Word: dollarization
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Dates: during 1980-1989
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When the value of the dollar began falling early last year, American manufacturers were confident that their competitive powers would be rejuvenated. As the currency weakened, they reasoned, U.S. exports would become cheaper, while foreign imports would grow more expensive for American consumers. The trade deficit would begin its long-awaited decline. Economists cautioned that it would take time--twelve months, a year and a half at the most. But it would happen. This was no idle daydream, after all, but a proven tenet of modern economic policy...
Things have not turned out that way. Since March 1985 the dollar has fallen in value by about 30% against an average of major currencies, and yet the trade gap--economic theory be damned--keeps right on growing. Last week the Government reported that the trade deficit hit a record six-month level of $83.9 billion. June's trade imbalance was almost identical to the one posted in May. If the deficit keeps expanding at the current pace, it will total $168 billion by year's end, a 13% increase over 1985's record level. Plainly, the widely expected turnaround...
...expected that the trade deficit would vanish the moment the dollar began its descent. To begin with, the greenback fell only modestly at first, down about 9% between February and July of last year. During the next eight months, however, it fell a more dramatic 19%. Indeed, it is still falling. Last week the dollar bought only 153.6 yen at one point, the greenback's lowest level since the late 1940s. The dollar has fallen some 39% against the yen since early...
...economists point out, the dollar is in some ways stronger than it appears. While it has fallen against major currencies, when it is valued against a broader measure of 25 currencies, it has hardly dropped at all. It has decreased less than 4% against the Taiwan yuan since March 1985 and actually risen nearly 4% against the South Korean...
Terrorist acts are hardly frequent, and one has a greater chance of being struck by a bolt of lightning. So the fear, I must conclude, is manifested falsely by our press. Couple this with a weakening dollar overseas, and you get a rather American-less Europe...