[Marxism] Japan said to warn of huge dollar selloff ifdropcontinues

Marvin Gandall marvgandall at rogers.com
Mon Dec 6 07:31:53 MST 2004


Joe D wrote:

> At present the vast bulk of Russia's trade is conducted with member-states
of
> the European Union. I'm not sure as to what percentage of inward
investment
> emanates from the US as opposed to Europe, but regardless, with the rise
of the
> euro as a viable alternative to the dollar as a reserve currency, any US
> inward investment lost as a result of de-dollarization would undoubtedly
be
> covered by a corresponding increase in European investment.
--------------------------
A cheaper dollar would make it harder for US capitalists to invest in
Russia, but Russia is not actively seeking to stop the flow of US capital
into the country, nor to curtail its developing trade relations with it -
despite its steadily increasing unease and unhappiness about growing US
influence on its borders. I'm not an expert, but that's how I read it. It's
true that for geographical and historical reasons Russia has close economic
ties to Europe, especially Germany. But this is also not in contradiction to
its wanting to pipe and ship oil and gas to the US, Japan, and China, and
welcoming foreign investment from those countries to help develop its
economy. Even if Russia or any of these other states wanted to challenge the
US, as an ambitious and self-confident Germany did the sclerotic British
Empire last century, they're hardly in a position to do so.

So I don't think a falling dollar or diversification into the euro somehow
implies a sharpening of "inter-imperialist" contradictions, as some on the
left have suggested. They have even blamed the US invasion of Iraq and
efforts to destabilize Venezuela on these governments wanting to sell oil in
euros rather than dollars. But this ignores that the US not only knows the
dollar is going to weaken but actively WANTS IT TO, and one of the ways this
happens is when foreign governments and companies alter the mix of their
foreign currency holdings by substituting euros for dollars. The Chinese,
for example, are widely expected, to revalue their currency upward by
unhooking it from the dollar and pegging it instead to a wider basket of
currencies based on the euro and yen as well as the USD.

As I suggested in my previous post, the dispute between the US and its trade
rivals largely boils down to how many dollars are going to be sold in the
world market and how low will the dollar be allowed to go, and what degree,
if any, of international coordination there will be to regulate an orderly
currency and trade adjustment. Of course, some (like Morgan Stanley's
Stephen Roach) think the so-called economic fundamentals - ie. the
spiralling US budget and current account deficits and consumer
indebtedness - are already so far out of whack that they will precipitate a
dollar collapse, no matter what governments and central bankers try to do.
But the point is no one, least of all the bankers and governments in the US,
Russia, or the other major trading nations, would welcome it, and this is
what we have been discussing.

MG









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