Change is in the air across the Atlantic
Change is the catch word in the US today, be it in the presidential campaign or in the US financial and social outlook and it manifested itself in a crystal clear way in two transatlantic visits last week.
German-born Pope Benedict XVI became the first leader of the Roman Catholic Church to walk into New York’s East synagogue, a Jewish place of worship dating back more than a century and designed in Byzantine style.
The Pope was welcomed by Rabbi Arthur Schneier, an Austrian-born Jew. I had the fortunate coincidence of meeting Schneier at a meeting last year at the Council of Europe, Strasbourg where he had told me the moving story of losing most of his family in the Holocaust.
Later, speaking to diplomats from 192 countries at the United Nations, the Pope endorsed stronger “collective” action to protect human rights, preserve the environment and end humanitarian crises.
Hinting at different flashpoints and ongoing battles around the globe, Benedict, representing a sixth of the world’s population, cautioned that intrusion into any country’s internal affairs or an international conflict must only follow a search for “even the faintest sign of dialogue or desire for reconciliation.”
Earlier, Pope Benedict XVI, the leader of millions of Catholics around the world, got a red carpet welcome as he was received at the airport by President George W. Bush himself along with thousands of Americans.
No president in American history has picked up a visiting leader from the airport before and it also marked President Bush’s fifth meeting with two successive popes, a record again for any US president.
Bush explained the reason for the Pope’s special status, “One, he speaks for millions. Two, he doesn’t come as a politician; he comes as a man of faith.”
One quick look at the front pages, the TV channels of different media outlets and even talking to the common person on the street, it became apparent that the other visitor, British Prime Minister Gordon Brown failed miserably to get any attention in the US media as limelight was hogged by the first visit of a Pope to the White House in almost 30 years.
As the British media will make one believe that Brown got overshadowed by the Pope’s visit, a walk down the recent past points to more than that. Brown was flying back to United Kingdom as little known on the New Continent as he was when he flew across the Atlantic.
The emergence of French and German leaders, on behalf of the European Union, on the horizon of the transatlantic diplomatic canvas has taken the shine off the old “special relationship,” which Brown mentioned during his trip.
During the John F. Kennedy memorial lecture in Boston, Brown told his audience, “I am pleased that over the past half century the special relationship between America and Britain which John Kennedy prized remains strong and enduring - so firmly rooted in our common history, our shared values and in the hearts and minds of our people that no power on earth can drive us apart,” concluding with a note, “For the first time in human history we have the opportunity to come together around a global covenant, to reframe the international architecture and build the truly global society.”
Although US administration has openly supported Brown’s intentions to withdraw from Iraq, political pundits highlight subtle euphoria generated in Washington by French decision to supplement troops in Afghanistan.
“No question the relationship is changing for the better and President Sarkozy gets a lot of credit for that,” President George W. Bush was quoted as saying during Sarkozy’s visit.
On the other hand, Germany is slowly but steadily cementing ties with the US.
Speaking at the “Conference on Germany in the Modern World” at Harvard University, April 12, 2008, Frank-Walter Steinmeier, German Federal Minister for Foreign Affairs recalled “two great transatlantic speeches,” the famous speech by George Marshall some 60 years ago in which he announced the plan that became a hallmark of American statecraft” and a second speech “by Chancellor Willy Brandt,” in Harvard in 1972 “to celebrate the 25th anniversary of the Marshall Plan and establish the German Marshall Fund of the United States.”
Stressing the relationship of US-EU and not US-UK as highlighted by British premier Brown, the German minister Steinmeier told his audience, “For the past 60 years the transatlantic relationship has been the world’s transformative partnership. America’s relationship with Europe - more than with any other part of the world - enables both of us to achieve goals that neither of us could achieve alone.”
Hailing American leadership, the German leader candidly defined the need for “new concepts, a revitalised alliance and particularly renewed American leadership in the world.” Together, the EU and the US account for nearly 37 percent of global trade in goods and 45 percent in services with the flow of transatlantic trade and investments being the largest in the world and hovering around a billion US dollars everyday.
Showing posts with label New York. Show all posts
Showing posts with label New York. Show all posts
Tuesday, April 22, 2008
Sunday, March 9, 2008
Decline of the American dollar
Fiscal policies over the years take toll on the greenback
The days when the greenback ruled with absolute supremacy and simultaneously commanded the unparalleled confidence of chiefs of international and domestic financial institutions along with the man in the street in the remotest parts of the planet are over. The American dollar is no more “The Currency” that can be relied on for value, as was evident by a recent CNN news clip showing an antique store in New York preferring Euro over the local currency.
Since World War II, when the American dollar started replacing gold as a means of transaction on the international level, the dollar has taken some hard knocks in recent years.
With the launch of the Euro nearly a decade ago, much was written in the pro-dollar media and EMU, as the Eurozone is called, and it was compared with the “EMU,” a bird that cannot fly. But then, compared to the launch and subsequent drop as the nascent currency took baby steps, the Euro has come of age and has crossed the threshold One Euro=USD 1.5 plus. And the dollar has also lost against the other leading currencies, like the Japanese Yen and British Pound.
With the way things are going, one must understand why and when the American dollar got to that place on the pedestal. Only then does it become clear what is happening now. As mentioned earlier, a walk down memory lane shows that till World War II the exchange rates of major currencies were reflected in terms of the price of gold in the respective countries, but with the manipulation of costs of other goods then, gold was a growing discomfort among trading partners across the globe, and the dollar came as a suitable solution.
World War II ended with the emergence of the United States as the dominant military and economic powerhouse, and as countries gathered to this epiccentre for military and financial support, the dollar emerged as the financial powerpoint of the financial world.
With the issuing of US government securities there was an added charm of earning interest over dollar deposits.But to the discerning eye, there was a Catch-22 situation that stayed afloat all these decades - and still is. The use and abuse of the technical term “Balance of Payments” was so rampant by the US that one shudders to look at the figures over the years. The United States consumed more than it produced, financing the payments with printed paper and all had been well till 1971 arrived.
The US devalued the “International Currency” unilaterally. Internationally-held dollar reserves overnight lost value and that was quite a hard knock for some of the poor countries of the world.Five years later, in 1976, came the Jamaican Agreement that gave the financial world a floating exchange rate system where the markets started playing a lead role.
But again, it was not a free float and, instead, government intervention in the form of buying and selling determines the final results at the end of the day.With the arrival of the Euro in the world F/X (foreign exchange) market scene, things started changing.
And let us not forget that the Euro has replaced 15 European currencies, and some of them, like the German mark, French franc and Italian lira were backed by strong economic and industrial giants of the world.
With the Euro surging not only in value but also as a dependable currency, the world commodity markets, especially relating to oil, will start contemplating a switch to the Euro to protect themselves against instability or the falling dollar.
The US administration will definitely want to sabotage such a move by hook or crook as its financial survival depends on the role of dollar as a legitimate international currency. Now, a look at what is really going on behind the scene.
US statistic reports have repeatedly shown the American C/A (current account) deficit has expanded continuously with billions in fiscal deficit.With China shifting some of its foreign reserves into Euro, there is already a warning ringing for the United States as more countries shift to Euro; more falls in the dollar will result.
Add to those factors the role played by the locomotive economies of Asia including China and India growing by leaps and bounds in the current years. But the financial mechanism needed to keep the dollar at a price that will sustain the US C/A deficit without putting pressure on its import/export ratio, which in turn enhances or erodes the lifestyle of its citizens, will not garner support internationally over a long-term period and US will have to pay the price at some point.
The days when the greenback ruled with absolute supremacy and simultaneously commanded the unparalleled confidence of chiefs of international and domestic financial institutions along with the man in the street in the remotest parts of the planet are over. The American dollar is no more “The Currency” that can be relied on for value, as was evident by a recent CNN news clip showing an antique store in New York preferring Euro over the local currency.
Since World War II, when the American dollar started replacing gold as a means of transaction on the international level, the dollar has taken some hard knocks in recent years.
With the launch of the Euro nearly a decade ago, much was written in the pro-dollar media and EMU, as the Eurozone is called, and it was compared with the “EMU,” a bird that cannot fly. But then, compared to the launch and subsequent drop as the nascent currency took baby steps, the Euro has come of age and has crossed the threshold One Euro=USD 1.5 plus. And the dollar has also lost against the other leading currencies, like the Japanese Yen and British Pound.
With the way things are going, one must understand why and when the American dollar got to that place on the pedestal. Only then does it become clear what is happening now. As mentioned earlier, a walk down memory lane shows that till World War II the exchange rates of major currencies were reflected in terms of the price of gold in the respective countries, but with the manipulation of costs of other goods then, gold was a growing discomfort among trading partners across the globe, and the dollar came as a suitable solution.
World War II ended with the emergence of the United States as the dominant military and economic powerhouse, and as countries gathered to this epiccentre for military and financial support, the dollar emerged as the financial powerpoint of the financial world.
With the issuing of US government securities there was an added charm of earning interest over dollar deposits.But to the discerning eye, there was a Catch-22 situation that stayed afloat all these decades - and still is. The use and abuse of the technical term “Balance of Payments” was so rampant by the US that one shudders to look at the figures over the years. The United States consumed more than it produced, financing the payments with printed paper and all had been well till 1971 arrived.
The US devalued the “International Currency” unilaterally. Internationally-held dollar reserves overnight lost value and that was quite a hard knock for some of the poor countries of the world.Five years later, in 1976, came the Jamaican Agreement that gave the financial world a floating exchange rate system where the markets started playing a lead role.
But again, it was not a free float and, instead, government intervention in the form of buying and selling determines the final results at the end of the day.With the arrival of the Euro in the world F/X (foreign exchange) market scene, things started changing.
And let us not forget that the Euro has replaced 15 European currencies, and some of them, like the German mark, French franc and Italian lira were backed by strong economic and industrial giants of the world.
With the Euro surging not only in value but also as a dependable currency, the world commodity markets, especially relating to oil, will start contemplating a switch to the Euro to protect themselves against instability or the falling dollar.
The US administration will definitely want to sabotage such a move by hook or crook as its financial survival depends on the role of dollar as a legitimate international currency. Now, a look at what is really going on behind the scene.
US statistic reports have repeatedly shown the American C/A (current account) deficit has expanded continuously with billions in fiscal deficit.With China shifting some of its foreign reserves into Euro, there is already a warning ringing for the United States as more countries shift to Euro; more falls in the dollar will result.
Add to those factors the role played by the locomotive economies of Asia including China and India growing by leaps and bounds in the current years. But the financial mechanism needed to keep the dollar at a price that will sustain the US C/A deficit without putting pressure on its import/export ratio, which in turn enhances or erodes the lifestyle of its citizens, will not garner support internationally over a long-term period and US will have to pay the price at some point.
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