With all the other things to worry about (people in the US, even US citizens, being made to disappear without any semblance of due process or judicial review, a pro-torture yes-man being shoehorned into the attorney general's office, North Korea with yet another nuclear weapon, a rapidly destabilizing Middle East), it's kind of funny that the thing with the most emotional impact on me would be a casual statement by a Chinese economist.
"The U.S. dollar is no longer - in our opinion is no longer - (seen) as a stable currency, and is devaluating all the time, and that's putting troubles all the time," Fan said, speaking in English."So the real issue is how to change the regime from a U.S. dollar pegging ... to a more manageable ... reference ... say Euros, yen, dollars - those kind of more diversified systems," he said.
There have been a lot of doom and gloom predictions about the effect of the decline of the dollar, but somehow I always took comfort in the fact a slightly weak currency actually has some trade advantages, and that even our foreign creditors, our most vulnerable point, didn't seem to be interested in taking action.
Well, they are now, and the trade advantages may not be that great after all. Fan Gang isn't a government official, and his comments can't be taken as a determination of policy, but he is considered one of the country's top economists, and in a very depressing article in the Asia Times about the economic state of the US, it is noted:
Already China has given indications of its long-term intentions on this matter: roughly 50% of China's growth in foreign exchange since 2001 has been placed into US dollars. Last year, however, while China saw its reserves grow by $112 billion, the dollar portion of that was only 25% or $25 billion, according to the always well-informed Montreal-based financial-consultancy firm Bank Credit Analyst.
Malaysia may be following suit. Obviously that didn't happen overnight, and I find myself wondering how I missed the beginning of the switch from political chatter to action.
It's probably too soon to do anything drastic, but I hear the pebbles coming down the side of the mountain and glance up nervously trying to see whether or not an avalanche is about to follow, knowing I have very little room to run. I think that might be what bothers me the most; if the political situation continues to degrade, I could probably count on having enough warning to get out of the country, but a currency collapse can happen in a matter of days, and would leave me with no escape if I didn't plan ahead. There might not even be anywhere to go.
I had been planning to possibly buy a house this year, but am suddenly uncomfortably aware that I have absolutely no idea what effect a tumbling currency or a drastic change in interest rate would have on my financial situation after I take on that much debt. Stephen Roach, the chief economist for Morgan Stanley & Co., is warning of an economic bubble in residential property, and pointing fingers at Alan Greenspan.
I guess I better find out. And maybe look into converting my savings into Euros.
