Towards A Good Samaritan World

Monday, November 22, 2004

UKRAINE, AND ASIA AND THE DOLLAR

History unfolds; The Economist reports. Whatever its faults, there's no rival for comprehensive coverage of the world scene.

The press has treated the recent election in Ukraine as an important one. And they liked Yushchenko. Whereas President Putin of Russia, as well as the former president, Leonid Kuchma, backed Yanukovych. Yanukovych is said to have won; Yushchenko is arguing the election was stolen, and that the exit polls were not reliable. Funny, it's the other side of the world, and yet it seems so close to home! The Economist seems to want Yushchenko to fight the election result. Is that really a good idea? Unless there's good evidence of fraud (much better than unreliable polls) wouldn't it be better for Ukraine's democracy for him to concede?

Poor media. None of these elections are going their way. But Putin is doing well: the candidates he endorses keep winning!

Meanwhile, this is the sort of article that makes The Economist worth reading: no one clarifies the mystery of global currency movements better (at least, that I've found). And this stuff is deeply important. Sometimes the most important forces are the hardest to understand.

The dollar continues to slide. Alan Greenspan thinks the trade deficit is unsustainable:

In a speech in Frankfurt on Friday November 19th, Mr Greenspan helpfully drew attention to these risks. America's creditors (central banks and private investors alike) will eventually grow wary of adding dollar assets to their portfolios, he said. Rather than leaving all of their eggs in the same dollar basket, they will seek to diversify into other currencies. Only if America compensates them with better returns will they keep faith with the dollar, he said. But as its creditors grow harder to satisfy, America will find it more costly to live beyond its means. Its current-account deficit will, Mr Greenspan said, grow “less tenable”.


That Asians keep buying up depreciating dollars is good for us in one way: they are subsidizing our consumption and getting less than the value of their subsidy in return. But it depends on whether you want to consume more or to work more. If you prefer working and producing, the falling dollar, which will reduce our imports and boost our exports, is good news.

Dems often claim hysterically that George Bush will turn this into a Third World country. In a way, they may be right: if current trends continue, we may become more similar to the Asian tigers, with low unemployment, a high rate of productivity growth, an undervalued currency and strong exports.

1 Comments:

  • An undervalued currency. What a distant dream that is. I agree it's a good thing that the dollar's finally declining, though the *way* it's doing it is highly unfortunate.

    By Blogger Nato, at 7:16 AM  

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