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 Editorials | Opinions | November 2007 
Weakening Dollar Reflects USA's Fading World Status
 DeWayne Wickham - USA Today
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 |  | Unless the United States gets its financial house in order, Cold War history might need to reconsider its verdict on winners and losers. |  | |
I wonder what this really means.
During a vacation stop in Mexico last month, I played golf with two fellow travelers from the USA and a man from Scotland. It cost us each $140 to play the Cozumel Country Club, a fee that caused me and my American friends to swallow hard before paying. But the Scot thought the price was a bargain.
Back in May, while in Cuba, a restaurant waiter returned to my table with an uncomfortable look on his face after I had tipped him generously with U.S. dollars. "I'm sorry," he said sheepishly, "but do you have euros, Canadian dollars or convertible pesos (Cuban currency)?"
He wanted anything but the U.S. dollars. That's because those other currencies are more highly valued in Cuba, where our currency was once the favored medium of exchange in that country's flourishing black market, a Cuban friend told me.
Next summer, my wife and I plan to vacation in Europe with friends. Though that trip is more than half a year away, some members of our group are starting to convert some dollars into euros to avoid suffering a big loss if the gap between the value of these two currencies widens next year. Just five years ago, a euro was worth 90 cents. Now it takes about $1.45 to buy a euro.
The euro steps up
While American presidential candidates debate immigration policies that seem largely focused on keeping illegal Mexican immigrants from coming into this country to work low-paying jobs for U.S. dollars, Canadians launch shopping forays into this country with their nation's stronger currency.
The U.S. dollar, long the undisputed king of international exchange, is — like this nation's prestige on the world stage — sagging badly. Economists differ over what this downturn signals, but this much is clear: The American greenback has lost its luster abroad.
"Until recently, the dollar has enjoyed an almost monopolistic position internationally. When people wanted to escape the uncertainties of their domestic economies, they turned to the dollar," says John Cole, an economics professor at North Carolina A&T State University. "The euro is now an alternative to the dollar."
The underlying problems
The dollar's declining value, Cole says, results from this nation's growing national debt and staggering trade deficit. Late last month, the federal government reported that the debt is more than $9 trillion — up 55% since President Bush took office in 2001. Communist China is the second-largest holder of U.S. treasury securities, which underwrite our domestic debt.
Also this month, the Treasury Department reported that this country has a $56.5 billion trade deficit. Nearly half of this trade imbalance — $23.8 billion — is with one country: China.
"We're running internal deficits, which we're asking foreigners to fund for us. And then we keep pumping dollars to those people so they can send us cheap goods. This depreciation of the U.S. dollar is in lieu of the United States ... paying our own way," Cole says.
How long can that continue without risking this country's economic dominance in the world?
In the closing years of the 20th century, the world appeared to be in the final throes of the fight for supremacy between democracy and communism. The Soviet Union had collapsed. China's socialist market economy sputtered — and the United States was the declared winner.
In the early years of this century, however, Russia is awash in oil revenue and is running on surpluses, just as China's economy has strengthened.
"China's rapid economic growth has boosted incomes and is making China a huge market for a variety of goods and services. In addition, China's abundant low-cost labor has led multinational corporations to shift their export-oriented, labor-intensive manufacturing facilities to China," the Congressional Research Service reported last year.
What does this all mean?
Once the world's economic strongman, the U.S. economy is much less that today. And unless the United States gets its financial house in order, Cold War history might need to reconsider its verdict on winners and losers. |
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