[Marxism] Japan said to warn of huge dollar selloff if dropcontinues

Marvin Gandall marvgandall at rogers.com
Sun Dec 5 22:47:46 MST 2004


Jon Flanders wrote:

> The Japanese are not the ones who will start the dollar panic. My
> candidate is the Russians. They have an asset the whole world wants, oil
> and gas, and the motive, payback for US attempts to strip them of their
> Central Asian and Eastern European assets. The Ukraine may be the last
> straw for them.
------------------------------
So long as the Japanese, with 800 billion in $US reserves, and the Chinese
with about $600 billion don't start dumping the dollar, it will be difficult
for anyone else - another central bank or private speculators - to do so.
The Russians, with 50 billion USD, are relatively minor players. In fact,
the Asians and Europeans would intervene to buy dollars to halt a selloff
because the flip side would be a rapid appreciation of their own currencies.
All these states need to sell into the US market, and understand no one
would benefit from a dollar collapse and the large risk of an ensuing
American depression which would quickly become global. Everyone is eager to
avoid a panic, and is looking instead to engineer an orderly and coordinated
decline and trade rebalancing. But it's as yet unclear to what degree they
will succeed in doing so, and who will mainly benefit.

Different interests are at play. The US wants to let the dollar float down
to weaken the advantage its competitors enjoy in world markets, and to give
its corporations pricing power at home. Its competitors want the US to limit
the dollar's decline by intervening more forcefully in currency markets,
jacking up interest rates and cutting government spending in order to
support it. These countries would rather have US workers bear the brunt of
any readjustment, and vice-versa. So far the US has been coy about where it
wants the dollar to settle. The threats emanating from the Russians,
Japanese, and Chinese are designed to pressure the US to negotiate these
matters and to agree to joint coordination in a new Plaza-type accord,
something which they sought unsuccessfully at the recent Berlin meeting of
finance ministers.

All of these states have a good idea of what is in their economic
self-interest, and they are jockeying for position based on what they think
is possible in the circumstances. They rarely act on the basis of political
pique, for reasons of "payback", any more than workers go on strike to take
vengeance on their employer. If the other side is made to suffer pain in the
process, so much the better. But I very much doubt the Russians would
precipitate a dollar crisis, even if they could, to get back at the US for
encroaching on their traditional sphere of influence, especially as their
relationship with the US is more contradictory and less antagonistic than
implied in your remarks.

MG










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