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U.S. Dollar — The Old Faithful

What makes the U.S. dollar the index currency of the global economy?

January 11, 2002

What makes the U.S. dollar the index currency of the global economy?

A one-dollar bill has a an average lifespan of only 18 months, but that has not kept the U.S. dollar from running the world economy. The economic strength of almost any given country is measured in its currency’s worth against the U.S. dollar. Our new Read My Lips takes a look at what people worldwide have to say about the U.S. dollar.

What is the U.S. dollar?

“A dollar is a share in America Inc., held by both U.S. citizens and foreigners.”

(Washington Post Columnist Jim Hoagland, April 1995)

Is there some kind of innate arrogance about Americans and their dollar?

“The dollar may be our currency, but it is your problem.”

(John Connolly, President Nixon’s Treasury Secretary, commenting to European officials on the dollar exchange rates, in 1971)

Why is the U.S. dollar so important in overcoming a downturn in the U.S. economy?

“A lower dollar has always been a crucial piece of exiting a slowdown.”

(James Paulsen, chief investment officer at Wells Capital Management, July 2001)

Does the U.S. Fed’s dollar policy represent a “United States first” approach?

“We would never put ourselves in a position where we envisage actions we would take to be of assistance to the rest of the world, but to the detriment of the United States.”

(U.S. Federal Reserve Board Chairman Alan Greenspan, April 1999)

What does the U.S. dollar represent to the world?

“More than the Big Mac, Coca Cola or Levis 501 jeans, the dollar is surely the United States’ signature export.”

(Berkeley economics professor Barry Eichengreen, March 2000)

Is there any competition for the U.S. dollar?

“The dollar and the euro are keeping watch over one another. The dollar now faces a prospective adversary.”

(Cuban President Fidel Castro, March 1999)

So, the U.S. dollar is still alive and kicking?

“Reports of the dollar’s death have been greatly exaggerated.”

(Jeffrey Frankel, Harvard economics professor, June 1995)

Secretary O’Neill, wouldn’t it be wise for you to change the strong dollar policy?

“If I decide to shift that stance, I will hire out the Yankee Stadium and some rousing brass bands — and announce that change in policy to the world.”

(U.S. Treasury Paul O’Neill, February 2001)

What then is the problem in the currency markets?

“The euro and the yen are overpriced — not the dollar.”

(Morgan Stanley Managing Director Paul Kimball, October 2000)

What is the answer from Europe?

“I don’t think the euro is weak at all. What we are seeing is the force of the dollar.”

(Then French Finance Minister Christian Sautter, November 1999)

What makes the dollar go up?

“The dollar is not just a strong currency. It is the reflection of a strong continent which comprises military, political and economic power.”

(Deutsche Bank Chief Economist Norbert Walter, October 1994)

Is everyone equally impressed by the dollar’s dominance?

“Three trillion dollars are being traded in speculative operations every day. What does this have to do with world trade? All of world trade as a whole totals 6.5 trillion dollars a year, which means that every two working days, speculative operations are realized on those stock markets that you hear so much about amounting to approximately the total of world trade operations in a year.”

(Fidel Castro, President of Cuba, September 2000)

What does someone have to say who lost money betting against the strong dollar?

“God only knows how exchange rates move.”

(Mitsubishi managing director, after his company lost money hedging against the dollar, February 1996)

What about the U.S. dollar’s global appeal?

“We’ll use American money, but only if they put Evita on the $100 bill.”

(Argentinian office worker in Buenos Aires, February 1999)

Is the U.S. President confident about the dollar’s future?

“The dollar will seek its level based upon market forces and based open whether or not our country can rein in spending, can recover, can revitalize our manufacturing base.”

(U.S. President George W. Bush, June 2002)

And finally, how accepted is the U.S. dollar in good old Russia?

“The Russian language probably has more words for the dollar than for the ruble: baksi (bucks), zelyonyiye (green), kapusta (cabbage), krop (dill) — and even just green in accented English.”

(Los Angeles Times international correspondent, October 1994)