Do you feel secure with a pocketful of crispy dollars? I know I do, but it might not remain a warrant of security for very long unless both American consumers and our leaders in Washington do something about, and fast. Indeed, the dollar has been experiencing a dreadful and steady decline over the last 7 years in regard to other currencies. Here is the point of view of Jacques Attali, a famous French intellectual.
"Jim Rogers knows a thing or two about money and currencies. He is an American finance mogul, former partner in crime of Georges Soros in the famous Quantum hedge fund that shorted the British Sterling Pound in 1992.
He recently announced that he was selling his Riverside Drive mansion in New York, and that he decided to convert his assets in Chinese yuans while relocating himself to Asia. According to him, moving to Shanghai or Hong Kong today in 2007 is just like moving to New York in 1907 or to London in 1807, because this is where the epicenter of future business is headed.
As a matter of fact, the US economy is in major distress nowadays; the budget deficit is humongous; the transportation infrastructures are falling apart; skyrocketing healthcare bills outweigh the economy's growth; the Defense budget is out of control; both domestic consumer and foreign debts are abysmal.
These deficits used to feed the entire world's growth, as long as America's foreign partners and lenders had faith in the Wall Street powerhouse and accepted to invest their money in it. But the recent mortgage crisis unveiled that American banks neglected to implement any competent risk management strategy for too long. As a result, nobody trusts the dollar anymore. Those in USA who capitalize and used to thrive on exporting operations in dollars find it more difficult everyday to make a profit because they end up losing more from the depreciation of their domestic assets based on an eroding US dollar.
Oil producing countries usually control huge sovereign funds in dollars, estimated today collectively at 2.5 trillion dollars. Soon enough, they will have no choice but to convert big chunks of that capital into other currencies, including the Euro. American investors themselves took action and did not wait to buy foreign titles. Wall Street can still be regarded as a "security deposit" where these sovereign funds could decide to inject some of their money and take over. But if they choose not to do so, the US Stock Market will plummet and cause a global economic collapse, because nobody in the world today has enough disposable capital to fuel the wild consuming machine that the US has become.
To avoid such a disaster, the next US President will have to find ways to reduce individual debt; control consumption; encourage and increase both government and household savings; raise more taxes to reduce deficit. These drastic but necessary measures might lower the average American standard of living. Of course, no candidate to the White House will run his or her campaign based on such resolutions. Instead, they will probably hold other countries and the global economy responsible for the problems plaguing America today. They will overstress the importance of protectionism, just like the Dutch or the English did in the past, before the demise of their respective empires into recession and war. Hopefully this time the harsh lessons of History have been learned and we will be able to avoid such a catastrophe to reoccur." J. Attali.
Jacques Attali is a French economist, writer, scholar and former Secretary of State under late French President Francois Mitterrand. Translated from French by the MiddleClassCrunch.com Team from L'agonie du dollar (post) by Jacques Attali.
