Currency Connexions
The International Herald Tribune offers world news without quite so much Americacentrism, which is particularly relevant when thinking about the world economy and the U.S.'s unique role in it.
This article in the Tribune, written by a professor of political economy at the London School of Economics, discusses the effects of the failing U.S. economy on currency valuation around the world, and a proposition (introduced by George Soros) to extricate the rest of the world from the paradox created by linking the international reserve currency to the U.S. dollar.
I'm not sure how seriously this sort of proposal is being taken worldwide, or whether it's an inevitable debate regarding an inherently flawed system, but the most relevant thing to me is that this can be seen as evidence, on a real, practical level, that our current administration's behavior is affecting the U.S.'s position in the global economy in unprecedented ways, extending both geographically and temporally.
Could our economy really tank, like Argentina's did, like East Asia's did? Are dependency relationships like one described here undergirding the relative economic stability we've enjoyed for so many years? What, truly, separates the United States from any other economically depressed post-industrial state ruled by an illegitimate warlord (er, I mean "war president") whose sole concern is exploiting its resources to the advantage of himself and his supporters?
Posted by Palabris at February 12, 2004 01:00 AM
Soros is an interesting figure in world finance, especially since he has demonstrated that he is able to singlehandedly devalue or value national currencies by moving his own investments around (he did this to the DM, I believe, in the 1990s). So, despite the fact that his personal wealth is not able to do this anymore (he's lost a lot of money in the past years) people take his statements very seriously out of fear that he may try to do it again (what exactly did he mean a few years ago when he so much as promised that America would undergo an economic recovery?). As a key political lesson, Soros shows that there is an inherent linkage between politics and economy.
That said, I think that his proposal misses the point. One of the best, if simplistic, ideas I've heard with reference to currency valuation comes from the Nobel Laureate liberatarian economist F.A. Hayek, who argued out that currencies should not be managed by nations, as political pressures give national institutions (such as the Fed Reserve) a reason to devalue their currencies. In the free market, construed in the classical sense, this would be seen as a good idea, if not for the nation, then for world economy. Keeping currency fluctuations in the domain of politics means that valuation will always be something done out of political expediency and not good economic policy. This, incidentally is a very good point on which to hold so-called conservatives to answer.
