The House of Representatives Financial Services Committee
Tuesday heard from economists who agreed the weakening dollar is likely to
decline further. VOA's Barry Wood reports.
Committee member Ron Paul, a conservative Republican, called attention to the
dollar's weakness. The U.S. currency, he said, has this year lost nine percent
against the euro and even more against some other currencies.
"It's lost more than 10 percent against the British pound," he said. "And lo
and behold, the Indian rupee - if you had been holding Indian rupees - you would
have made 13 percent."
Paul asked the panel of three economists whether Americans should be worried
by the dollar's decline. Alan Meltzer, a professor at Carnegie Mellon University
in Pittsburgh, said the dollar is weak because for America's rising external
"The long-term problem is a serious problem," he said. "If you ask, over the
long-term what is likely to happen to the dollar, you'd have to believe that
over the long-term the dollar is going to decline in value. Why is that?
Basically, because we invest more [as a nation] than we save. We save too
Benjamin Friedman from Harvard said no other country could get away with
having such large current account (trade) deficits. It is, he said,
irresponsible for the United States to incur an external deficit equal to 6.5
percent of its national income.
But none of the economists saw a danger in the huge accumulation of dollars
by China and Japan. Neither country, they said, would gain by selling their
dollar holdings in order to devaluate the currency further.
Jamie Galbraith, the son of the late Nobel-winning economist John Kenneth
Galbraith, is a professor at the University of Texas.
"The problem, as I see it, is that the system - like all monetary systems -
is inherently precarious," he said. "It is subject to a shock, a crisis, a
panic, a collapse down the road."
None of the economists would predict how much further the dollar will drop.
But they said a further decline could help by lowering the prices of U.S.
exports, thereby boosting exports and reducing the size of
the external deficit.