Spiegel: The "Mother of All Threats" is a Dollar Crash

April 11, 2003
Posted By: Rosalinda

Spiegel 15/03]

WIESBADEN, April 7 -- THE "MOTHER OF ALL THREATS" IS A DOLLAR CRASH, STATES THE GERMAN WEEKLY SPIEGEL, in its headline.

Spiegel notes that the U.S. dollar, "once a symbol of American strength" is rapidly losing value as there is the "growing fear in financial markets of a sudden downturn of the U.S. economy."

Bankers, including Goldman Sachs chief economist Jim O'Neill, are quoted, saying that a dollar ratio of 1.40 to the euro is quite possible in mid-term. Mideast oil exporters are debating about selling oil against euros, instead of dollars.

And central banks, including Russia, China, Taiwan, and Canada have already announced plans to replace some of their dollar holdings with other currencies or gold.

The biggest threat for the dollar, states Spiegel, lies in Asia. Much of the huge U.S. current account deficit is being financed by capital flows from Japan, China and other Asian countries. The Bank of Japan alone holds $363 billion U.S. Treasuries, the Chinese central banks another $102 billion.

Sooner or later, investors from Tokyo, Beijing, and Hongkong will no longer be willing to take the risk. At this point, says economic historian Harold James of Princeton University, there will be "the great crash."

The dollar, as well as the U.S. economy, will go under. It could turn into a global currency crisis, adds O'Neill.

He says, "President Bush is right now trying to refute economic theory and economic history. He will fail." Concerning the threat of a dollar crash, Newsweek warns, "Forget the Iraq war. Forget the transatlantic conflict. The mother of all threats is lurking at a different front."

Spiegel compares the coming upheavals centered around the fall of the U.S. dollar to the collapse of the Bretton Woods system in 1971-73, a system created in 1944, which "secured stability at global foreign exchange markets for more than 20 years."

[source: April 7 {WSJ} article, "Labor Market May be Softer than Reported;" Dept of Labor Bureau of Labor Statistics]

THE WALL STREET JOURNAL HAS DISCOVERED THAT OFFICIAL U.S. UNEMPLOYMENT DATA HIDE REAL UNEMPLOYMENT. Hundreds of thousands of Americans have lost their payroll jobs during the last few months, but the official U.S. unemployment barely rose from 5.7% to 5.8% between January and March. Even the Wall Street Journal recognizes that this is impossible, and is becoming a scandal.

Today's issue states that, "with all that is going wrong in the U.S. economy, economists are starting to suspect that the current unemployment rate of 5.8% ... could be underestimating the true level of distress in the labor market."

The Journal reports some ways by which the Labor Department Bureau of Labor Statistics "misses" the real number of unemployed. "Many laid-off workers ... are simply setting themselves up as independent consultants operating from their home offices." They are self-employed.

Many of these "self-employed" consultants may work only one-third as many hours as they did when they had a job--or have no clients and thus have no work at all--but they are still counted by the BLS as employed.

The Journal states that others, after months of futilely searching for jobs may have become "too discouraged to look for work"--indeed, this category has risen by 360,000 workers during the past year.

But the BLS has made "too discouraged to look for work" as a category within "Not In the Labor Force"; however, in order to be counted as unemployed, a worker must be classified as "In the Labor Force."

Thus, the "too discouraged" are not considered as unemployed.

Further, the Journal states, "some are simply opting to take what they can get, working part-time at low-wage jobs that provide some health benefits."

These workers are "Part-Time for Economic Reasons."

The number of such workers has increased by 500,000 during the past year.

{EIR} has determined a real unemployment level:

- Table 1 -

EIR's Level of Real Unemployment, March 2003

Official Unemployment 8.45 million

"Want a Job Now" 4.76 million

"Part-Time for Economic Reasons 4.70 million

Total Unemployment 17.91 million

Unemployment Rate 11.9%

Of the 8.45 million whom the BLS reports as being officially unemployed, 1.90 million, or 22%, have been unemployed for more than six months.

The strains on their family income are greatly increasing.

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