At 28/01/02 20:28 -0800, Peter Dorman wrote:
>In the narrow sense, the strength of the dollar can be attributed to the 
>weakness of other currencies, especially the yen and the euro.  The 
>downward pressure on those two will continue for some time, I think.  If 
>there were a viable rival to the dollar, "fundamentals" (the chronic US 
>current account deficit) would express themselves much sooner.

Does that not mean it is in the interests of Europe and Japan to start 
creating, no doubt by stealth, an alternative to the dollar as world money? 
That would mean that the relative advantage of having your currency as 
world money, is shared out.

>In a larger perspective, US foreign policy has been run to create the 
>structural conditions for continuing the dollar as the reserve/key 
>currency.  It's not so simple, of course, but I think that's the main 
>effect.  If/when the dollar falls, it will set off a political crisis of 
>succession as severe perhaps as the economic crisis.


Europe and Japan will presumably have to take advantage of this under cover 
of international cooperation. Could they be willing to let their currencies 
fall until the point at which this undermines the advantages that the USA 
gets from its strong dollar policy?

Then would they have reforms ready that would change the system, or just 
make minor repairs so it essentially continues with the mechanisms of 
unequal exchange.

I suspect that talk about international development of poor countries may 
be a proxy for this power play about the shape of the world economy.

Chris Burford

London

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