Yesterday, the pound and the euro hit their highest levels in a generation
against the US dollar. The dollar, meanwhile, collapsed to a record low
against an average of all the world’s major currencies. It is tempting to
interpret the flight from the dollar in financial markets as the clearest,
most objective, indicator of America’s relative decline.
Europe has long been derided as an ageing, sclerotic continent, doomed to
irrelevance in a world dominated by America and Asia. But could it actually
be America, not Europe, that is failing to compete in the globalised world
economy and is now threatened with long-term decline?
Much that is happening in the world today certainly seems to belie the
hubristic assumptions about American hegemony that were so prevalent a few
years ago. It is not just the military debacle in Iraq and the geopolitical
setbacks suffered by American diplomacy from the Middle East to Venezuela to
North Korea. Less prominent in the media headlines, but in some ways more
troubling, are the indicators of economic underperformance: the reliance on
foreign borrowing (now equivalent to $2,000 annually for every American man,
woman and child); the loss of Wall Street’s global dominance in financial
services to the City of London; and now to cap it all, the dollar collapsing
to record lows. Surely this is the ultimate vote of no confidence in the US
economy by people who are best placed to know?
Sadly, for those of us who live in Britain and Europe and would like to
believe that the strength of our currencies reflects our superlative
economic prospects, the answer is an emphatic “no”. There was a time in the
19th century when the strength of sterling reflected Britain’s unparalleled
prosperity and imperial power. But since the deregulation of currencies and
financial markets in the 1980s and 1990s, currency strength has conveyed
almost no information about the health of a national economy – and none at
all about a country’s competitive position in global trade. For example,
anyone who believes that the falling dollar reflects America’s huge trade
deficit and foreign borrowing should consider that the one leading currency
even weaker in the past three years than the dollar has been the yen; yet
Japan has the world’s biggest trade surplus and is the greatest
creditor nation the world has ever seen.
To the extent that any relationship has existed between currencies and
economic performance, it has usually been the “wrong” way round – rising
currencies usually preceded periods of economic decline, while weakening
currencies have presaged economic strength. Think, for example, of the
collapse of sterling in 1992, which ushered in the strongest and longest
period of economic expansion in British history.
Or consider the strength of the US economy in the late 1990s, just after the
dollar fell to its previous nadir in 1995. Even more spectacular has been
the decade of growth in China since its currency collapsed to a record low
in the Asian crisis of 1997. On the other side of the ledger, there has been
Japan’s stagnation after 1995, when the yen hit a record high, and Germany’s
lost decade after the surge in the mark that followed German reunification
and the eurozone’s dismal economic performance from 2003 to 2005, as the
newly created euro appreciated by 60 per cent against the dollar.
There are many explanations for the apparently perverse relationship between
currencies and economic performance, though none of them is watertight. For
example, currencies tend to strengthen in response to rising interest rates
and fears of inflation – which are obviously bad for economic performance –
but also in response to strong economic growth.
On the other hand, a currency may weaken because inflation prospects are
improving, as they are in the US at present, or because investors fear a
financial collapse, which some believe to be a looming in the US mortgage
market. But if the causes of currency strength are ambiguous and
contradictory, the consequences are clear. A currency that keeps rising, as
the euro and sterling are at present, will eventually do serious damage to
almost any economy, hurting export competitiveness and stunting growth.
This is what happened to Britain and America after the pound and the dollar
appreciated excessively in the early 1980s and again in the early 1990s. It
happened to Germany and Japan in the mid1990s and again in the middle of
this decade to the eurozone. Europe and Britain enjoyed some relief in 2005,
when the euro and the pound temporarily weakened.
But now they will have to bear the full brunt of excessive currency strength.
In Britain’s case, the strength of the pound may not do too much harm, since
it will forestall or at least delay any further rate rises from the Bank of
England. On the Continent, however, the European Central Bank seems
determined to keep raising interest rates, thereby exacerbating the damage
done by the euro’s excessive strength.
Americans, meanwhile, will enjoy the benefits of a super-cheap currency, which
will more than offset falling property prices and problems with a small
minority of mortgage loans. American politicians, for all their faults,
instinctively understand this, which is why they have generally welcomed a
falling dollar and have been pressuring China and Japan to let the dollar
weaken against the yen and the renmimbi – not just, as at present, against
the euro and the pound.
European policymakers, by contrast, seem to have no idea of how currency
markets operate. In contrast with Americans and Asians, German politicians
in particular still see a “hard currency” as a virility symbol – not as a
threat to economic performance or an indicator that interest rates are
probably too high.
There is only one leading European politician who seems to understand the
dangers of an overstrong euro. This is Nicolas Sarkozy, who travelled to
Brussels this week to plead for a more expansionary economic policy in
Europe. But his pleas were met with ridicule from the other governments and
the ECB. Within two months of promising to spark an economic revival, the
new French President has already been paralysed by the rules of the eurozone.
That is the reality of life in today’s Europe – and one of the main reasons
why America, despite all its problems, will continue to dominate the world
economy in the decades ahead.
'Money quote' from recent NRO article "The Death of Monetarism":
{{ here’s the point. If the economy decides to demand more money, as reflected by the “soaring†demand for it, how then does money supply matter? The Fed’s supposed tinkering with the monetary base ... is meaningless. ... maintaining the fed funds target rate and nothing to do with attempts to control the money supply. The ... "quality of money†theory, is in essence liquidity created by the system since the structure demands that liquidity. Effective money supply is determined by money demand, or velocity. The idea that central-bank increases to the money supply are inflationary is debunked by the modern Japan example. by the modern Japan example. The Bank of Japan (BOJ) lowered its policy interest rate to zero, without regard to controlling interest rates, in order to pump money into the economy. This surge in money supply was enormous, yet inflation in Japan was non-existent. }}
Interference is futile
Brian H, Vancouver, Canada,
There is something called "feedback", within "homeostatic systems". This describes the operation of "corrections" and market response to differing payoffs.
So when the $$ is high, importing surges, dropping the $$. When the dollar is low, exporting surges, raising the $$. The balance points are determined by the net weighted average judgments of all players about where they get the most bang for their $$.
It is possible to temporarily insulate a segment of the economy from these negative feedback forces (i.e., self-correcting flows and patterns), but only at the cost of eventual collapse of the barrier walls and sudden catastrophic return to the actual underlying trend line.
So the two main things to watch for are: are there any current efforts to artificially insulate and isolate some segment of the world economy? and what is the underlying trend, and how is it determined?
Brian H, Vancouver, Canada,
What a load of embarrasing old twaddle, more hope than reality. Let's just say you're having a bit of an off day shall we and we'll not mention this out of date derivative claptrap again.
Piers, London,
well, that´s interesting, when us dollar is strong and euro is weak, it´s of course a sign of us strenght and europe´s weakness, and when us dollar is weak and euro is strong, it´s again of course a sign of us strength and europe´s weaknes, how strange ???
peter, kosice, svk
Bruce in D.C. is upset he can't afford his trip every 18 months to London, not realizing the 17.5 months in D.C are much more affordable now. We call that the BDS.
SEW, Dallas, USA/Tx
This article is a fallacy; after maybe a year of "fruits" of a weak dollar, this will be highly inflationary (ask the Italians what happened to the Lira) and cause massive damage in the US. This is basic economics!
Paul, London,
It is known that deviations of currency rates from fundamentals can be big and long lasting (i.e. 5 or more years).
The dollar was trading 1.72 to the pound a year ago.
I think the whole discussion here is utmost futile.
Michele, Richmond,
The US government (bribed by a made-in-China-holic Walmart ~ "Always Evil. ALWAYS!") is hollowing out the US Industrial base. Watch closely as GM and Ford go bankrupt in the next 5-10 years. Most US heavy-machinery companies tractors etc) have already been sold to Chinese or Japanese firms.
Nothing about US dollar weakness is changing the structural advantage that the Asian economies have rigged for themselves via currency manipulation in their deadly embrace with the USA. It's just causing countries that have rigged their trade balances in other ways (Europe and UK with VAT) to see ballooning currencies.
But there will come a day soon when OPEC decides to no longer price oil is US$, then most of the worldview assumed by the author above becomes moot, hyperinflation takes off in the USA, and we spiral into an economic deathtrap that would make a Mild Cenntral American currency collapse something that we Americans could wish for only in our wildest dreams ...
Don, San Diego, CA
To Tim Shaw:
According to the FT, from 1994 until the Asian financial crisis the Yuan was not pegged, but allowed to float within guidelines. In the latter part of 1997, "The renminbi’s average nominal and real effective exchange rates against trading partners rise by 10.2 per cent and 38.7 per cent, respectively."
In _response,_ the currency was "quasi-pegged" to the dollar.
http://www.ft.com/cms/s/720c3e0a-c69c-11d9-a700-00000e2511c8,dwp_uuid=af522be6-4c8c-11da-89df-0000779e2340.html
Molly, Minneapolis,
Sure, an expansionary policy might be good for short-term wealth - that is, until the country's interest on its deficit reaches $430Bn per year... This piece seems to contain more propaganda for international creditors than common sense.
Sure, a Porsche seems nice... until you realize you can't cover the loan payment. America has borrowed its wealth - who gains? The international creditors.
samuel, Vancouver, Canada
"the new French President has already been paralysed by the rules of the eurozone." - says it all about giving up economic independence and joining the Euro doesn't it? However, the UK has its own eceonomic headaches caused by reckless spending by Government and consumer alike.
Richard, Worcester, England
The Euro has been over 1,30 a few times in the past few years on spikes but the average annual rate for the Euro/$ has hovered around 1,25 in 2004, 2005 & 2006. It is only in recent months the Euro has traded consistently above 1,30 so it might be premature for the European decision makers to proclaim Euroland can cope with a real strong Euro especially if it settles in around 1,40. The markets are very selective in what they want to see ignoring for example that compared to the United States Euroland has higher government debt as a percentage of GDP, worse demographic trends, worse problems assimilating immigrants and also ignoring the fact that certain countries were allowed in by fudging official economic data.. Of course it is also ludicrous to allow German economic performance (25 % of the population in the Euro area) to justify the market rate for the Euro. France, Italy and Spain as a block has almost double the population of Germany.
Also if you are a believer the dollar is clearly undervalued you can take solace in the fact the same “financial gurus†that now think 1,40 is a fair value are by large the same who 5/6 years ago thought the correct value to be 0,85 or going back a little further thought 1:1 Pound/$ was justified.
Ingvar Strom, Rapallo, Italy
So let me get this straight. When the dollar is strong it is a sign of America's, and of course the American economic model's, continuing success; now when the dollar is weak it is also a sign US economic success. Wow, talk about having your cake and eating it! Of course the EU is by definition always on the edge of collapse being 'sclerotic, ageing, uncompetitive' and so forth. No matter that the EU has fuddy-duddy things like savings, investment and trade surpluses whilst the USA - even with what is becoming a pariah currency - still manages unprecedented deficits on current account, a hollowed out manufacturing sector, a collapsing housing sector, massive federal government deficits, and the unenviable position as the world's greatest debtor nation.
Mr K's political preference for the Anglo-American economic and social model, and his all too discernible hatred of all things European, have led him postulate the most spurious arguments in favour of the former.
Is it possible to have a little a more measured, non-ideological approach to economic analysis? It is certainly in short supply here.
F V Lee, London, UK
That is the reality of life in today’s Europe – and one of the main reasons why America, despite all its problems, will continue to dominate the world economy in the decades ahead.
Does he mean the third world perhaps?
Oliver, Brighton,
Japan intentionally weakened the yen for years..cheap yen equals cheap exports. American High tech companies are selling cheaper products in Europe. Who takes the hit? Euro high tech companies.
I had people boast to me of their increased euro sales. We exported our recession to europe.
Isaiah, dallas, tx
The Mighty American Economy?
America has a Current Account deficit approaching 1 trillion dollars annually, we Import most of our Oil and we have Trade deficits even in Farm Products now.
This is not the sign of a Strong economy.
U.S. job Growth is not keeping up with population Growth and is millions short since 2000.
The European Union Created 3.5 Million new jobs last year and is growing stronging again this year.
Since 1999 the E.U. has Created more jobs then the U.S. and continues too outperform the U.S.
The E.U. has 40 million factory jobs and growing!
Why?
The U.S. added 3.5 Trillion dollars in new debt last year throughout it's economy!
We are adding 6 dollars of debt for every dollar of GDP Growth.
The U.S. Worker is being hammered.
Shortest Vacation time in the world, Healthcare ranked 37th in the world, most expensive college Tuition in the world,etc,etc.
The Economy and the Nation is tanking and I hope we can regain our senses and start to rebuild the U.S.
thomas, Holiday, Florida
US dollar is 70% of international reserve currency.The rest of the world has to buy dollar to do international business.WTO,WB,IMF and commodity trades are all in US dollars.US goverment is borrowing about 3 billion dollars from abroad to run the business every 24 hours.That is secret of the strength of the dollar.We are a consumer society,the rest of the world has to sell their products,by weakning their currency and strenthening the dollar.As long as the above situation continues I do not see a dollar crisis.Once again international reserve currency status is the secret of the purchasing power of the US dollar.
SABU NINAN, SUGARLAND, TEXAS
It is not very sophisticated but I think that printing paper dollars will eventually lead to a collapse. The chairman of the Fed admits his weapon of last resort is the printing press. The question is when? I suspect the global financial situation is sufficiently complex with ever more powerful players outside the USA and Europe to hold the leak in the dam for quite some time. We have been waiting for 20 years already, but the coming collapse is probably measured in decades rather than years. But the experts never know and always take a short-term view.
Brian Lewis, Manila, Philippines
Great article.
"...since the deregulation of currencies and financial markets in the 1980s and 1990s, currency strength has conveyed almost no information about the health of a national economy – and none at all about a country’s competitive position in global trade."
I've read a great many articles recently from more, shall we say "enthusiastic" sources (Mises institute for example), advocating taking this argument even further, contemplating, even, deregulation that would see the abolition of central banks altogether. I wondered of Anatole's opinions for such an argument.
Lee, London, England
There are two reserve currencies Euro and Dollar and Sterling is simply a bridging currency. Some British companies are going to see big profit falls and big upsurges in Chinese exports to Europe.....the Bank will leave us with higher interest rates and a rising pound to squeeze exporters before property speculators
TomTom, Leeds, England
Let's be honest, on the whole, the strongest currencies are those that offer the highest rates.
Peter Roach, Manassas, Va U.S.A.
Kaletsky is an inflationist. He never saw an interest rate he didn't want to cut.
tom, lexington, US
The world financial system is in crisis - the Yanks are running the dollar printing presses flat out. The consequence is that the Dollar has declining value and if this is related to the decline in the US empire - then yes.
Iain, sydney, australia
America will power ahead because of the myriad individuals working hard for themselves and creating wealth for others verus millions of Europeans being paid by the state.
The economics is just the score.
Richard Boyce, HAYWARDS HEATH, UK
Lets say you have two competing car lots. Car lot A adds 30% to the sticker price, Car lot B adds 10%. Who's going to sell more cars to cost conscious consumers.
Mike, Seminole, Florida/USA
The world financial system is in crisis - the Yanks are running the printing presses flat out. The consequence is that the Dollar has less declining value and if this is related to the decline in the US empire - then yes.
Iain, sydney, australia
Mr Kaletsky - still recommending that one should re-mortgage his/her house and pile into US dollars?
CWW , Suffolk,
The Euro has been over 1,30 a few times in the past years on spikes but the average annual rate for the Euro/$ has hovered around 1,25 in 2004, 2005 & 2006. It is only in recent months the Euro has traded consistently above 1,30 so it might be premature for the European decision makers to proclaim Euroland can cope with a real strong Euro especially if it settles in around 1,40. The markets are very selective in what they want to see ignoring for example that Euroland has higher government debt as a percentage of GDP, worse demographic trends, worse problems assimilating immigrants and the fact that certain countries were allowed in by fudging official economic data.. Of course it is also ludicrous to allow German economic performance (25 % of the population in the Euro area) to justify the market rate for the Euro. France, Italy and Spain as a block has almost double the population of Germany. Also if you are a believer the dollar is clearly undervalued you can take solace in the fact the same “financial gurus†that now think 1,40 is a fair value are by large the same who 5/6 years ago thought the correct value to be 0,85 or going back a little further thought 1:1 Pound/$ was justified.
Ingvar Strom, Rapallo, Italy
Perhaps the dollars weakness is only a small temporary blip-given that the American economy is still a mighty juggernaut dont write it off.China will face certain burnout aka the Japanese if the necessary restraints are not put in place.For me the mighty Greenback must never be underrated.
Iain chapman, Marciac, France
<<and one of the main reasons why America, despite all its problems, will continue to dominate the world economy in the decades ahead>>
Hubris.
As soon as oil reaches $100/barrel - perhaps later this year - and it is finally understood that driving big wasteful cars huge distances is passé, the price of exurbian housing will fall a lot more.
The sad thing is that there is no Plan B.
Alfred, Ryde, Isle of Wight, UK
This analysis is a bit cocktail party talk for the Times Mr Kaletsky.
Have you forgotten the strong German growth for decades after the second world war coexisting with the ever strong DM? How does fit with your argument?
Then there is the everpresent question for economists concerning leads and lags in economic indicators. Not a word about the possibility that a rising or strong currency foreshadows and helps economic growth.
Then again you seem to have forgotten about China the strongest economy on the planet.
Marek, London,
This is one of the most insightful explanations that I have read. The relationship of a country's currency strength is a mystery to most people. This article very clearly unravels this mystery.
A. Baxter, Tewksbury, MA
Totally irrational.
Steve, UK,
I disagree that American domination of the world economy is a given. America has always been happy to have a weak currency, going back to the 1830's and every 'hick' town in the mid-west having its own bank issuing 'promissory notes', which in many cases turned out to be worthless. The 'Fed' came into existence to provide a standard unit of exchange 'within these here United States', it never gave a fig about its external value, why should it? To this day only the value of external trade imports and exports only account for about 20% of GDP, I think.
The external value of the dollar is decided by its use by third party users. When that was predominantly Japan and Europe, who had to keep the provider of their military shield happy, a steady value was ensured.
Now with China, and increasely India plus Brazil, major players in internal trade the dominance of the dollar is not a given.
The future dollar related debt, both corporate and government issued, is precarious.
Bryan McGrath, Weston-Super-Mare,
The less than favorable dollar/pound exchange rate has certainly impacted me. I used to hop on a plane toi London (my favorite city) every 18 months just to hit the bookstores n Charing Cross Road and to soak the ambience and fun of one of the world's greatest cities. Alas, i can't afford that anymore.
Too bad.
Bruce Northwood, Washington, D.C., USA
er, not quite right. Post 1992 the economy was in dire straits, with millions of repossessions, people going bust and no way out. But in recent years, a brainwave! Slash rates! Print money! The economy has been sent into orbit with the biggest Labour induced borrowing binge of all time. Kaletsky is Gordon Brown's biggest brown noser and has made it his life mission to promote this con trick again and again and again...he'll be repeating it still when they nail down his box. The bigger the lie...
Russell Hicks, Woldingham, Surrey
Probably the biggest factor is that US federal spending increased from $1.8 trillion under Clinton to $3.2 trillion at present. That's almost a doubling in the size of government in 7 years of so-called "conservative" management. And there has been inflation: food has doubled or tripled, look at gasoline, and of course, taxes have had "stealth" inflation. Weak dollars help with foreign trade. Inflation is helped along when we have to import foreign goods, especially oil at increased exchange rates. The US dollar has always been weak during protracted wars. It was during Vietnam. It is now. As J. K Galbaith said, "Inflation has been a major problem in most wars."
Tony Francis , Wichita , KS/USA
I know sweet fanny adams about economics, so it was interesting and informative to read Anatole Kaletsky's article. I take it that the article answers its title-question by saying that a puny dollar is not a sign of America's decline and that a strong euro IS a sign of Europe's. So America's economic muscle is still well buffed while Europe's is sagging. It is the second part of the conclusion that seems unjustified. To compare european economics with american is like comparing apples and pears. In Europe, economics is a tool for creating better living conditions for most people; in the USA, economics is something else - a tool for making the very rich exponentially richer! Measurements of interest rates, inflation and such will therefore be interpreted differently, depending on which side of the pond you are on.
jimbo, Oslo, Norway
Nah, this is just one of Wall Street phony schemes to get rid of huge US debt burden. Suppose this debt's cost was a trillion Euro a year ago. At this rate that number could easily be only a half trillion next year or so.
Nick, Canada,
Since the USA imports 70% of its energy how exactly is the weaker Dollar supposed to be useful? Part of the reason for the housing collapse is that people have had to choose between going to work or paying the mortgage.
I do not hold it against German politicians for their quaint attitude to the Euro, it may be because of an obscure event in history called the Weimar republic and what that lead to.
As for the world being dominated by the USA economy in the future, will this be brought about by the same brillant minds that haven't been able to stabilise Iraq after four years and a half trillion dollars?
Adam Smith, Dalby , Australia
It's true what has been said about the relationship between economic performance and strong currencies. However, the given facts in the articles are just a few cases; not enough to back up what's being suggested. One can very easily find case studies which oppose this theory; a strong currency aligned with positive economic performance. The concrete argument that correctly explains the mentioned false belief is the transformation of the world economy in the past 4 or 5 decades: globalisation and development of financial market. The dominance of trade in the economies of numerous nations is undeniable and thus a fall in currency value would result a rise in economic performance due to international competitiveness. Moreover, as stated in the aricle, a high interest rate does attract foreign investors to mass purchase the currency:inflow of "hot money"; thus further exacerbating the appreciation. Rightly, "hard currency" is no longer a symbol of economic strength, but for these reasons.
James, London, United Kingdom
You had me worried for a while!
Dave Larkman, White Salmon, WA USA
And another excellent reason to stay out of the eurozone.
Much as I loathe Gordon Brown, he managed at least to get that one right.
Credit, however grudgingly, where it is due.
cuffleyburgers, lucca,
Since my normal judgement is that anything George Bush approves must be wrong, it would seem I should be opposed to the current currency policy. But I doubt very much that he understands currency policy or has any idea as to what is going on, so I must say you've got it right; cheap bucks are a good deal.
Dante, Portland, USA/Oregon
In the search for an explanation of market behaviour I suggest we look at it at a personal level. How long can a person expect to live on rising levels of borrowed money (UK £2 trillion made up of £500 billion National Debt, £1 trillion public sector pension liability, £500 billion PFI loans etc.). How long could a person get away with de valuing his IOUs (inflation fixed at (2%).
Brian Gilbert, Hampton,
Anatole, you might as well admit that you have no idea what's going to happen next, or why. On a similar subject, why is it that Angela Merkel's reforms seem to have worked, when all the pundits said they wouldn't?
Frank Upton, Solihull,
It saddens me that European politicians don’t see the negative impact of virility driven monetary policies. In the recent past Americans have benefited from tax breaks and strong export performance due to a weakening dollar, during the same period they have consumed an increasing amount of cheap Chinese imports, mostly designed and marketed from the US, mitigating losses in manufacturing. This has led to better jobs, a better quality of life and more opportunity for the average American. That’s governance at it’s best when things get better, here in Europe we may be born free like our cousins across the pond, but the burden of high taxes and over-regulation makes us wage slaves to a bloated, detached and unresponsive state more concerned with itself than with it's citizens quality of life. Sub prime mortgage fears and inept foreign policy aside, Americans have a better quality of life than we in Europe do, let's face it.
Alex McHugh, Edinburgh,
you are wrong
Muna Reyal, antwerp, belguim
Let me get this straight. When the US$ is strong this is a confirmation of the strength of the US economy. Similarly when the dollar is weak this is also a sign that the US economy is strong. Hmmm, very Jesuitical. Of course it goes without saying the the eurozone is always on the verge of collapse: it is after all 'sclerotic, uncompetitive' ... and so forth. So don't be deceived the fact that the EU economy runs a trade surplus, invests, saves, manufactures and exports; all of these dated, fuddy-duddy practices are actually a sign of weakness. Success - US style - is evidenced and measured by record trade deficits, industrial hollowing out, house market bubble followed by collapse, and being the world's greatest debtor nation. Like I said ... Jesuitical
What absolute drivel. Is this the best your house-trained Europhobe can manage?
By the way the Yen and the Yuan are undervalued because the Chinese and Japanese want it thay way. The dollar's collapse is market led.
F V Lee, Hackbridge, UK
A weakening US dollar is actually a very clever move. It automatically cheapens all the huge American debt. It makes American goods and services attractive and sucks in tourist money. You just have to look at the booming sales of the Boeing Dreamliner to see the benefit of a cheap dollar. So what if Americans find overseas travel expensive: most don't travel that much overseas and their holidays aren't long anyway. Any American in debt can clear those debts quickly by either doing business outside the US or working outside the US. I have done this and cleared debt very quickly. In short, it is a smart move. Get ready for another wave of cheap American innovation to roll into the UK shortly.
Bob Macdonald, London,
'the reliance on foreign borrowing'
The UK government alone borrows about $1400 USD per person yearly based on Brown's conservative figures of 40 Billion in the red. With the overall deficit the UK like all borrowing countries will suffer long-term. Balance will always be required - eventually.
As an importer it will only get worse in the UK and parts of Europe. But it will take time to bite.
Paul, London, Canada
While your view that the puny dollar may well not be sign of weakness in every case, this view doesn't seem to be widely shared on this occasion. Most commentators are linking weakness of the dollar with the parlous state of the US housing market
John Reid, Wellington, New Zealand
Capitalism (USA) is a cruel unforgiving system which works - Socialism (Europe) is a benign welfare system which doesn't. Currency strengths and weaknesses have little long term influence provided the remedies are allowed to take their natural course and politicians don't try to fiddle the system for their own short-term interests.
It may be unpleasant but it is fact.
David Cotterell, Cheltenham, United Kingdom
Whatever happens in the world economy Anatole Kaletsky
could never believe in the thriving of the EU's.
Just try and spend some time in the EU (the UK does not really belong to it) and get a feeling of the comfortable life compared to the rest of the world.
H Gutfreund, Upton, Oxford
..."Even more spectacular has been the decade of growth in China since its currency collapsed to a record low in the Asian crisis of 1997."
- China's currency remained pegged to the dollar, preventing further sell-offs in the region . Come on "Times", higher standards please.
Tim Shaw, Shanghai, China