There is a quiet economic change that has greater impact upon the financial fortunes of Americans than the war, the deficit, and the bad economy combined. It has happened in large measure due to anger of the international world at the Bush Administration and the perception that Bush is a war monger, not interested in cooperating with the family of nations.
The first strike against the dollar took place over a year ago by of all nations, Iraq. Iraq had been holding dollars in its foreign reserve accounts, these dollars largely gained by the sale of petroleum. Iraq, in a move that brought great concern to members of the Federal Reserve in New York, gave instructions that $10 Billion dollars should be sold and converted into Euros. This transfer was during a time that the Euro had been struggling to compete with the U.S. dollar and symbolically to allow the European Union to compete economically with the United States economy. The dollar immediately dropped in value, while the Euro increased in value.
Subsequently, the United States followed a policy that increasingly ignored and seemed to insult and inflame leaders of other nations. The Europeans were particularly incensed when Bush refused to sign the Kyoto accords on the environment, accords that had been negotiated by the world through years of thoughtful design and compromise. Bush’s comment that “trees cause more pollution and should be removed” was seen as an example of his lack of grasp or appreciation for environmental issues. Then the U.S.A. seemed to ignore the United Nations, when 95% of U.N. members spoke against an impending war with Iraq. Furthermore while U.S. wars with Afghanistan and Iraq proceeded and Israel continued to bomb and destroy Palestinian homes in violation of United Nations accords the Islamic world and many nations in Europe began to convert Dollars into Euros in quiet, but effective protest.
Now for the first time in history, the Euro is a stronger currency than the dollar. Most Americans don’t realize that one of the ways that America has “financed” its economy over the past 20 years (in spite of losing industrial power and blue collar jobs in mass) is that it has always been able to rely upon the nations of the world to hold American dollars in their reserve accounts. This has allowed the United States to finance its economy, function with major deficits and survive with low interest rates even when the economy has been weak.
Now, the dollar is on the run. A lower dollar has enormous implications for American business and for Americans. When Americans travel abroad they will find that it is much more expensive for them to travel, to eat and to shop. They will find that the dollar no longer is as desirable as it was. Americans will find that almost everything they buy will be more expensive and that their monthly budgets are somehow more difficult than ever.
American corporations will find that when they go to purchase raw materials, such as steel for building cars and bridges, that the cost is far higher. Americans, who import some 80% of their consumer goods, will find that everything they import is now substantially more expensive. Everything from computers, to toys, cameras, shoes, shirts, lawn mowers and even the gasoline for their cars, is higher because of this shift away from the dollar. On the other hand, the shift makes American farms, companies and property easier for foreign investors to come in and pick off. Thus the economic ownership and power of the United States becomes diluted as foreign investors buy us at bargain prices.
Many economic observers believe that this is a weapon that nations such as Saudi Arabia, Mexico, Syria, Iran, Korea, India, Russia, Germany, France, and even Canada have utilized to register a growing dislike of the United States domination of the world.
While the Bush Administration hopes that its control of Iraq's oil will now enable it to use influence to force nations to purchase oil with dollars, the practical fact is that nations in mass are now selling off dollars to "hedge" their bets. Our friends, who have kept dollars, have lost billions of dollars during the recent declines due to their loyalty to the United States.
So the photo on this page that was published by India's most popular magazine depicted "dubya" with fangs and horns illustrating Bush as a War Monger may seem humorous, but economically it may have a serious side, very costly to the American people. If people the world over have such hostility and anger to his "unilateral" attitude on policy, especially his penchant for using wars and invasions to impact international trends…it could be that they could permanently cripple the U.S. economy by transferring to Euros. And in the process establish the new United Europe as a power that can effectively compete and take jobs away from the USA.