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AdvertisementDeath of the dollar?You know that eye on the dollar bill? Is it looking out or looking in? The difference may be the way we see ourselves versus how others see us in this period of 21st century realignment. We know that the U.S. dollar, the greenback, is falling out of favor in world markets. It may be replaced, as the single most important currency in world oil trade, with a blending of U.S. dollars with several rising currencies from Brazil (real) to Europe (euro) to China (yuan) to Japan (yen). This troubles many of us, as the dollar is more than an ornate paper inscribed with its value; it is a statement of our perceived stature and ranking in military might and dominance of trade. When it serves us well, we like to remember the past: The 20th century when we held dominance in world currencies as Europe struggled with war and Asia built up from developing nations to first world status. Japan did not rise in economic power until the 1970s, and China did not until it obtained WTO membership in this century. The rise in these countries shows what relatively free trade can do to equalize economies. In the case of China, it shows how fast this can occur. There are those who argue for a strong dollar and those who support a weaker currency in world markets. The strong dollar advocates want to hold dominance over other currencies, while the weak dollar advocates wish to expand trade by making exports attractive. What we've seen most, in recent years, is volatility that has taken the dollar up, but mostly down, against other currencies, especially the euro and yen. The Chinese yuan is still not a full player in world trade because it doesn't "float" on its own, but the power of Chinese trade is so strong it cannot be dismissed. China owns so much of the United States' debt they can't afford to let us go under! As Americans, we are adverse to volatility in the marketplace. This last year of up and down commodity prices proved that. Now we see a dollar that is falling sharply, and we anticipate inflation and rising interest rates. In other countries, there has never been stability. Several years ago, I was part of a trade delegation traveling in Argentina. They are notorious for financial mismanagement, sort of like Enron, on a national scale. They found that the best thing to do was devalue the currency. In other words, they printed more of it. (Sound familiar?) In doing so, the normal goods became quite expensive even though more money was in circulation. To keep a loaf of bread from costing 10,000 pesos, the government devalued the currency 10,000 to 1. That meant the three major denominations: one million, one hundred thousand and ten thousand were now respectively: one hundred, ten, and one peso in value. It was truly amazing that the stores were using both currencies at the same time. They had no overlap, so you knew which one you had, and change was made with both in the mix. I suggest the Argentine type of devaluation would lead to revolution in this country--but some lesser form might take place if we continue to lose value against other currencies. The other prospect is using multiple currencies at the same time. When in Russia in 1990, the uncertainty of their ruble was such that they had a parallel market in U.S. dollars. If you wanted to hail a cab, just hold up a dollar or a pack of Marlboro cigarettes and listen for the skidding tires. The hardest part of this is realizing that we are just like every other nation that has economic woes. We set this in motion years ago and it is just now manifesting itself. Had you been in the currency market from 2000 to now, you could have hedged against the dollar drop. Americans usually see other currencies as unsound and unsafe and usually we have been right. However, recent imbalances in the value of the dollar against the euro, yuan and yen have expanded their purchases from us and decreased our ability to buy from them. We have made it! We now have a world market but the bad news is that we now have to fight to be a player in it. We handicap ourselves by spending billions for military forces while most of our trading partners pay very little. We are reacting to financial mismanagement for the first time since the late 1970s, and other nations have been through it several times in the same period. The only thing for certain is volatility and the realization that we can only be competitive by producing items that we can build or grow more cheaply than our global competitors. Agriculture may well be a winner, while industry may be a loser--a different twist to the "new world order." Editor's Note: This is Ken Root's 35th year as an agricultural reporter. He grew up on a small farm in central Oklahoma and started his career as a vocational agriculture teacher. He worked in Oklahoma, Kansas and Missouri as a broadcaster and was the original host of AgriTalk. He has also been the executive director of the National AgriChemical Retailers Association in Washington, D.C. and the National Association of Farm Broadcasters in Kansas City. Ken is now the lead farm broadcaster at WHO and WMT Radio based in Des Moines, Iowa. He has been a columnist for HPJ and Midwest Ag Journal for eight years. Advertisement
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