Gisele, Jian, and the Dropping Dollar

Open up your wallet, pull out a dollar bill, look at it closely, and things get weird. So weird that last week both supermodel Gisele Bündchen and Chinese Bank official Xu Jian became the strangest of bedfellows. I would wager that the two have never before been mentioned in the same breath. However, as the value of U.S. currency hits record lows around the world, they both threatened to dump the dollar. Today, whether you are a made-up mannequin or a bumbling bureaucrat, American cash in your pocket is a problem.

Bündchen, a Brazilian bombshell, works all over the globe, flaunting her scantily clad curves for companies like Dolce & Gabbana and Christian Dior. She is reportedly worth hundreds of millions of dollars, the richest supermodel on the face of the planet. Only, as Bloomberg reported last week, Bündchen — like many major hedge funds — has decided to be paid for a recent American shampoo deal in Euros rather than dollars. Her manager (who is also her twin sister) said in September that “we don’t know what will happen to the dollar.” Last week she denied ever saying it, perhaps trying to save face in front of the American public. But can anyone blame her?

Switch gears to Jian, the Chinese central banker. Last Wednesday he said the dollar is “losing its status as the world currency . . . We will favor stronger currencies over weaker ones and will readjust accordingly.” China, second only to Japan in terms of U.S. currency reserves, holds $400 billion in U.S. dollars, the U.S. Treasury says. And should China “readjust,” that is, decide the dollar is a weak investment and sell off their chunk of change, there could be hell to pay.

Even Alan Greenspan, former chair of the Federal Reserve, recently told “60 Minutes” that it didn’t matter how he was paid because he would immediately diversify.

When the dollar drops abroad, inflation rises at home. Current Fed chair Ben Bernanke said as much last Thursday. Why is this all happening?

Economists agree there’s nothing radical or controversial here: For far too long, the U.S. has been living beyond its means. And there’s no quick fix. The bankers who botched the housing market are going to have to pay. But for the rest of us, our hard-earned cash is worth less and less. Maybe we should all pull a Gisele and demand to be paid in Euros.

(Also published in Metro. Image from flickr.)

Americans Turning Away From Globalization

A protectionist wind is stirring America.

Typical antiglobalization tracts spout the evils that free-market capitalism wreak on the poor and developing nations south of the equator. Rich, gluttonous Americans are often stereotyped as the perpetrators of exploitative economic policies. Critical theorists have called the United States the big power in a new kind of empire. So-called "economic hit men" have even gone soft, defected to the other side, and confessed their demonic deeds.

Only, Americans themselves have now grown skeptical. A new poll of Republicans shows that 60 percent of them believe that foreign trade is bad for the US economy. The American right, not exactly an anticapitalist constituency, is turning against globalization.

They aren't the first, though. The protectionist wind has been blowing for a while, because despite the fact that estimates put US profit from trade liberalization somewhere between $500 billion and $1 trillion a year, which translates into a sum between $1,650 and $3,300 for every American.

Those numbers come from a report in Foreign Affairs that calls for a New Deal for Globalization, that is, literally a New Deal in the spirit of President Franklin Delano Roosevelt's huge public works program to lift American society out of the Great Depression of the 1930s.

Though the US has profited from globalization, many of its own citizens have not. From Foreign Affairs, "By some measures, inequality in the United States is greater today than at any time since the 1920s." The rich have gotten richer, while growth in income for the rest of the population has floundered.

Kenneth Scheve and Matthew Slaughter, authors of the treatise, suggest that the uneven benefits are behind the backlash. They call for a redistribution of income via a tax overhaul. That isn't happening at least until 2009, so in the meantime, and leading up to the next election, will the presidential campaigns hoist their sails to gain from this gale?

Many of them already have. And several free-trade agreements are coming up this session for renewal.

Considering the leftist turn of many South American countries, and in light of Costa Rica now thinking about tossing CAFTA, might the Americas (and who else?) have to refigure their economies?

(Update: Costa Rica approved the free trade deal with the US after some arm-twisting.)

(Image from soartsyithurts.)

US Responsibility to Iraqi Refugees a Question Mark

Back in February, US State Department officials appeared at a special briefing with the United Nations Commissioner for Refugees Antonio Guterres and made the noble assertion, "We have a responsibility to respond to the immediate needs of Iraqis who have fled violence and persecution, and the United States will provide leadership in meeting those needs."

Only, seven months later, leadership is lacking. Actually, it's near-nonexistent. The Iraqi refugee crisis has become one of the world's most severe humanitarian situations with 1.2 million Iraqis now living in neighboring Syria, and another 700,000 in Lebanon. 60,000 are now leaving their Iraqi homes every month, and the US has admitted barely any.

There are few excuses, considering that in the months after the fall of Saigon, the US airlifted 125,000 Vietnamese into air bases in the Philippines and Guam before they were brought to the US. It's not a matter of logistics.

News coverage of US delinquency has been increasing. What follows is a roundup of recent reports. And an update: the State Department has leaked news of a "tenfold increase" in the number of Iraqis hitting American shores in the last month. Too bad that still means a meager 500, but at the same time it's clear that the pressure is on.

"Tens of thousands" of Iraqi refugee schoolchildren attended their first day of school in Jordan late last month. Schools in Jordan and Syria are only one of the many parts of state infrastructures that are feeling strained because of the heavy influx of an entirely new population. In response, the US has pledged $30 million in response to a request from UNHCR and UNICEF to send 155,000 children to school in Jordan, Syrian, Egypt and Lebanon.

60 Minutes focuses on Iraqis who worked as translators for the US for in Iraq who are now stuck in limbo, away from their homes, nowhere to go, with a target on their backs. Despite the fact that these people were good enough to work for coalition forces in Iraq, a State Department official points to 9/11 as a cause for heightened security in admitting refugees into the country.

Efforts have been made by the American government, apparently, but the Times reports that Iraqis in danger are not allowed to apply for resettlement because, simply, the facilities aren't accessible in Iraq. They actually have to head to Syria or Jordan, despite the fact they face the very real chance of being turned away at the border.

And the UN has been negotiating a tenuous visa situation for refugees in Syria, though the latest word is that Iraqis will not be forcibly deported.

Free Global Financial Markets, More Transparent for Your Pleasure

Ramifications of the subprime mortgage market fallout continue to sprout up. As we've watched the ripples shut down deals around the world and shake a prominent Middle Eastern real estate company, there are now calls for international oversight of the US financial markets.

The International Herald Tribune reports from New Delhi that "politicians, regulators and financial specialists outside the US" want regulation on the financial products that the States are shipping overseas. Such proposals have been made in the past, when the US held a more commanding financial position around the globe. However, as the IHT puts it, "Washington might have to yield if it wants to succeed in imposing bilateral regulations on state-owned investment funds from other emerging economies."

The IHT quotes a German economic  official, "'America depends on the rest of the world to finance its debt," Bofinger said. "If our institutions stopped buying their financial products, it would hurt.'"

The cry is for transparency, but would transparency have satiated, or quelled, the appetite investors around the globe had for the medium- and high-risk collateralized debt obligations packed with subprime loans that they all bought up?

How would regulation temper the extreme, say, the blind fervor of the market?