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Prestowitz Articles
Up one levelA collection of all the articles written by Clyde Prestowitz for Global Strategy Watch.
The Dollar Frays
The dollar seems to be fraying most around the edges. While major players like China and Japan continue to hold enormous dollar reserves, smaller, more peripheral countries continue what has become a quietly measured flight from the greenback. Recently Rachel Ziemba reported that Libya is shifting its reserves and investment away from dollars. Now, reports from Bangkok indicate that the Bank of Thailand is considering reducing the dollar weight in its reserves as well.
The Emerging Basket of Reserve Currencies
Recent discussions with top bankers in Hong Kong and reports in the South China Morning Post and the International Herald Tribune foreshadow the end of dollar hegemony and the rise of a triad system of reserve currencies.
The Visible Hand
At the first annual Women’s Forum Asia in Shanghai last week, much of the talk was of free trade and the inevitability of globalization. Top political, business, and economic leaders opined that market forces beyond the control of even the most powerful governments were now determining our destiny. So it was a refreshing reality check to read the papers in Hong Kong this morning.
Competitive Nonsense
The United States remains the world’s most economically competitive country according to Switzerland’s renowned IMD business school in its latest competitiveness index released yesterday. Let’s see. It’s pretty much agreed that the U.S. economy is in recession or close to it. It needs a fix of about $3 billion of foreign capital a day just to keep from plunging into deep, and I mean deep, recession. The current account deficit is still running at over $700 billion annually despite a 70 percent fall of the dollar against the euro and other freely traded currencies in the last few years and [...]
Mexico Atop the Volcano
Watching the strollers and diners from my corner seat in the Casa Portuguesa restaurant in Mexico City, I sense no angst. Life seems good. The sun is out, the temperature is warm but not hot, and the cod and white wine are great. Yet as we enter the third hour of the typically relaxed Mexican lunch, the conversation at my table turns serious. The Mexican drug lords, it seems, are now advertising publicly for recruits to their various cartels. They are especially interested in those with military or police experience and while they admit that the work may be dirty [...]
It's Not As Flat As You Think...
So you read Tom Friedman and you thought the world had become flat, one big global market with everyone behaving like good Adam Smith consumers and capitalists maximizing global welfare by pursuing their own individual economic interests.
The Fading Dollar
In 1958 when I was an exchange student in Switzerland the currency exchange rate was 4 Swiss Francs per $1. As a sixteen year old at the time, I was amazed at how cheap everything in Switzerland seemed to be when I translated the prices into dollars. I sometimes wondered if the two currencies would ever be equal and if Swiss prices would ever equal those of the United States.
Europe Will Lead Reform of Globalization
Yesterday the euro topped $1.60, and EU Trade Commissioner Peter Mandelson attacked Japan by calling it “the most closed investment market in the world.” Both events signal a seismic shift, as Europe takes the lead in confronting the distortions of the current wave of globalization.
Strong Yen Good For Japan
“A strong dollar is good for the U.S. economy.” How many times did Treasury Secretaries Bob Rubin and Larry Summers repeat that mantra in the face of ever rising U.S. trade deficits? Now with the dollar falling and U.S. exports at last beginning to take off and make a much needed contribution to growth, Secretary Hank Paulson is still singing the old song. “The strong dollar is in the nation’s interest,” he recently told Reuters.
Is America Following in Britain's Footsteps?
As the stock market, employment, and the dollar swoon, and the Fed helps J.P. Morgan eat Bear Stearns lunch, dinner, and breakfast, the Washington Post reports one saving grace for the U.S. economy – COAL.
Let's Not Imitate Japan Completely
The picture of the Fed orchestrating the takeover of Bear Stearns by J.P. Morgan and scrambling desperately to keep Wall Street afloat, brings to mind the Japanese financial crisis of the late 1980s and early 1990s in which I had personal experience as the then Counselor to the U.S. Secretary of Commerce. The two crises both resulted from the collapse of real estate bubbles that were rooted in the view that property prices could go only one way.
Thomas Palley on our Debt Delusion
Our friend Thomas Palley has been blogging on the misguided efforts of US policy makers to head off a recession by any means possible, no matter the long term consequences. Palley's point is that policy makers are in a bind - US economic growth is dependent on asset price inflation - so the Fed finds itself in the position of needing to be a serial bubble blower. I would add that this isn't simply a problem of domestic policy. Some sort of international agreement that prevents countries from undervaluing their currencies against the dollar and puts an end to the [...]
The View From the Middle East
While Senators Hillary Clinton and Barack Obama joust over answering early morning phone calls and Senator John McCain pledges to keep troops in Iraq for a hundred years in the current U.S. presidential campaign, the future of America is being determined here in the Middle-East. To observe the scene in Doha and the cities of the United Arab Emirates (U.A.E.) along the Persian Gulf is to be reminded that the Gulf is not filled with water so much as with dollars. The housing and real estate bubble may have burst in the United States, but it shows no signs of [...]
What if They Just Gave the Oil Away?
Despite the incredible flood of money currently pouring into the countries of the Arabian Peninsula and the Persian Gulf, they all face a potentially explosive unemployment problem that could become dangerously destabilizing in ten to fifteen years. The populations of these countries are increasing rapidly and estimates of the number of new jobs they will need to create over the next decade are in the range of 25-50 million. Given the available wealth, it would, at first glance, seem a small matter to create suitable employment for all the new arrivals. But it won’t be. The difficulty is that aside [...]