Looking beyond the current turmoil in global capital markets, that long-running subject – what outlook for the dollar? – seems likely to involve further decline in its value against the euro and other major currencies. There is scant evidence of willingness on the part of U.S. political and monetary leaders, today’s or tomorrow’s, to do what is necessary to make the dollar fundamentally stronger. Indeed, American policy-makers have powerful reasons to let the dollar depreciate over time, shifting the cost to the rest of the world of U.S. international borrowing to cover shortcomings in economic policies pursued by Washington.
A Roundtable Discussion
Already the buzz this year in financial circles, sovereign wealth funds have been initially welcomed in the United States (and to a lesser degree in Europe) as white knights whose capital investments have helped rescue troubled financial institutions and other companies stricken by the credit-market crisis. But these funds, even as they are currently sought after by financially-bleeding companies, could easily become controversial with public opinion and regulators in the United States and European countries because of their potential political dimensions. The very fact of their emergence is a symptom of profound new shifts in the global financial order. To head off potential jingoist reactions against the proposed buy-ins by these new investors, there is a need to probe a set of questions about how these funds work and about whether rules can be reached – by mutual agreement – to ensure that the funds prove compatible with global capital movements.
© COPYRIGHT THE EUROPEAN INSTITUTE 2009
You may share using our article tools. Please don't cut articles from our site and redistribute by email or post to the web.