11/20/07

As an update to my journal entry on the 7th of November, which discussed the decrease in the power of the dollar and the possibility of China shifting its foreign reserves out of dollars, I decided to do a journal entry today on a similar article found within today's Financial Times.

Title of Article: Weak dollar alarms Chinese
Source: Financial Times
Date: 11/20/07

It has been found that the dollar has dropped significantly (16 percent) this year against the other major currencies of the world. Because of the ongoing decline of the dollar, yesterday, China's Premier Wen Jiabao told a business audience in Singapore that China's reserves are under unprecedented pressure, and added that they are concerned about how they are going to preserve the value of their reserves, which is now around $1,430bn (£698bn). Apparently this feeling of concern is shared by several global policymakers as the dollar is the world's main reserve currency.

Despite global concern, several top international economic officials are in support of a strong dollar, including China. Zhou Xiaochuan, China's central bank chief, said Beijing wanted to see and are in support of a strong dollar because it would help to ensure an orderly resolution to the recent market instability caused by US mortgage lending problems. US Treasury secretary Hank Paulson commented that a strong dollar is in the nation's interest and expressed his belief that while the US economy has had its ups and downs, the long-term economic strength will allow for the re-establishment of the dollar in the currency market. Paulson's optimistic outlook on the future of the dollar is shared by other US officials, including our President, who are all becoming increasingly vocal on the dollar to signal they are not indifferent to its fate. This increase in global communication about the dollar has been termed an "uncoordinated verbal intervention" by Stephen Jen, who is the head of currency research at Morgan Stanley.

As I had discussed in my November 7th journal entry, I am still worried about the future of America as a result of the weakening of the dollar. I still fear that another country may supersede us in dominance and power and the America as we used to know it will become a thing of the past. Hopefully this "verbal intervention" as Jen put it will help the dollar rebound and regain it's power as a global powerhouse within the currency market, but at the same time, all of my fears could come to fruition. I sincerely hope the latter is not the case. As an optimist I believe that with time conditions will improve and the dollar will regain its power, just as I also believe that the current market turmoil will clear up in the US as well as in the UK. In my entry about a November 15th Guardian article which discussed the outlook for the UK economy after the current financial market turmoil, I mentioned that officials need to develop a plan to restore the UK economy. I believe the same is required of US officials to not only restore the economy but also the power of the dollar. A substantial amount of time and planning will need to be put into this effort, but I believe that if this is done, the economy will be repaired and back to running smoothly.