Trade warrior turned globalizationeer Clyde Prestowitz was just in my office this morning, telling about his travels. He had a nice story about being in Doha over the weekend, reading the Gulf Times, and finding that almost every story had something to do with the decline of the dollar. It was only later that he informed me that he’s started blogging, and when I checked out the blog I discovered that he’d already told the story online:
The headlines of the Gulf Times of Sunday, March 9, 2008, say it all. “Weak Dollar Deterring Indian Workers” is the lead story. It reports that the Indian construction workers who until now have provided the muscles that are turning the sands of Dubai, Abu-Dhabi, and Qatar into modern cities with the world’s tallest buildings are no longer willing to accept the thousands of jobs being offered because of the falling value of the dollar. The workers are paid in the local currency, the UAE dirham, which is pegged to the U.S. dollar. In the past, they could earn four times as much in the Emirates as in India. But now the differential is only 40 percent which hardly justifies the expenses and hardships of being away from home for months at a stretch.
Turn the page and the headline reads; “As U.S. Economy Bleeds, Federal Reserve Grasps for Solutions.” Just beneath that is a headline saying: “Crude Oil Prices May Surge to $130 This Year.” Pierre Andurand, the Chief Investment Officer of the BlueGold Capital Management hedge fund explains that pension funds are investing more in commodities and that the outlook for oil over the next five years is bullish. The article goes on to note that Calpers, the giant California employees pension fund, has decided to increase its investments in oil and other commodities to about 3 percent of its total $240 billion in assets. Author and Cambridge Energy Research Associates Chairman Dan Yergin explains that whereas in times of past economic uncertainty there was always “flight to dollars as a refuge, today, instead there is a flight to oil.”
Turn the page again and the headlines note that the UAE central bank is granting limited dollar loans to the region’s banks in order to help them meet their foreign currency requirements. It seems this is a kind of emergency measure to combat a shortage of dollars that paradoxically has arisen because of the surplus of dollars. “There’s a shortage of dollars in the market because everyone is betting on a revaluation of the dirham against the dollar,” says an executive of Dubai Emirates NBD bank. Another story reports the advance of the Malaysian ringgit (remember when it threatened to collapse against the dollar in 1997?) and of the Singapore dollar against the U.S. dollar. …