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Hasan Yasar Ozfidan Writes...

27.03.2005, 17:38 Despite  America's  efforts  to   strengthen  exports  by  keeping  the  value  of   dollar  low,  further  growth  of  foreign  trade   deficit,  every  passing  day,  clearly  shows  that   America  is  unsuccessful  in  the  policies  applied   so  far.



 About 2 Years ago, at the date 14.06.2003, when the US dollars was 1,420,000 TL, I had shared my article having the title “the future of the dollar” with you. The time, since then, reveals that I was right in my views. And I find it useful to share this article of mine with you again, insisting on my view about the future of the dollar.

 “Today various discussions are held on the future of the dollar. And I also wanted to tell my views on the issue to you. In this context I find it useful to evaluate the issue both generally and in terms of our country.

 If we handle the issue in general terms, as you know that American economy is signaling danger for a long time. Every passing day you hear news on this frequently. The previous President of the United States of America Mr. Bill Clinton had put the American economy into a better situation, as a result of the savings policy he had followed, and had hand over it as it is. Despite all these developments, Mr George Bush, who is in charge now, had adopted and implemented the spending policies in the economy. As can be seen in his budget, he had put emphasis on war economy.

 America had made deployment plans and implemented them in the Middle East and related region, in order to watch closely the Chinese Government, which is seen as the great rival. The issue had revealed first with the capture of an American spy plane by Chinese people. After that, Afghanistan and the Iraq had passed to America's control with various excuses proposed. The next is Iran and Syria.

 As it's understood, America will continue the war economy policy, until realizing all these plans. After adding the economic stagnation in America onto all of these, it's clearly understood that America tries to increase exports and reduce the imports by keeping value of the dollar low. It seems that this policy will continue till Iran and Syria will go under America's control or until the giving up war economy policies, with the change of US President and its administration in the next elections.

 If we look at the developments in our country, one should accept the Turkish Lira appreciation and dollar depreciation normal, as a reflection of the low dollar value policy of America. Here, Turkish Lira appreciation and dollar depreciation certainly doesn't mean that the economy is strengthened and goes well in our country. Excessive supply surplus in dollar lies behind the Turkish Lira's extreme appreciation.

 In addition to all of these, if we consider that some foreigners speculatively play with dollar and gain net profits, and still prefer our country for this matter, one should take into account that foreigners' dollar pumping can have great impact, through certain banks to our country in order to accelerate the decrease of dollar in our country, which loses value in international arena, and make profit via playing with the dollar, and this lies behind the Turkish Lira's extreme appreciation these days.

 It seems that America will continue this implemented low dollar policy until taking all aimed countries under control, and till recovering its poor economy. And related to this, Dollar's value against Turkish Currency will be around these levels. In my opinion, investors having dollars in their hands should be quiet and take the speculative dollar increases as an opportunity to sell.

 It seems America, which tries to handle its economic stagnation via war economy, will carry the low dollar policy for a long time. With the low dollar policy implemented, American economy will strengthen its exports and complicate the imports against foreign countries. And this won't suit other countries' economies.

 As I had mentioned before, the efforts to keep its own economy against uncontrollable rise of China State lies behind all these economic and military policies followed by United States. America makes every endeavor to be close to China and to observe them better. Also, again in the same way US had put all of its power in order to dominate the Mideast region, where world's economically important oil reserves rest. In short, United States had performed whatever possible in economic and military matters to keep its economy high, and will continue to do so.”

 As is seen, the issues I had mentioned in my article is still valid today, and will probably be valid from now on. Now I want to mention a scenario, belongs to American economy, that turned the rules of economy upside down.

 “United States, while trying to overcome its poor economy via war economy, had aimed to increase its exports with the low dollar policy. Hereupon, the US Federal Reserve had reduced interests and dollar had shifted to foreign countries, and the world market had lost value via drowning in excessive US dollars. So, it's planned to pull back the dollars, which is diminishing in domestic market, with increase in exports.

 America, though plans to increase exports, hadn't increased exports despite the low dollar policy. Notwithstanding, an abundance of dollars had emerged as if exports increased much and dollars returned in domestic market, whereas the reason was the excessive introduction of dollar by US Federal Reserve.

 That is to say, developments in American economy are not going as planned. Therefore FED's increase of interests will stop the inflationary pressure temporarily, and will increase the value of dollar.”

 If we examine the current developments shortly, with the light of these information, it's better to consider behavior of American economy rather than decrease or increase in America's interest rates. Lastly, the US foreign trade deficit in November 2004, breaking all time record with 60.3 billion US Dollars is absolutely not a good sign. Despite America's efforts to strengthen exports by keeping the value of dollar low, further growth of foreign trade deficit, every passing day, clearly shows that America is unsuccessful in the policies applied so far.

 As a final remark, at 22.03.2005 the US Federal Reserve's, or in short FED's increase of interest rates because of the inflationary constraints, seems to strengthens dollar temporarily. United States, with account imbalance in its economy and under increasing financial burden of Iraq War, is about to fall into interest and inflation whirlpool, that once our country had fallen into. In short, worse days ever are waiting the American economy.




Hasan Yaar zfidan.

Lawyer - Economist

Researcher   Writer.


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