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| Another day, another dollar, another delusion |
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| Tuesday, 25 September 2007 | |
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The greenback’s downward spiral against the Euro emasculates the world’s most priapic currency. The American technology sector may be dragging its gonads along the ground, too.
Salvation for the UK’s education system came earlier this year when the US dollar ($), previously measured at 1.6 to the British pound (£), slid to 2:1 in the dollar’s disfavour. Even Britain’s ill-educated kids can do the two times table. (Don’t try this at home). Shortly afterwards, up crept the Euro (€), closing yesterday at 0.71 dollars to the Euro. That’s a sickly dollar: bets on 1:1 $:€ parity by July 2008 are now being taken. My guess? March 2008 or January 2009. Inevitable? How long have you got? Traditionally, the dollar draws its strength from the Republican Party, defense and technology. Defense and technology have been indefatigable pump-primers of the US economy and the dollar, on and off, from the 1950s to date; ‘blips’ have laid it low, of course, but countless currencies are pegged to the dollar and so swathes of the world’s currency momentum is effectively US-based. The Republican Party has done its bit too, on and off, over four decades: that is soon to grind to a halt. Hey-ho, here comes democracy. Sterling has been a rogue currency for the last five years of what is likely a 30-year cycle… but the Euro? Central banks in emerging markets are now pegging their currencies and their debt against the Euro, forsaking the dollar. Short term, you can blame sub-prime scandals and all the other gutless forms of business that define the broad church of latter-day American capitalism in the wake of WorldCom, Enron and the rest. More entrenched is the US economy’s failure to cement its position in key technology sectors: sectors in which the country felt it had a God-given stranglehold. Here’s a simplistic overview: in commercial and consumer technology, the USA is dropping off the pace set by emerging market producers, many of whom it no longer funds. America still invents and designs and builds and deploys the most terrifying and indiscriminately deadly weapons known to any on Earth. The budget for such developments is written in perpetual ironstone: it’s the military-industrial complex and its budget grows exponentially as each new djinn is identified.. But the US simultaneously is doing a limping impression worthy of an original Achilles on the civilian front. It imports its cellphones, laptops and cable modems. High-end R&D is drifting back to Europe and Europe’s own industrial or post-colonial satellites. These are fully-funded, by soft (and even sick) loans from the EU and individual European countries. A strong Euro and a palsied dollar have already led many countries, especially in the Middle East, to convert to the dominant European currency rather than the once-dominant American one. China and its capitalist tic-bird Hong Kong remain dollar-denominated: but track back through recent history and it is not hard to see how this might change. China is the most fascinating case. The row over its convertible currency was begun when the United States was arguably more powerful and could demand that China control its currency so as not to expose the dollar’s inherent weakness. China can laugh at such suggestions now, although it may restrain its mirth until after next year’s Olympics. India, meanwhile, watches, scarcely able to contain its laughter. The world of technology – invention, development, production, supply and demand – is now drifting away from the USA as surely as a disowned relative with a shameful secret. In eight or even 16 years I have yet to hear a US leader speak of communications technology with anything like the passion they reserve for lethal technology. Life goes on? Jim Chalmers |
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