[EMAIL PROTECTED] writes: >Ellen Frank did a nice job of handling this question on KPFA about a week >ago. Maybe she should chime in. > I don't recall saying that much on KPFA, but I will chime in nonetheless. The idea that we are at war to force OPEC to keep pricing in dollars makes little sense.
To the extent that they've thought about this at all, I suspect the Bush folks see the dollar's role as evidence of US power, see the war in Iraq as an assertion of US power and so imagine the war will help the dollar. I think they are correct that the international role of the dollar reflects US power, but I think they may be wrong about how investors perceive the Iraq venture. My research (some of which will appear in the RRPE) suggests that currency preeminence is built on global economic preeminence. The key currency country is the country whose committment to a liberal world economic order is absolute, is guaranteed by the size and exposure of its international corporations and is backed by its ability to coerce/persuade others to support that order. Military power is important but in a statistical study I did on international currency usage, it was less important than the assets/sales of MNCs. Military and diplomatic preeminence (like a veto in the UN and 20% of IMF votes) give some comfort to dollar-holders that in a crisis, the US will be able to coerce others to bail it out -- holding dollar reserves or buying dollars to support its value on world markets, for example. Where I think the Bush folks might be wrong is in thinking the the diplomatic imbroglio they created will not impact investor perceptions. Would you say the disdain and even contempt with which they treated allies reflects unwavering commitment to a liberal world economic order? Is this an administration that will keep its capital markets open even if there is short-term political gain to be had from closing them? Even if central banks in China and Japan will scream? This really is an issue for the dollar. I wouldn't be surprised if some of the dollar's recent decline signifies a real portfolio shift to euro and not just a transient speculative attack. So my take is that not only are we not at war to defend the dollar, but the war could prove very detrimental to the dollar's international role. Ellen >On Sat, Mar 22, 2003 at 12:25:44PM -0800, Peter Dorman wrote: >> I'm both happy and a bit embarrassed at the way this dollar-euro story >> is being picked up by the antiwar movement. I'm happy because the >> extreme vulnerability of the US payments situation is crucial to any >> analysis of the geopolitics of the current moment. Talking about this >> represents an advance in sophistication and perhaps preparedness for >> what may come. I'm embarrassed because the analyses that are floating >> around are highly flawed in their particulars and make it look as >though >> our side is not very together. I think the fault may lie with us lefty >> economists; we who have been studying this for years should be writing >> about it, but instead we are leaving it to folks who are trying to >> figure it out on the fly... >> >> Peter >> >> Carrol Cox wrote: >> >> >This article by Geoffrey Heard is one of the better I've seen on the >> >war. This URL takes you to the printer-friendly version. >> > >> >Carrol >> > >> >http://slash.autonomedia.org/print.pl?sid=03/03/20/1330253 >> > >> > >> > >-- >Michael Perelman >Economics Department >California State University >Chico, CA 95929 > >Tel. 530-898-5321 >E-Mail [EMAIL PROTECTED] > >
