Greenback is worth nothing in terms of American pride

Tim Harper
Toronto Star
Friday, November 9, 2007

http://www.thestar.com/News/article/275023

MUSCATINE, Iowa -- An American rap star and entrepreneur celebrates his wealth with a wad of euros in a new video.

A Brazilian supermodel reportedly declines payment in U.S. dollars. A newfound French friend warns of international economic war.

While Jay-Z, Gisele Bundchen, and Nicolas Sarkozy are making statements about the once-vaunted U.S. greenback, the leading contenders for 2008 U.S. presidential nominations aren't talking about the battered buck and the legendarily attentive voters of Iowa aren't asking about it.

In years past, when Canada's loonie plunged, it sparked a wrenching debate among Canadians over sovereignty and national pride, but a similar devaluation of the George Washington here inspires no such breast-beating or embarrassment.

"We have national pride coming out of the gazoo," says Stephen Hess, a political analyst at the Brookings Institution and former presidential adviser. "We don't like to lose wars. We feel terrible if we lose at an international baseball series or basketball tournament. But I've never seen national pride here linked with the value of the dollar."

"It's ignorance and arrogance," says Clyde Prestowitz of the Economic Strategy Institute. "The candidates, the voters, the country's elite – they all take it for granted that the U.S. currency is always going to be the world's currency. It hasn't hit them yet."

Indeed, a dollar which is trading at an all-time low to the euro, has sunk to its lowest point to the Canadian dollar in 57 years and is nearing historic lows against the British pound and the Australian dollar, is taking a back seat on the campaign trail to other pressing economic concerns.

The top two contenders for the Democratic presidential nomination, New York Sen. Hillary Clinton and Illinois Sen. Barack Obama hammered away in Iowa this week about the sub-prime mortgage crisis, the U.S. minimum wage, lost manufacturing jobs, and the need to replace them with "green" jobs, social security, health insurance, the price of oil, and prices at the pump.

But when they invited questions, no one in central or eastern Iowa leapt to their feet to suggest a weak dollar was leading to the end of the American empire.

A devalued dollar here is seen as a Wall Street issue, not a Main Street one.

The dollar slump appears a concern so far limited to those returning from trips to Paris -- or Toronto -- where a dollar bill doesn't get you what it once did.

Some economists are calling the dollar's dive a "stealth" decline in the U.S. standard of living and some commentators have been giving viewers a crash course on the meaning of a "loonie" and the humiliation of looking up at a currency honouring a bird instead of a founding father.

The plight of the dollar bounded into public consciousness in the U.S. Wednesday with word that China was thinking of moving some of its $1.4 trillion (U.S.) hoard of foreign currency reserves away from the American dollar.

Under the Bush administration, the country's trade deficit has been growing each year, the national debt has hit $9 trillion, a $10 billion-per-month Iraq war is being largely funded on borrowed money and the U.S. president has done nothing to stem the bleeding of the greenback except parroting his mantra that he has a "strong dollar" policy, most U.S. analysts say.

Economic concerns are now vying with the Iraq war as the top-of-mind election issue as the 2008 primary season approaches.

U.S. Federal Reserve chair Ben Bernanke listed the devalued dollar as one factor, along with housing foreclosures and the price of oil, that could lead to short-term inflation and a slowing of economic growth in this country.

The tattered dollar will raise the price of imports and contribute to inflation, he told a congressional committee yesterday. But he downplayed the Chinese threat.

"I don't see any significant change in the broad holdings of dollars around the world," he said.

"Dollars remain the dominant reserve asset and I expect that to continue to be the case."

But New York Sen. Charles Schumer, Democratic chair of the joint economic committee, sounded the alarm in his opening statement. "I think we are at a moment of economic crisis," he said, "stemming from four key areas -- falling housing prices, lack of confidence in creditworthiness, the weak dollar, and high oil prices.

"Each of these problems alone would be enough of a threat to our economic well-being, but taken together, they are essentially the four horsemen of the economic crisis."

One presidential candidate is issuing a clarion call about the dollar's value -- insurgent Republican Ron Paul, the Texas congressman who raised $4.2 million for his campaign in a single day this week.

"The dollar is on the ropes," he said in a television interview.

"The end of an empire always comes when the currency is destroyed. And today, even this very moment, the dollar is crashing on the international exchange market.

"Washington is sound asleep about this dollar and understanding about how the financial system works."

Paul told Bernanke that seniors in this country are being "robbed" because they have their retirement money in U.S. dollars, which are losing value each day.

Any typical American using U.S. dollars to buy consumer goods is only being hurt when purchasing imported goods, Bernanke replied.

Meanwhile, Jay-Z thumbs a wad of euros in his new video accompanying the "American Gangster" CD and Bundchen tells some of her corporate clients to switch to euros from greenbacks (her sister later denied the story) and Sarkozy politely warns American legislators.

"The (U.S.) dollar cannot remain solely the problem of others," the French president said this week. "If we're not careful, monetary disarray could (become) economic war."

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