal Reserve Board is to safeguard the dollar's
domestic purchasing power, but not to safeguard its international
value.... It seems that the vast developing countries can not
expect the Western countries to do anything to stabilize the
exchange markets."
HONG KONG: "The Problem Lies In America's Huge Deficits"
The leading pro-PRC Ta Kung Pao's feature column "Worldwide Talk"
carried a piece (4/25) that said, "It is unrealistic to expect that
finance ministers of the seven countries can put forth any measures
to stop the U.S. dollar from falling. The crux of the U.S. dollar
[problem] lies in the huge deficits in America's financial and
international expenditures. The U.S. dollar will drop further as
long as the problem remains unsolved."
"At G-7 Meeting, U.S. Dollar Kicked About Like A Football"
The pro-PRC Hong Kong Commercial Daily opined (4/25), "What result
will come out of the meeting of the seven big industrial countries
depends to a large extent on what the United States wishes. After
making a row, if [the finance ministers] can just say a few words to
express their support for the U.S. dollar, that will be counted as
doing the currency a great favor."
"Token Moves By Japan"
The independent, English-language Hongkong Standard said (4/19),
"The best solution, it seemed, would be for the Japanese to
liberalize their economy, promote higher imports and reduce excess
savings. The trouble is that Japan has always been unwilling to
take more than token measures to reduce its massive trade surpluses
with the rest of the world in general, and with the United States in
particular."
"Only Good Intentions Are Offered"
The independent, English-langauge South China Morning Post commented
(4/17), "Impartial observers--especially those paid in Hong Kong
dollars--may blame both sides for the instability. The adventurous
spirit and strong work ethic that turned the United States into an
economic superpower appears to be dissipating; the stoicism and
sacrifice that enabled Tokyo to rise from the ashes of wartime
humiliation appears stifled by a bureaucracy more interested in its
own future than Japan's.
"Japan and the United States must cooperate. But that alone is not
enough. They should be acting, in concert, to rectify shortcomings
on both sides that are obvious to the rest of the world. The United
States needs innovation...a cultural revolution, or sorts, on each
side. But judging by the performance of the two finance ministers,
it would be unwise to count on anything more than good intentions."
INDONESIA: "Addressing Currency Swings"
The leading English-language Jakarta Post (4/18) observed, "The
market reality and studies by various multilateral agencies, such as
the International Monetary Fund, show...that a high degree of
coordination of macroeconomic policies among the industrial
countries is a precondition to a more stable floating rate system.
We think that such coordination will be difficult to achieve as long
as the economic powerhouses, especially the United States and Japan,
continue to have divergent views on the (effects) of their policies
on exchange rates and the international monetary system in general."
"Time To Reorient From Dollar To Yen"
The indpendent Media Indonesia held (4/17), "It is time to reorient
Indonesia's policy on foreign debt management, especially with
regard to whether it is still appropriate to use the dollar as a
base currency. The trend shows that the yen appreciates more often
against the dollar than the other way around. This is significant
since most of Indonesia's debts are in yen, while exports are in
dollars. In other words, is it high time for the government to
shift the rupiah exchange rate from the dollar to the yen?"
"U.S. Dollar Still Mighty After All"
Kitch Ortego wrote in the conservative Manila Bulletin (4/22),
"Until now the scene...is of a rising Japanese yen and a sinking
U.S. dollar. Even so, the greenback commands a high respect in most
parts of the world. Whatever this note's stature vis-a-vis other
currencies, it is mighty in the perception of the majority of
earthlings, as if the British pound and the German mark did not
exist.... Even when France had more gold than the United States
had...the dollar, more or less, retained its cosmic power. It
appeared to be endowed, like the U.S. presidency, with imperial
sway."
SINGAPORE: "A Chance The G-7 Must Not Waste"
A pro-government Business Times editorial (4/25) said concerning the
G-7 meeting, "The expectations are that Japan and Germany are going
to push the United States to jack up its interest rates.
Notwithstanding the depth and the genuineness of Japanese and German
anxieties, the value of such a move in isolation is probably
dubious: rising U.S. interest rates have singularly failed to break
the dollar's free-fall during the last 14 months. In any case, the
proposal is unlikely to get anywhere. Both the U.S. Federal Reserve
Board and the Clinton administration are reported to be adamantly
opposed to interest-rate hikes because they are--not unreasonably--
concerned about pushing the U.S. economy back into recession.
"A wiser proposal would be to move toward some form of policy
coordination. Of course, wide-ranging coordination involving
detailed monetary and fiscal targeting by all of the G-7 is out of
the question; it would be a non-starter, politically, and too
unwieldy, economically. The proposal for the adoption of a
currency-target zone regime--which has been made by some experts--
suffers from the same disadvantages. However, limited policy
coordination involving the United States, Japan and Germany, would
stand a better chance. What's essentially needed are at least loose
commitments to fiscal tightening on the part of the United States,
combined with more accommodative monetary and fiscal policies on the
part of Japan and, to a lesser extent, Germany. Some acceleration of
deregulation in Japan and pro-savings policies in the United States
would also help.
"Another big challenge for the G-7 during these meetings is to come
up with a credible strategy to deal with Mexico-style financial
crises, to which a number of developing countries are potentially
vulnerable. It will not be sufficient to simply beef up the IMF's
surveillance of economic policies in the developing world, as the
United States has proposed--welcome though that would be."
"U.S., Japan Must Resolve Dollar-Yen Crisis Together"
The pro-government Business Times argued (4/18), "The dollar-yen
dilemma is not exclusively any one country's problem. It is
pointless arguing over whether this is a dollar crisis or a yen
crisis. The fact is, both the United States and Japan are in this
together. They have to resovle it together. A halfway-house
economic package from only one side is not going to do the trick.
That is why little has changed in the currency markets after what we
heard from Tokyo last week (regarding its interest rate cut and
financial package.)"
SOUTH KOREA: "U.S. Still Not Doing Anything About Dollar"
Conservative Segye Ilbo opined (4/20), "Japan has begun to take
action, but the United States is still not doing anything. The yen
appreciation is likely to continue, to the point of 70 yen for a
dollar. Ill effects from the superstrong yen are now being felt in
the ROK."
THAILAND: "America And U.S. Dollar"
Commentary in top-circulation Thai Rath (4/18) contended, "I dare
say that the U.S. government is ecstatic over the falling dollar and
has no intention whatsoever to interfere.... U.S. products are much
cheaper now...and sell more.... The most important U.S. economic
index is the (improved) unemployment rate, not the value of the
dollar."
EUROPE
BRITAIN: "A Fresh Blow To Japan"
The independent Financial Times noted on the front page of its final
edition (4/19), "The dollar fell through the Y80 level for the first
time in Tokyo early today to a new postwar low, dealing a fresh blow
to the competitiveness of hard-pressed Japanese exporters.
"The lack of progress in U.S.-Japanese talks in Washington on
improving foreign access to the Japanese car market brought the
dollar under instant attack when the Tokyo markets opened.... An
indication by President Bill Clinton at a White House news
conference last night that the United States should not risk a trade
war with Japan did little to prompt a recovery in the U.S.
currency."
"U.S. Is Indifferent"
The liberal Guardian (4/19) commented on its economics pages, "The
United States is indifferent.... In Japan, meanwhile, there is a
growing desperation over a fourth year of negligible economic growth
as exports are choked off and importers capture the slight pick-up
in domestic consumption. More ominously still, the Japanese
political system is incapable of producing a government that can
rebalance the economy and create growth--creating a crisis of
legitimacy reflected in the recent election of two comedians to the
governorships of Osaka and Tokyo. This is dangerous tinder. The
United States is abusing the international financing system and
Japan is unable either to prevent it or help itself."
"Victim"
The independent Financial Times (4/18) remarked, "For months, the
Japanese government has portrayed itself as the victim of the
vagaries of the foreign currency markets and the neglectful policies
of its Western allies, especially the United States. That Japan is
the country with the most to lose from a failure to curb the yen is
not in doubt. But a government that merely gestures at its problems
at home can hardly expect those abroad to behave any differently....
The Bank of Japan ought...to commit itself to intervening, without
limit, against the yen. Yet even this will achieve little until the
government acts to boost the economy through public works programs
and crucially much faster deregulation."
FRANCE: "G-7 Must Send Clear Message"
Martine Royo commented in economic Les Echos (4/25), "They have no
right to be wrong anymore. The G-7 finance ministers and the heads
of central banks are meeting in Washington today to find a remedy to
the currency crisis which resulted from the dollar's fall and the
instability in financial markets. There has been so much
clumsiness...and so many contradictory signals that it is high time
for the G-7 to send a clear, coherent message, if possible, together
with credible action.... For the time being, the Americans must
give tangible signs of their desire to see the dollar rise. But
Washington's partners have the impression that the Clinton
administration is powerless faced with a Republican Congress."
"Clinton Not Keen On A Credit Crunch"
Jean-Marie Macabrey noted in La Tribune (4/25), "The IMF thinks that
U.S. authorities must clearly show that they are not indifferent to
the dollar's fate. For its part, the Clinton administration is not
very keen on supporting the dollar by a credit crunch, something
which might transform the economic slowdown into a recession,
shortly before the 1996 presidential election."
"Hot And Cold Clinton Administration On Dollar"
Muriel Motte wrote in conservative Le Figaro's "Le Fig-Eco" section
(4/24), "Do the G-7 countries share a common desire to see the
dollar rise? The G-7 officials who will be meeting in Washington on
Tuesday will have to answer this elementary, though crucial,
question.... The position of the Clinton administration is
ambiguous.... Their way of blowing hot and cold has had up to now a
disastrous effect on the markets, which no longer know whom to
believe."
GERMANY: "Clinton, Rubin Paying Mere Lip Service"
Washington correspondent Dietrich Zwaetz concluded in business-
oriented Handelsblatt of Duesseldorf (4/25), "This week, when the
spring meeting of the IMF and the World Bank are taking place in
Washington, people often and impressively tell the U.S. government
and the Fed that they have a responsibility for the dollar. So far,
President Clinton and Treasury Secretary Rubin are confined to
paying mere lip service. They said that the dollar must again be
strong. But it is surprising that officials of the Fed have so far
refrained from statements (on the dollar) as if they wanted to spare
the markets from any detrimental developments. But during the
meeting of the Open Market Committee in May the Fed will have to
show its true colors: Does it want a strong dollar--or will it be
satisfied with the previous outcome of its policy at the economic
front?"
"Not Much Expected Out Of Summit"
Centrist Stuttgarter Zeitung said, "It can hardly be expected that
the financial summit in Washington will agree on a clear line, let
alone an effective defense strategy to back the U.S. dollar."
"Clinton's Pithy Words"
D. Bittermann commented on national radio station Deutschlandfunk of
Cologne (4/21), "(The downward trend) of the dollar will continue
until Washington realizes that the economic benefit of a weak dollar
is faced with a political damage which is bigger than all economic
advantages. Washington is in the process of forfeiting confidence
and losing credibility. Bill Clinton's pithy words that the United
States is interested in a strong dollar must soon be followed by
deeds namely in the form of a concept of a sound economic and
finance policy which alone will ensure the stability of a currency
and which will impress the brokers at the stock exchanges."
"Japanese Neglect"
Centrist Sueddeutsche Zeitung of Munich opined (4/24), "To show
consideration for Japan's export industry would be to show sympathy
at the wrong place, since Japan's export industry is much less
dependent on exports than the majority of G-7 countries including
Germany. So far, Japan's consumers have been neglected. They have
profited from the rapid rise of the yen only via stable consumer
prices. The enormous currency profits were...hardly passed on.
Importers partly kept them and the same is true for the multi-
faceted marketing system. The price revolution is yet to come and
only pressure from the outside can bring it about."
"Deliberations Will Not Help"
Right-of-center Dresdner Neueste Nachrichten commented (4/24),
"Those are on the wrong track who think that deliberations would
help resolve the international currency crisis. And tomorrow's G-7
meeting...will not change this. An intervention from the outside
will hardly help the ailing dollar get back on its feet. The
reasons for this lie in the United States itself. For much too
long, the United States has lived on credit. The enormous deficits
have been paid for with the creation of money...which has rather
increased the distrust in the dollar. No wonder that it is now even
more difficult to mend the open financial holes."
"Mock Arguments"
Gerd Brueggemann noted in right-of-center Die Welt of Berlin (4/24),
"Under short-term aspects, these U.S. views can hardly be disputed.
But, on the other hand, the Americans know too well that these are
mock arguments, but they allow the United States to omit measures of
which it fears it could hurt the U.S. economy.... But neither the
Fed nor the president who faces his reelection in 1996, want to run
this risk.
"In addition, it is more than doubtful whether exchange rates can
permanently be stabilized. Interventions of the central banks in
Germany and Japan have so far not had any influence on the flow of
capital.... The slow and continuing erosion of the U.S. currency is
not based on short-term changes in interest rates, but on a deficit
finance policy which has resulted in billions of debts.
"This problem has been realized, but so far, U.S. politicians did
not have the courage to make decisions which could force the country
not to live any longer beyond its means. This is also the judgment
of the financial markets about the dollar and the U.S. finance and
economic policies. The markets often overshoot the markets, and
this seems to be the case this time, too. A correction of the
dollar exchange rate into another direction is possible, too. And
this is what the finance ministers in Washington are hoping for. But
that is the only hope they have."
"Weak Dollar Helps U.S. Exports"
Business-oriented Handelsblatt (4/20) of Duesseldorf commented,
"Nobody is taking President Clinton and his Treasury Secretary
Robert Rubin seriously any longer when they support a strong dollar.
The weakness of the dollar fits too well the foreign trade concept,
since a weak dollar helps U.S. exporters on the global markets. And
what could be a better possibility than a weak dollar to break open
the closed Japanese markets?... The weakness of the dollar signals
that the markets no longer think that U.S. politicians have the
discipline to cope with the dual deficit in the budget and foreign
trade. It speaks for itself that the Republicans want to come to
power in one and a half years via a lowering of taxes. But what
about making savings? This is something the Germans and the
Japanese are better at."
"U.S. Punishment For Japan"
Wolfram Baentsch judged in Die Welt (4/20), "Both [the United States
and Japan] want to avoid an escalation of the controversy into a
trade war...but presumably both sides clearly know that the trade
war has long since begun. The weapon in the economic battle of the
former war opponents is the dollar. The advantage is now on the
U.S. side, since time is, for the time being, on the American side.
The continuing slide of the dollar has made virulent the distrust in
the further development.... A recovery will be due only if the
Americans no longer use their currency as an instrument of
punishment."
"The Dollar's Free Fall"
Right-of-center Saechsische Zeitung (4/19) of Dresden remarked, "The
only genuine support for the dollar can come from the U.S.
government. But Bill Clinton and his team are obviusly not trusted
to reduce the budget deficit at this time. The most recent U.S.
economic data and the development of prices do not point toward the
Fed turning the interest rate screw in the near future. What is
even worse: The impression is strengthening that the Americans do
not really mind the dollar's weakness. After all it makes their
products cheaper on the global markets and thus more competitive. As
long as this distrust is not being cleared away with decisive
resolutions on restructuring the state finances, the dollar cannot
possibly go up."
ITALY: "World Has Changed; Dollar Has Changed"
Mario Deaglio noted in centrist La Stampa (4/20), "The king of
currencies hits its historical low.... Financial experts...talk
about 'market follies.' When, as in this case, technical
explanations are lacking and the phenomenon reaches such dimensions,
it is better to look further behind, searching for historical and
political reasons. If we take a look at the dollar in this
perspective and wonder why it continues to fall, the answer is quite
clear: Because, in a world which is not the same as before,
currencies are also not the same as before. The dollar is not the
dollar with the capital D, it has in part naturally, in part
voluntarily lost that leadership that was a product of the Cold
War....
"In a world characterized by more freedom...financial operators tend
to exchange some of their dollars into yen, marks, Swiss francs....
Therefore, the dollar is going to become a currency like the others,
a 'provincial' currency, even though it represents a very large and
very affluent province. And this evolution is further favored by
the political developments in Washington, where both the Democrats
and Republicans, though in different ways, are leaning inward and
putting aside the country's international commitments. The U.S.
tendency is also to become 'provincial' in its foreign policy,
providing that such serious events, like that in Oklahoma City,
allow them to remove themselves from the world's big problems, of
the responsibilities of being the strongest state and the biggest
economy on our planet."
RUSSIA: "Dollar No Longer Master"
Konstantin Sarkisov, head of the center of Japanese studies of the
Russian Acadeny of Sciences, asserted in the English-language Moscow
News (4/24), "The latest events on the Tokyo exchange promise
changes in the development of the world economy.... The yen's
protective reaction may be its internationalization and the
formation of a yen zone in Asia, which will gradually oust the
unpredictable dollar. Washington has itself been prodding Tokyo
toward a nightmarish situation: An independent internal market,
with the Americans as guests and not masters, may develop in Eastern
Asia. Thus, the rise in the yen exchange rate is not only, and |
