Top models and pop icons are asking to be paid in euros. New York’s Fifth Avenue is full of Europeans snapping up cheap goods. At Buffalo there are six-hour queues of cars full of Canadian consumers on weekend shopping trips to the US, and analysts predict that the UAE or Qatar will sever their dollar peg within the year. The bottom, it seems, has fallen out of the dollar, and with US firms across all sectors suffering from a looming recession, to quote one head of an international bank it’s “10% discount sale today on all American companies”.
Interestingly, there is a growing conspiracy theory that the decline of the US dollar is perhaps not as unexpected as some would believe. This view has it that the powers that be in the US are pushing for a common currency for the US, Mexico and Canada, the so-called amero, a move that could only gain backing if the dollar were regarded as being in free fall against the euro, and US citizens became riled about the increasing costs of imported goods. The claim is that such a currency would enable the US to hold on to its control of the world stage in the face of strengthening Asian economies.
But, from an economic standpoint, the argument for a common currency, planned or not, is looking less like a crazy theory by the day. It would provide US firms with greater opportunities by operating across the entire north American continent, while attracting investments from the growing economies of Mexico and Canada. For all three countries, a common currency would give much greater stability, deepen capital markets, and improve efficiency.
A handful of analysts themselves have come out publicly as saying that they expect a single currency, and former Mexican president Vicente Fox set the cat among the pigeons this autumn when he briefly mentioned, on a US talkshow, that a “trade union of all the Americas” – by which he meant a free trade zone including, in the longer term, a single currency – had been discussed with president George W Bush. But in all cases, predictions of such a move range from 10 years to the “long term, very long term,” as Fox put it.
Rather, the majority of analysts are holding on to the belief that the dollar will likely drop a little further but pick up again some time in mid to late 2008 once the Federal Reserve’s rate cuts kick in. Stranger things have happened than an “amero”. For now, though, foreigners should relish snapping up their Christmas gifts at a discount.
