Heralded economist sheds light on a second inconvenient truth for America and what we ought to do about it
Nouriel Roubini, one of the earliest voices to speak out on the shaky economic underpinnings of our financial system and resulting economic crisis in which we now find ourselves entangled, today opined in the New York Times that within the first half of this century, the U.S. Dollar will no longer be the dominant reserve currency of choice. This will have far reaching effects on our nation both domestically and abroad for the coming Century.
As Dr. Roubini states,
Today, the United States is running huge budget and trade deficits, and is relying on the kindness of restless foreign creditors who are starting to feel uneasy about accumulating even more dollar assets. The resulting downfall of the dollar may be only a matter of time.
Continuing that,
If China and other countries were to diversify their reserve holdings away from the dollar - and they eventually will - the United States would suffer. We have reaped significant financial benefits from having the dollar as the reserve currency. In particular, the strong market for the dollar allows Americans to borrow at better rates. We have thus been able to finance larger deficits for longer and at lower interest rates, as foreign demand has kept Treasury yields low. We have been able to issue debt in our own currency rather than a foreign one, thus shifting the losses of a fall in the value of the dollar to our creditors. Having commodities priced in dollars has also meant that a fall in the dollar's value doesn't lead to a rise in the price of imports.
While this inconvenient truth of deteriorating U.S. currency leverage bears much semblence in size, scope and complexity to the inconvenient truth of global warming, there is in fact a single solution that will simultaneously confront and help solve both of these problems. Dr. Roubini reveals this solution by concluding,
Now that the dollar's position is no longer so secure, we need to shift our priorities. This will entail investing in our crumbling infrastructure, alternative and renewable resources and productive human capital - rather than in unnecessary housing and toxic financial innovation. This will be the only way to slow down the decline of the dollar, and sustain our influence in global affairs.
We couldn't agree more with Dr. Roubini and we think the moment to make our national priority shift is now. While the Stimulus Package (ARRA) enacted by Congress and the Obama Administration earlier this year was a significant step in spurring renewable energy and energy efficiency investment, the Waxman-Markey Climate Bill, now moving forward after several weeks of intense negotiations among the 57-member House Energy and Commerce Committee, is our best chance to set a new national paradigm in how we supply and use our energy resources. And it's not just super-intelligent economists who see this critical need - a sweeping majority of Americans understand what it will take to address global warming, despite a few remaining members of Congress who are out of touch on the issue and continue to try holding us back. Why would we want to let so much potential for new green jobs, economic growth and cleaner environment go to waste?
Oh, it's also worth mentioning that while American leadership has been asleep at the wheel the past several years to advance clean energy technologies, China already made a bid (proudly with NRDC's assistance) to beat us at advancing technological solutions (see here and here) to solve global warming. In the spirit of healthy and fair competition among both nations towards meeting our critical climate goal (at least 80% by 2050), we gladly continue to fuel both sides toward greater innovation and investment in clean energy.